Trends & ForecastsApril 6, 2021

One Year Down the Line, the Grocery Sector Proves Resilient to Pandemic Woes

By GABRIELLA BOCK | MANAGING EDITOR

The arrival of the COVID-19 crisis in 2020 has significantly altered the way people shop. And no industry has proved its resilience through the tides of change quite like the grocery sector, most notably through the rollout and adoption of same-day pickup and delivery services. As such, 2020 will go down as one of the most profitable years for big grocery.

 

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Digital rollout

Prior to the pandemic, the U.S. grocery industry held to a common pattern and was slow to adopt digital services.

 

One year later and one of the areas where grocery has seen its greatest growth is in the rollout and adoption of BOPIS, curbside pickup and even home delivery through third-party vendors such as Instacart, Doordash, and SHIPT.

 

With the rollout of these services, more consumers are shopping for groceries online than in previous years, with 58 percent of consumers—including 71 percent of Gen Z and Millennial shoppers and 44% of baby boomers—having adopted digital tools to assist with their grocery shopping.

 

Private label preference

To appease the growing consumer preference for private label, grocers and big-box retailers have been investing more in their in-house brands and rolling out new options for organic, natural and competitively priced foods.

 

Costco’s Kirkland brand grew 504 percent in 2020 and Kroger’s Simple Truth brand saw a 217 percent sales increase last year, too.

 

Target.com’s sales grew the most in 2020, with its Good & Gather grocery line seeing a 1588 percent increase in its year-over-year sales when compared to 2019.

 

Image courtesy of Target

 

Following the upward momentum of Good & Gather, Target will soon launch a food and beverage line known as Favorite Day, which will have over 700 indulgent treats including baked foods, mocktails, and gourmet sweets.

 

Improving inventory management

When the first wave hit in the spring of 2020, we witnessed firsthand how unprepared the grocery sector was for a crisis. Major disruptions occurred in the supply chain with inventory shortages prompting a mild panic among consumers. What’s more, nearly six percent of grocery revenues were lost in 2020 due to out-of-stock products.

 

However, with many grocers and big-box retail stores having since increased their IT budgets and opened their minds to AI, the grocery industry has demonstrated that it can handle new challenges head-on.

 

Carl Boutet, chief retail strategist for Studio RX, told RETHINK Retail that the first lockdown showed grocery leadership where their vulnerabilities were and gave them new insight into how they transform their shortcomings with new investments in IT and automation.

 

“We’ve already been seeing massive investments around automation, fulfillment and how the grocers are going to have to meet that digital demand more quickly for all sorts of good reasons,” Boutet said.

 

In addition to last spring’s inventory challenges, many shoppers reported problems with the home delivery of their products.  A survey conducted by Anyline, a mobile solutions provider, found that three-quarters of US shoppers had encountered a problem with their delivery in the last year.

 

“A common disruption we saw was the significant failure in the last mile of retail deliveries,” said Anyline’s digital content lead Marc Babin. “This clearly has an impact on customer trust and loyalty to retailers and shows the importance of a reliable delivery network on the bottom line of every retailer.”

 

To mitigate this challenge, Babin told RETHINK Retail that many grocers are now using mobile scanning technology to organize products for BOPIS, curbside pickup and home delivery, which helps streamline the job of front-of-house employees.

What’s more, the data captured from scanners can be integrated with customer-facing apps to keep inventory counts up to date—a function that has become imperative to providing a positive customer experience.

 

Going forward

From the adoption of curbside pick-up to the extreme growth of same-day services, the COVID-19 pandemic has left an imprint on the way consumers shop for food.

 

And while numerous studies indicate mobile-assisted grocery shopping is here for the long haul, brick-and-mortar is expected to remain the primary grocery channel of consumers in the United States.

 

“Online grocery shopping is not going away anytime soon. It spiked 54% in 2020, will cross over $100 billion in sales in the USA in 2021, and will continue to grow 18% per year to 2024,” said TD Insight’s CEO Tony D’Onofrio.

 

“Having said this, by 2024, roughly 86% of grocery sales will still be in physical stores. Brick-and-mortar is not dead, but it will become much more efficient, including taking a more leading role in delivery fulfillment.”

 

As such, grocers must anticipate a return to pre-pandemic levels of in-store shopping. Fortunately, grocers have now done the work to prepare them for future shifts in the supply chain, proving their resiliency to adapt to the demands of the nation’s shoppers.

 

GERALD MATIRI CONTRIBUTED TO THIS STORY