The COVID surge for supermarkets

The pandemic hit many retailers hard, with stores shut and high streets deserted. But shopping for food continued and supermarkets – the leviathans of the grocery segment with up to 95% share – have not only kept their doors open, but have seen a massive surge in demand, online and in brick and mortar stores.

According to industry experts The Grocer magazine, UK supermarkets continue to see high levels of growth.  They quote research from NielsenIQ, that shows that sales for February 2021 grew by 10.6% year on year.

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With restaurants closed, we’re eating at home more – the US has seen at home food consumption up 50% and the UK 30% since the start of the pandemic. As Susan Barratt, CEO of analysts IGD, says: “Supermarkets continuing to benefit from the ongoing closure of non-essential retail and the out-of-home sector.”

The pandemic has increased demand for local produce and in April 2020, Google searches for ‘local food’ increased. Supermarkets want to mitigate supply chain vulnerabilities, such as the virus impact in supplier countries or restrictions on the transportation network.

For those whose disposable income has been reduced as a result of the pandemic, value is more important than ever. Lower income households want to reduce their spend and in McKinsey’s Grocery Retail survey 37% of respondents said they will look for ways to save money on grocery shopping.

Uninterrupted service

In such a shifting environment, how do supermarkets ensure that they continue to deliver an uninterrupted service to customers, and capture maximum opportunity? How retail is changing, the process transformation offers opportunities to differentiate and adapt.

  • Online is essential

    The shift to online shopping started as a necessity, but is now a habit. According to Mike Watkins, NielsenIQ’s UK Head of Retailer and Business Insight: “It is now past the ‘tipping point’ and is at the ‘sticking point’. We anticipate that online demand will continue to grow ahead of the market.

    Supermarkets need to offer ecommerce options making it easy for customers to buy their groceries online. It’s essential that online shopping is user-friendly, with a frictionless checkout process that avoids abandoned carts and lost opportunity.

  • Delivery options

    Retailers need to consider delivery options – home delivery is convenient for customers, but the ‘last mile’ is costly for retailers. Adding BOPIS/Click and Collect and Curbside Pickup expands customer options and helps to manage expense.

  • Brick and mortar stores – the customer experience

    Not everyone is ordering via the screen – in 2020 a significant majority (65%) of consumers still didn’t shop online, and of those only 7% say they are planning to shift from the store to the screen.  So supermarkets wanting to offer uninterrupted service can’t afford to take their eye of the customer experience ball. That means continuing to make brick and mortar stores safe, for example with contactless payments, and self-checkouts.

  • Personalisation and loyalty

    Consumers were demanding personalised communication well before the pandemic and that is one thing that hasn’t changed. Uninterrupted service means that supermarkets need to continue to use personalised loyalty programs, coupons and different types of promotions to win and keep customers.

  • Transparency

    The pandemic has accelerated the growing awareness of the source of our food, and a focus on healthy and local produce. Supermarkets need to share information about product origin with customers. Retail technology such as QR codes and specialised barcodes help consumers to informed choices about what they buy.

  • Cost efficiencies – inventory keeping and process automation

    To meet the demand for ever greater value, supermarkets have to continue to shave off every element of avoidable cost. The market has seen a 13% increase in retailers who investing in automation of their warehouse management system. Others are using smart inventory visibility systems to help to increase customer value.

  • Retail analytics

    We can see how retail is changing rapidly, supermarkets have to adapt with agility. McKinsey estimates that retail analytics offer the opportunity for a 3-6% increase in sales. Supermarkets wanting to take advantage of this growth opportunity need smart retail analytics to give them full visibility of what’s happening in their organisation.

The last word

2020 was a record year for supermarkets, and whilst the market may contract a little once the pandemic is over, all indications are that it will not return to pre-COVID levels, but will retain some of the growth from the pandemic surge.

If supermarkets are to take advantage of how retail is changing, and continue to serve and delight their customers without interruption, they’d do well to heed the words of Marc Poulin, the former CEO of Sobey’s, in his interview with Oliver Wyman – Management consultants:  “The retailers who will recover most strongly are those who evolved to meet consumer demands by adapting their business model.”

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