In a fate shared by several independently owned grocery chains around the country, original family-run New York grocery store, D’Agostino’s may soon go out of business. The 84-year-old supermarket chain, known as DAG, runs just nine remaining stores, down from 26 at its peak 20 years ago, and the companymay be looking to sell those locations. It’s a sign of a changing landscape for grocers, as middle-market, conventional retailers have failed to evolve with the segmentation of the market and modernizing consumer shopping habits.
“DAG’s really hasn’t evolved its stores, operations, or marketing for some time, and that has hurt in the face of growing and changing competition,” says Gary Hawkins, CEO of the Center for Advanced Retail and Technology, who keeps a close eye on the grocery market. “DAG’s stores look much the same way they did a decade or more ago, and yet consumers today want more.”
Currnently, niche retailers like Whole Foods, Trader Joe’s and specialty food markets lead the charge as consumers demand niche products, prepared foods, and natural and organic offerings. Hawkins explained that New York has evolved especially quickly with the introduction of tech-savvy specialty retailers as well as Fresh Direct, which not only offers gourmet foods, but also the convenience of online ordering and home delivery.
 “The world today revolves around the smartphone in your hand 24-7, and shoppers expect, even demand, relevancy,” Hawkins explains. “I don’t have time to look through a mass weekly ad flyer. Just tell me what’s on sale that I like.”
In fact, the number of people who shop at grocery stores has declined eight percent in just two years, according to a study by research firm Mintel, released in late 2015. For one, the top motivation for brick-and-mortar shopping is convenience, with consumers stopping at the closest supermarkets to their homes and offices. With the proliferation of e-commerce in the grocery space, including Amazon.com, and the expansion of grocery goods in pharmacies and corporations like Walmart, consumers have more (and easier) options for acquiring the basic goods they need. 
That same study also noted how millennials look to alternative platforms for shopping—they are not tied to the idea of shopping in a store for freshness and quality, long thought to be the defining characteristic of brick-and-mortar shops. The study even showed a rise of 11 percent between 2014 and 2015 in the number of people who shop online for grocery products. And these consumers are also utilizing online meal delivery services, such a Blue Apron, for at-home cooking rather than pulling out mom’s cookbook and buying the goods at a supermarket.
“Amazon is absolutely causing turmoil in the industry,” Hawkins adds, saying that online grocery is predicted to be 10 to 20 percent of industry sales in the next five years. “This is huge when you consider the thin margins traditional supermarkets work on. Any loss in sales can quickly throw a supermarket from profit to loss.”
In response, some retailers, like Walmart, opted to implement online ordering while other grocers adopted startup services like Instacart or consider their own meal delivery kits like Kroger. Retailers who don’t jump on the technology bandwagon, such as D’Agostino’s, are often left in the dust.
Hawkins noted that it’s not just about e-commerce, but branding in general. Consumers no longer have a loyalty to a particular supermarket brand, instead loyalty to particular products. If a store or service does not offer those products, then the consumer won’t shop there—it’s part of the reason Trader Joe’s eclectic offerings have succeeded with younger shoppers as well as independent organic food retailers. 
That same loyalty to products extends to product price, and the lack of overhead with e-commerce companies and distribution network of country-wide brands often lead to cheaper prices than those of local chains like D’Agostino. A New York Post article about DAG’s future showcased the pricing differential with Walgreen’s in the same neighborhood over a half-gallon of Horizon organic milk: DAG charged $2.20 more.
Beyond consumer preferences and convenience, the industry also faces challenges with consolidation and new store formats. Major companies have either acquired regional chains and posted profits, such as Kroger, while others, like A&P, have dissolved and broken up. “Competition is driving this change as margins become tighter and the economy places a premium on low prices and efficient operations,” Hawkins says. “DAG’s has been hit by Whole Foods coming to NYC, the growth of Fresh Direct, and other specialty stores—all of that has put increased pressure on DAG, and most likely thrown some of their stores into a loss, leading to the company continuously selling locations. DAGs—and many other retailers—have remained more traditional operators and have not evolved with the market as aggressively as maybe they should have.”