HOW GROCERY IS SHAPING THE FUTURE OF RETAIL 28th May 2020
An insight into leading grocery trends and their wider impact – how other sectors can learn from the innovations and approaches taken by the essential-retail industry.
As supermarkets remain one of the few retailers able to continue physically trading with consumers, we look at how grocers are responding to the impact of coronavirus and discuss what these trends could mean for the future of the physical customer experience. With lockdown demanding consumers stay indoors, new patterns within at-home food consumption and online shopping are also beginning to emerge, highlighting implications for the digital customer experience.
The retail landscape has been dramatically affected by the pandemic. By far the most notable impact has been the sheer acceleration of growth and diversification that businesses have had to undertake to survive. Since the outbreak Aldi, a discount supermarket with a previously limited online presence, has started selling groceries online in the form of food parcels. Pret has also modified its approach by pulling forward the launch of its supermarket coffee range by 6 months and indicating that there could be further changes to its business model to ensure it can continue to reach consumers. In a matter of weeks, we’ve seen the acceleration and materialisation of trends not expected to emerge for at least another 2-3 years. Subsequently, we’re likely to see more businesses expediting pipeline projects and developing existing successful projects to last through the pandemic and beyond.
Grocery shopping habits are changing. In the height of stockpiling, grocery sales grew by nearly 50% and during the first few weeks of lockdown 600,000 households ordered their groceries online for the first time. In line with government advice, consumers are now shopping less. They’re also spending more and planning their meals; as a result, the weekly shop is back and online orders are accounting for a growing number of sales with UK shoppers forecast to spend £16.8 billion on online groceries in 2020. This trend extends beyond the UK; Italy, France and Spain’s online grocery markets are also growing, and research suggests consumers from all 4 countries only intend to increase their online grocery spend.
“SUCH A RAPID DELIVERY MODEL COULD BE ADOPTED BY OTHER RETAILERS LOOKING TO SERVE CUSTOMERS WITH MORE CONVENIENT DELIVERY SOLUTIONS, UTILISING LOCAL STORES AND DECENTRALISING OPERATIONS.”
In a matter of days, the number of people shopping online has risen to levels not anticipated for 15 years, leaving retailers racing to catch up. The issue that many grocers face lay in their (in)ability to keep up with demand; prompting the likes of Asda and Waitrose to double delivery capacity and Tesco to increase it by over 100% to exceed 1 million slots per week. To keep up with orders, Sainsbury’s has been trialling home delivery from its closed convenience stores with its new Chop Chop app. If the trial proves successful, Sainsbury’s will be able to deliver up to 20 items to consumers all over the UK in as little as an hour. Such a rapid delivery model could be adopted by other retailers looking to serve customers with more convenient delivery solutions, utilising local stores and decentralising operations.
The recent spike in online orders also suggests that brands must deliver a positive and memorable digital experience to retain customers, especially as the growth in online shopping is expected to continue.
With the majority of consumers now spending nearly all of their time at home, combined with mass restaurant closings, there has been an enormous rise in the number of home-cooked meals. With the trend predicted to stay, more people are cooking from scratch and trying more ambitious recipes, with a particular uplift in the number of people cooking restaurant-inspired meals.
Experts have highlighted that this search for restaurant-quality food at home is likely to stay post-corona and will continue to be exacerbated if a recession follows the pandemic. As consumers seek to use their newfound skills, it’s likely that they will expect brands to broaden the opportunities for home cooking. Some restaurants themselves recognise the growing popularity of at-home meal boxes; Patty & Bun recently launched DIY Kits allowing customers to recreate their iconic burgers and Doughnut Time has also released at-home decorating kits, so customers needn’t miss out on their favourites. The trend indicates that more brands may opt to follow this approach and extend their existing offering to engage directly with consumers at home. Food delivery boxes have traditionally been popular amongst urban millennials looking for convenient ways to cook at home.
“EXPERTS HAVE HIGHLIGHTED THAT THIS SEARCH FOR RESTAURANT-QUALITY FOOD AT HOME IS LIKELY TO STAY POST-CORONA AND WILL CONTINUE TO BE EXACERBATED IF A RECESSION FOLLOWS THE PANDEMIC.”
However, we’re now seeing a growing demand from older generations, as those who may be particularly vulnerable to corona and therefore less able to shop conventionally, proving the boxes have massive potential for mass-market appeal. Recipe box company Gousto saw its Q1 sales shoot up 70% against 2019 figures and traffic to its website has increased tenfold since lockdown. As a result of the recent market growth, Gousto has also secured an additional £33m investment, further indicating the appeal of the meal-kit sector.
As retailers look for new ways to reach consumers, we may see grocers go head to head with brands like Gousto in a bid to expand into growing markets.
Climate change has remained a key topic throughout the outbreak of coronavirus, with the environmental impact of a near-global lockdown evident in the news; from air quality improving in cities across the world to water pollution reducing so much that in Venice the canals have become clearer and wildlife is thriving. The visible, direct impact of reduced human activity, combined with the heightened concerns around supply and sourcing safety as a result of the virus, has led experts to predict that consumers are likely to maintain an increased focus in sustainability, both in terms of how they live and how they consume. The pandemic has shone a light on just how interconnected the world truly is, most effectively demonstrated by grocery supply chains.
Whilst international operations are usually viewed favourably, running an entire business reliant on suppliers halfway around the world has since proved flawed. Since the outbreak over 40% of Brits are shopping more at their local independent stores and research shows that over 1/3 intend to continue to do so after lockdown. Ranging from green grocers to wine merchants, consumers are now looking closer to home to source their goods.
The move towards a more local supply chain is not new. Last year Ocado revealed that it had acquired the majority share of JFC – Europe’s biggest vertical farm in Scunthorpe – and had also adopted a similar approach in the USA, locating the farms within or near its warehouses in order to supply fresh, sustainable produce quickly. Until now, vertical farms have predominantly been used in supermarkets to boost customer engagement but developments in technology indicate the practice is becoming more commercially viable. To tackle supply chain disruptions caused by coronavirus and become more self-sufficient, Singapore has begun turning car park rooftops into urban farms and recently outlined aims to produce 30% of its food by 2021. Furthermore, whilst it may not be a branch-wide strategy, there’s huge potential for retailers to enhance the customer experience with urban farm-inspired experiential offers, particularly in flagship locations. In September M&S unveiled its first in-store farm, allowing customers at its Clapham store to pick their own herbs. Waitrose is also exploring plans to create in-store ‘pick your own produce’ allotments with vertical farm company Lettus Grow.
With businesses looking to safeguard their supply from future threats, we may well see an increased interest in vertical farming – particularly from grocers seeking to not only produce their stock but to do so on site. Such an approach could also extend across sectors seeking to elevate the physical customer experience – might we see more cafes and restaurants growing their ingredients, delivering their customers ultimate freshness?
There’s no doubt that safety concerns have changed the way we shop; social distancing rules have required retailers to limit capacity which has inevitably led to queues outside stores and lowered shopper satisfaction. In order to improve the experience, an app has been released enabling shoppers to check queue times for their local supermarkets. Supermarket Check-In also allows users to rank stores based on the length of queue and stock levels, providing real time data to consumers looking for a quick and painless trip. Experts anticipate that corona-related safety measures – like those first adopted at supermarkets – are likely to continue for the foreseeable future as nervousness around safety will remain at the forefront of consumers’ minds, requiring retailers to think differently about how they operate for at least the next 6-12 months.
“EXPERTS ANTICIPATE THAT CORONA-RELATED SAFETY MEASURES ARE LIKELY TO CONTINUE FOR THE FORESEEABLE FUTURE (…)REQUIRING RETAILERS TO THINK DIFFERENTLY ABOUT HOW THEY OPERATE… ”
The biggest behavioural change in the UK since the outbreak has been the increased regularity of hand washing as people fear spreading the virus. One clear indicator of this is the rise in card transactions as consumers seek contactless ways to pay. In March, The Co-op saw a 10% increase in card transactions, a huge contrast compared to the 1% shift to card payments that it usually sees every 3 months. Contactless payment methods were already being trialled – and implemented – before corona. However, the outbreak of a global pandemic has triggered retailers to reconsider the way their customers purchase goods, to reduce the risk of spreading the virus. Mercado Pago, an Argentinian internet payment company, has been encouraging purchases on its platform by offering discounts when customers use its contact-free QR code system. In a bid to provide their own solutions amid heightened consumer safety concerns, Russian supermarkets are also racing to launch facial recognition payment.
Already of growing interest before corona, contactless payment methods are likely to be adopted more widely having been further developed and encouraged as a result of the pandemic.
The outbreak has boosted the sense of community spirit amongst consumers, evident in multiple grocers launching volunteer cards for customers to help the vulnerable & elderly get their shopping. This societal shift towards collectivism points to a new avenue for retailers to pursue, with suggestions that we could see the introduction of incentivised schemes to encourage customers to purchase goods on behalf of their neighbours and local community. Such initiatives could also be adopted by other industries looking to build on this growth in cooperation amongst consumers, perhaps in the future you may be able to click and collect your neighbour’s order from your local fashion store alongside your own.
“THE PANDEMIC HAS SHONE A LIGHT ON THE BRANDS THAT TRULY LIVE AND BREATHE THEIR VALUES.”
In order to provide customers with support and advice during the lockdown, Waitrose & John Lewis are running a whole host of free, virtual services including digital nursery sessions, wine tasting and cooking classes and the partnership plans to continue this once the pandemic is over. Extended online offerings provide brands with the opportunity to bridge the gap between their physical and digital operations. By acting as more than a business and adding genuine value to consumers daily lives, brands will be able to reach consumers in their homes.
The pandemic has shone a light on the brands that truly live and breathe their values. Many argue that companies will need to go above and beyond their usual operations and create social value (CSV) in order to retain customers; it will no longer be enough to just talk about brand values, companies will need to prove them. Employee-owned US grocery chain Publix is buying excess produce from its suppliers and donating it to food banks to support those affected by corona.
This is a defining ‘do good’ moment for business, a time to build genuine relationships with customers and have a real purpose, now more than ever, as lives are at stake.
With the threat of a global recession and further economic instability looming, consumers will be evaluating every purchase decision they make. After months of nervousness and significantly reduced spending, there is an expectation that consumers will remain cautious post-pandemic. As we look to the future, here are our 5 predictions about what this will mean for brands:
- DIGITAL CUSTOMER EXPERIENCE
E-commerce will continue to grow as consumers become adjusted to online shopping and continue to rely on it, meaning brands must consider their digital customer experience just as much as – if not more than – the physical experience.
- EXPANDED OFFERINGS
The lines between sectors are becoming blurred as companies diversify their operations in order to remain relevant. We are particularly likely to see growing numbers of food brands enter the at-home market as businesses aim to reach consumers in lockdown. These expanded offerings are likely to continue post-pandemic.
We’re seeing a move to local in all senses, from the localisation of supply chains with grocers producing products next to distribution centres to nationwide chains satisfying online orders from their local branches.
- SAFETY FIRST
For the short term, the in-store experience is likely to be dominated by safety concerns. As consumers are expected to consider every visit in a post-pandemic world, brands will need to reassure and build trust with their customers.
- FUTURE STORE EXPERIENCE
In the mid to long term, the in-store experience will once again become a defining brand engagement moment, requiring brands to think about the future of their in-store experience and offer their customers something new and exciting.