How food retail will—and won’t change—post-pandemic
This year has been quite a roller coaster for the food retail industry. Pandemic-related disruptions have packed several years worth of change into a few months. And while the pandemic is far from over, the dust has settled enough for many in the food retail industry to be asking: What’s next?
We sat down with Mike Troy, Editorial Director of Progressive Grocer and 30-year industry veteran, to get his take on where food retail is headed.
Change is the only constant
Troy notes that there’s an overarching sense of “when do we get back to normal?” among food retailers. But he offers a reality check.
“Retail is never normal. It’s a constant state of change. You’re always adjusting to customer expectations.”
The industry has seen massive expectation-shifting events before—for example, Walmart entering the food industry, or CVS’ expansion from drugstore to vertically integrated healthcare provider.
Bottom line? “There is no normal in retail—it’s always advancing. Now, we have a new catalyst in the form of this virus that changed everything about how people work, live and play—and it’s changed everything about food retail.”
Pandemic or not, we have to eat
So far, the food retail industry has weathered the pandemic remarkably well.
“The food retailing industry really elevated itself as a source of national security and a critical part of our supply chain,” Troy notes. To put the last six months in perspective, he refers to his own experience living in Florida. “We regularly see these sort of pantry-loading reactions every time there’s a whiff of a hurricane. The pandemic took that and applied it across the whole nation. Then, you layered on this extra element of displaced demand (basically taking half of the food retailing capacity out of the equation and heaping it on the other end). If you think about that stress test, the food industry should feel really good about withstanding that tremendous shock.”
Data collected by Progressive Grocer shows the impact of this surge in demand. From January 1 to July 12 of this year:
- General food sales were up 14.1%
- Refrigerated goods sales were up 16.3%
- Frozen food sales were up 23.4%
- Meat sales were up 23.2%
Many non-food categories also grew, with select in-demand items practically flying off the shelves:
- Sales of toilet tissue were up 26.4%
- Sales of household cleaners were up 40.3%
- Sales of bleach were up 43.9%
For the frontline, keeping up with demand—along with a host of new safety procedures—was a constant challenge.
“In store, folks were just trying to keep shelves replenished under supply chain disruption,” Troy says. “At the same time, frontline workers were being asked to do all these new things in challenging circumstances that nobody’s ever dealt with.”
And while many categories surged (as seen above), others stagnated.
The battle for ‘share of stomach’
Pre-prepared foods within grocery stores took a hit during the pandemic. Sales of deli and prepared foods dropped by 16.9% over the period from Jan 1 – July 12, and bakery dropped by 6.9%.
“If you had a hot bar, you had to shut it down. But there was constant pivoting as companies who had the production capacity tried to figure out how they could continue to prepare foods and sell them,” explains Troy. “Instead of preparing the food and putting it out for self-service, now it’s full service. That required some rejigging of departments and training of employees.”
Food retailers with the tools in place to quickly reskill and cross-skill their frontline have been able to adapt more quickly—and capture customer demand.
“I’ve heard reports that the pre-prepared full service foods are doing well, maybe even better than when they were self-serve,” says Troy. “I think that speaks to the potential that might exist in the future with some of these areas.”
With restaurants closed or at reduced capacity during the pandemic, more people were cooking at home. This not only caused a 22.2% growth in sales of culinary items at food retail stores—it also sparked some customer behavior changes, the full impact of which has yet to be fully realized.
“People discovered ‘hey, I’m a pretty decent cook, I like cooking,’” notes Troy. “But we’re watching the fatigue factor. Are they sick of cooking, how soon will they want to go out?”
Going forward, food retailers should pay attention to trends in the ‘food at home’ vs ‘food away from home’ tug of war, as the lines continue to blur between them. When it comes to the question of what’s for dinner, consumers have a lot of options—from hot counter to drive-thru to food delivery to home meal kits—and they’re all jostling to be top of the list.
“You really need to keep an eye on this ‘share of stomach’ metric, because it’s how food retailers are looking at things and determining their addressable market,” Troy says. “Anyone who sells food anywhere is your competitor.”
The store of the future
A survey of food retail executives conducted by Progressive Grocer at the start of the pandemic provides a snapshot of omnichannel service adoption:
- 54% of respondents offered a mobile shopping app
- 43% offered 3rd-party vendor delivery (e.g. Instacart or others)
- 40% offered store supported delivery
- 40% offered drive up collection
- 31% offered click and collect
- 42% were just getting started or didn’t yet have a strategy for omnichannel service
Fast forward to today. There’s been triple digit growth in curbside pickup. The 42% of people who didn’t have a strategy in place have had to figure something out—fast.
And there’s no going back from this, according to Troy: “Nobody says they want something to be less convenient. That pendulum might swing back some, but there’s been a big surge in demand, and the digital commerce shift requires some adjustment.”
Does the growth in digital spell the end of physical stores? According to Troy, the answer is no.
“The death of physical stores is exaggerated. But the definition of stores is changing. We’re seeing a tremendous reinvention of physical spaces, the concept of store experience and the services offered. Some will be merely pickup points (the concept of the dark store), while others will be more experiential (with Wegmans being an example of that). There is a middle ground, but if you’re there, you better have a strong critical mass of locations to be ‘the convenient place,’ and you have to be right on prices too. There aren’t a ton of new stores being built, but the ones that are there will be changing.”
That means the role of frontline associates will change, too.
The frontline associate of the future
Technology continues to be a driver of change on the frontlines.
“You’ve got self-checkout, and this has been a record year for the rise of self-checkout. You’ve got Amazon Go stores and other solution providers that offer that sort of technology to help people remove the friction of going to a store,” Troy says. “I think that notion of going to the store and waiting in line to pay for your stuff will be one of those things you tell your kids and grandkids about—and it might only be five to 10 years away.”
At the same time, Troy predicts the emergence of brand new frontline roles. The pandemic has already given rise to new customer service roles—for example ‘health ambassadors’ and shopping cart cart sanitizers. Increased digital commerce means more associates will shift into fulfillment-type roles (already put in motion by the growth of click-and-collect).
As advanced technologies become integrated into the food retail industry, we can expect roles to change even further. Troy gives the example of delivery drones, which are being piloted by many major retailers.
“Think about what kind of a job that then becomes at the store level. You may need to have a drone retrieval specialist, a drone loading specialist. Somebody has to load the drone, handle it and store it at night. As I think about new types of jobs that will be created, that’s one oddball example that jumps out.”
It might sound far-fetched, but Troy cautions not to underestimate the fast pace of change in this industry.
“We’re already seeing this tremendous change in food retailing. I don’t think it’s possible to overestimate the changes we’ll see in two years.”
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