The "New Normal" for Fresh Food Grocers after COVID-19

After the first eight weeks of the unprecedented COVID-19 impact on grocery shopping habits, several trends are starting to emerge. Some of these patterns emerged as a result of the short-term situation, while others may have a lasting impact in the way our industry conducts business going forward.

The recently coined “New Normal” is already reshaping supply chains, store operations, and merchandising processes. As a result, some retailers are paving the way on how to capitalize their position in the market under these new circumstances.

 

Food sales are up, but not all Fresh Departments have grown the same

Nielsen reported a growth of $30.1 Billion in the Food Industry for the 5-week period ending on April 12th in comparison to the last year. Some of the largest grocery chains have also reported astonishing preliminary sales growth in March: Ahold Delhaize showed 34% growth, while Kroger and Walmart were close to 30% and 20% growth, respectively.

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The Meat department has been the big winner seeing a 49.7% increase in the week ending April 26th, as reported by IRI. Produce (+22.9%) has also been showing strong results, while other fresh departments such as Bakery (-17.3%) and Deli (-20.3%) have had underwhelming results during the same period.

Customers are now making fewer trips to the store while buying much more every trip, driven by the desire to get in and out as quickly as possible. It is now more important than ever for grocers to pay close attention to their forecast and replenishment process in order to ensure they are in stock on the appropriate items for each department.

Supply Chain constraints and high demand of specific items are reshaping assortments

Categories such as cleaning and paper products started to eliminate multiple sizes and presentations to concentrate on top sellers weeks ago, but now we are experiencing a similar phenomenon in fresh.

Departments such as Produce, Deli, and Bakery in particular, have led some retailers to start packaging products that were traditionally offered on open racks in order to eliminate potential contamination. According to IRI, some retailers have started to offer deli meats and deli cheese as grab-and-go options with good results (up 14%).

A recent research report by Acosta found that customers have started to move away from buying pantry and paper products to increasing their spending in comfort foods such as sweets, frozen pizza, and salty snacks.

Online grocery shopping is here to stay, but not all online retailers are succeeding, particularly in fresh items

Nielsen reports that despite the 26%+ growth in online grocery orders in the last two weeks of March, at least 10% of them ended up canceled due to lengthy delivery options. Customers are complaining of having to wait days for deliveries, last minute cancellations, or incomplete orders.

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Only grocers like HEB, who launched a new delivery service for Texas shoppers promising orders delivered to consumers’ doors within two hours, will likely be able to capitalize on the increased online demand in the long run.

Acosta’s study also concluded that 56% of shoppers are extremely likely or very likely to eat more at home in the future, and that 31% of shoppers will do more online grocery pick-up or delivery than they did before.

Retailers that offer features that can easily convert recipe lists into a shopping list, facilitate repetitive orders, offer multiple and quick delivery options, provide friendly interfaces for Made-to-Order items, and are capable of feeding these orders into their production schedule will have the best chances to gain and retain online fresh customers.

We are undoubtedly in a new era of customer behavior in which online proficiency is becoming extremely important. But store execution is still key to retaining customer loyalty by keeping them safe and happy — making the appropriate technology tools used on both fronts paramount in supporting our “New Normal.”

Jesus Mathus_Picture

Jesus Mathus 
Global Head of Retail Solutions, ADC
jesus.mathus@applieddatacorp.com
813.849.1818 ext. 22597