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Lockdown 2: Grocery sector's resilience is put to the test

Tuesday 10 November 2020 Shopping Behaviour

Val Kirillovs's picture
By Val Kirillovs

Unusual things are happening, it is getting harder to book your typical grocery delivery slots, stock levels of toilet paper in the local supermarket are running low and the chancellor is extending the furlough scheme until March 2021. We have experienced all of this before, it must mean only one thing, Lockdown 2, which sounds like a bad name of a movie sequel. Anyone who has seen the original one, would not recommend it to their friends or family, literally the NPS score is 0, but somehow, we ended up on our way to the cinema to see the second instalment. As the level of Covid19 cases are rising across the country we all have to do our bit and stay at home. All of this of course raises a big question, what it means to the grocery sector and how grocery retailers should operate in this environment. Retailers in the grocery sector, big and small, have all worked tirelessly to feed and supply the nation, have invested heavily in PPE, store modifications and supporting the vulnerable during the first lockdown. As a result, they have been rewarded with much higher sales but that came with a hefty price tag of increased costs. As we move into lockdown mode, here are my 4 thoughts on the topic for the grocery & convenience sector:

Online grocery shopping will continue to grow and increase in importance. We are habitual creatures, and once we do something enough times it becomes a strong habit that sticks with us. Shopping for groceries online has already become a weekly habit for people across the UK and that customer base is going to increase further during the second lockdown in UK. Any grocery retailer that has already offered online or click and collect options will look to increase their share in this market and there are a number of factors that will separate the winners from the losers.

  • Efficiency and accuracy of deliveries. Delivery and logistics is a huge cost to grocery retailers, any efficiencies that can be achieved here translate in to cost savings and better profitability. With the increased costs of operation in the lockdown environment, growing profitability will be key. Saving seconds on each delivery across thousands daily deliveries very quickly ends up in millions of pounds saved and more customers served. Precise address data that leads you right to the customers door and efficient and flexible routing will bring big wins to progressive operators.
  • Satisfied customers. Frictionless experience in compiling your order across multiple devices, ease of checkout, personalised experience and tailored offers are what will drive customer loyalty in the long term. Focusing on customer journeys will be key, once the initial spike in demand is gone and customers start looking beyond just getting a slot, quality of the experience will matter hugely. Understanding and segmenting customers will rise to the new levels of importance, targeted and accurately curated journey that feel intuitive is what will convert the one-off customer into a repeat customer.

For grocery retailers that have not offered online ordering options previously, or are just getting into this sector, it is all about partnerships in the short term to deliver to the local communities. In the longer term it will be about weighting pros and cons of launching a costly online delivery option or a more “cost conscious” Click & Collect option, parking space permitting.

In any case the first step is to understand where the online demand actually is, it definitely fluctuates across the country, depending on the customer types living in the area. Having an accurate barometer of what the current online sales are and how are they going to change in the future will act as a basis for future roll out strategies. Luckily some new and exciting data sets are already available to help with this.

Convenience shopping will keep winning. Our weekly movement tracker has been essential in understanding which stores will get the footfall needed and which won’t. Over Q1 and Q2 of 2020 we have observed how important the local shops have become for the communities and how footfall has shifted from city centres to local high streets and neighbourhood shopping areas. Retailers focusing on convenience locations need to scrutinise their range and offering by asking crucial questions on whether a customer can get everything they need in this store for their everyday needs. Analysing new customer data, grocery preferences and keeping a close eye on how the customer base is shifting will bring success and customer retention.

Big box shop, what is next? With the acceleration in online shopping and convenience shopping trends an elephant in the room is what to do with massive hypermarkets that are getting less attention from customers. The clear answer is they need to change, adapt and rethink the offer. Supermarkets have invested substantially in making the shopping experience as safe as possible in the current Covid19 environment, and customers have noticed this. Through our consumer surveys it is evident that customers feel the safest in supermarkets, compared to other venues they can visit. There is an outstanding opportunity to use this and transform large box shops into places that fulfil more customer needs. In order to do this, it is vital to understand where else the customers in those specific catchments are shopping and what they are shopping for. Once this is established those services and shopping missions can be brought into supermarkets with abundant space.

An analogy from the hard hit eating out sector would be the success of food halls in 2017-2019, bringing multiple flavours and occasions under one roof. Partnerships and concessions based on hard data of cross shopping will drive success for supermarkets going forward.

Ranging is another topic that is useful to discuss. This one might be counter intuitive at first glance, but in my opinion premium products and premium offer should be given more space and focus. Yes, we are operating with a backdrop of economic and jobs uncertainty, yes we are in recession and consumer confidence is low, but that doesn’t stop people from wanting to treat themselves. If we look back at Global Financial Crisis with economy tanking and jobs being lost, we will see a shift to value and discounters to save costs on everyday essentials but we will also see premium lines doing well. This can be explained by the fact that customers in the uncertain times might defer large and expensive purchases, but the treat element is still absolutely important. Some of the cheaper ways to treat yourself is through premium and indulgent ranges in the grocery sector, which grocery retailers should make easily accessible and visible.

Grocery retail sector is extremely resilient and is a part of our everyday lives, I have no doubt we will emerge even stronger out of the lockdown. As days and weeks go by, we will see how the sector responds and how the 4 points I mentioned develop.

It would be great to hear your thoughts and opinions on what the lockdown means for the grocery sector, so please share!

As we move into lockdown mode, here are 4 thoughts on the topic for the grocery & convenience sector:

Lockdown 2: Grocery sector's resilience is put to the test