Grocer Convergence

Why do all new automobiles have rounded jelly-bean style edges? Even the mighty Toyota couldn’t make a success out of its boxy Scion models.

And why do all new mobile telephones feature finger-flip screens and electronic keyboards? Although BlackBerry continues to try marketing a traditional keyboard on its KEYone device, it has only managed to snare a tiny fraction of the market.

Once upon a time, automobiles, telephones, and many other products and services featured creative and unique designs. So why are we now seeing design convergence in so many different sectors of the economy?

Indeed, even supermarkets are not immune to this trend. A few weeks ago, for instance, Kroger launched a new web portal called We Are Local to develop its roster of local niche suppliers. The service is expected to help the traditional chain compete more effectively against Whole Foods.

But at the same time, the Wall Street Journal reported that Whole Foods’ new owner Amazon is busy eliminating local suppliers at all supermarket locations! The move is expected to help the relatively young grocery organization lower its cost structure to a level that is comparable to more established competitors like Kroger.

In other words, Kroger is becoming more of a niche product retailer that is evolving towards the Whole Foods model, while Whole Foods is becoming more of a standardized retailer that is evolving towards the Kroger model. But is either business strategy a wise one?

In the short term, the answer to this question is likely “yes.” After all, Kroger’s product selection could benefit from some local flavor. And Whole Foods’ selection is a bit expensive.

But in the long term, the commoditization of an industry tends to lead to its inevitable consolidation. After all, when all competitors sell identical products and services, it isn’t very difficult for the largest firms to acquire the smaller ones.

At the moment, there are more than 64,000 supermarket and grocery store organizations in the United States. It’s a delightfully large and diverse industry, operating within a sizable and healthy competitive market.

But what will happen if its market leaders continue on their path to convergence? As fans of classic Scions and BlackBerries have learned, consumers may find themselves bidding farewell to creative designs.