Over the past year, Wal-Mart has nearly doubled its share of grocery sales in Chicago and its suburbs, reports Crain's Chicago Business. The gains are coming at the expense of Chicago fixtures Jewel-Osco and Dominick's, both of which are losing market share.

The chain's new "supercenters," selling both food and general merchandise, offer grocery shoppers savings of 10 percent to 15 percent on average, experts say, and threaten to reshape a market dominated by the grocery kingpins for generations.

"Wal-Mart is coming at Chicago full-bore, and I expect they will ramp up development and move in closer to the city," says John Melaniphy of retail consulting firm Melaniphy & Associates in Chicago. "Of course, this is bad news for Jewel and Dominick's."

The Chicago area -- with $11.9 billion in grocery sales last year, according to Florida-based market research firm Chain Store Guide -- is critical to all three companies. Wal-Mart has 16 grocery stores in the suburbs, eight opened since August 2007.

Jewel, with more than 180 stores in the area, is widely considered the crown jewel of Minnesota-based Supervalu Inc.'s 2006 acquisition of former Jewel parent Albertsons Inc. Dominick's, a unit of California-based Safeway Corp., operates roughly 80 stores, all locally, and "considers itself a Chicago grocery tradition," a spokeswoman says.

The local grocers have faced discount competition before, mostly from warehouse-style retailers such as Cub Foods. But they haven't seen a rival with the scale of Arkansas-based Wal-Mart, the largest grocery retailer in the United States.

During the recent boom years, Jewel and Dominick's lost higher-end customers to pricier chains such as Whole Foods Markets Inc. With the economy in free fall, they now face a stronger threat at the lower end.

"Traditional supermarkets can't compete with Wal-Mart on price," says Jim Hertel of retail consultancy Willard Bishop in Barrington. "Wal-Mart definitely has got a lot of wind at their back with pricing."

Spokeswomen for Dominick's and Supervalu declined to discuss Wal-Mart's impact on the Chicago market. But Supervalu CEO Jeffrey Noddle noted Wal-Mart's expansion in his past two quarterly conference calls with investors.

"The fact that Supervalu mentions it says it's significant," says Mitch Corwin, an analyst in Chicago with Morningstar Inc. "Chicago is a very important market for Supervalu, and Wal-Mart's rise in the area is contributing to the company's slower sales."

Rather than sacrifice profit margins in a price war with Wal-Mart, Jewel and Dominick's are recasting some of their stores to appeal to busy professionals willing to pay more for convenience. Jewel recently opened a new "urban fresh" store in Lincoln Park offering ready-to-go-meals and organic selections, while Dominick's has remodeled half of its 80-plus area stores with a similar emphasis on what it calls a "lifestyle" layout.

The upscale move comes as more consumers trim spending in anticipation of a steep recession. Chicagoans already pay some of the highest grocery prices in the country.

Wal-Mart hasn't hidden its desire to expand in the Chicago market. Resistance from unions and politicians stalled its plans to add to the one store it operates in the city, but the chain continues to build grocery outlets in the suburbs.

A spokesman says Wal-Mart will open or start construction on seven new groceries here in the next year, with more to follow. "It's a safe bet you will see more Wal-Mart stores featuring grocery in the area."