In our latest look at the Coronavirus' lasting impact on global Grocery Retail, we examine eight emerging trends that are set to redefine the industry's future.
1. Value becomes a decision maker<p>As global economies tighten, financial strain will prompt certain behaviours from shoppers; not only will they become more frugal in their spending, they will also make greater use of existing food stores and become less wasteful in their quest to reduce outgoings. As a result, value will become an increasingly vital factor in store and product choice.</p><p>This has major implications for Retailers and CPG brands:</p><ul><li>Private labels and<strong> discount brands will experience strong growth</strong> amongst value-centric shoppers.</li><li><strong>Non-grocery spend will fall</strong> as budgets tighten and non-essential purchases fall away.</li><li><strong>Discount stores that can deliver a "one-stop shop"</strong> experience could make significant gains.</li><li></li></ul>
2. Localized shopping means new challenges ahead<p>Even as lockdown measures ease in some countries, many shoppers are likely to try and stay as close to home as possible. Hypermarket-sized stores may have provided shoppers with bulk-buying opportunities during the initial outbreak, but sales volumes in those formats have now tapered off significantly. Instead, smaller and convenience format stores are now the <em>de facto</em> choice for consumers who would prefer (or are still mandated) to stay local.</p><p>As a result:</p><ul><li>Spending patterns are changing, with Customers choosing to <strong>carry out full shops closer to home</strong>.</li><li><strong>Cross-shopping has fallen by the wayside</strong> as shoppers limit the number of stores they frequent.</li><li>Strong action will be required to <strong>retain new shoppers and regain lost custom</strong> as the situation evolves.</li></ul>
3. Food adventures will continue to happen at home for the foreseeable future<p>One in five British shoppers are now cooking every meal from scratch, up from just one in eight before the pandemic began. While restaurants, cafés, and bars will slowly begin to open up as social distancing restrictions ease, many Customers – particularly higher-risk individuals – are likely to continue their food adventures in the comfort of their own home rather than risk potential exposure.</p><p>For Retailers, this means:</p><ul><li>Meeting <strong>greater demand for fresh and frozen products</strong> in favour of pre-prepared lines.</li><li>Educating and <strong>inspiring shoppers to try new recipes</strong> via online platforms.</li></ul>
4. Health, wellbeing, and humane behaviour become new benchmarks<p>Not only has the virus prompted Customers to raise their spending on personal and home hygiene products, we've seen it drive a similar rise in healthy eating as shoppers seek to build their natural immunity as best they can. Concerns aren't just limited to their own wellbeing, either; recent weeks have seen debates ranging from the safety and protection of Retail staff, to the need for a wholesale re-evaluation of global meat consumption.</p><p>Addressing this heightened awareness around health means:</p><ul><li>Supporting Customers with their <strong>renewed focus on health, nutrition, and mental wellbeing</strong>.</li><li>Focusing hard on <strong>hygiene and humanitarianism</strong> – not only with regard to employee and Customer wellbeing, but in terms of animal welfare in the supply chain, too.</li></ul>
5. Online Retail reaches the tipping point<p>Soaring demand for home delivery and click and collect services prompted many Retailers to ramp up their online operations, and early indications suggest that this change will be anything but short-lived. Online sales now sit somewhere between two and four times those seen pre-outbreak, limited more by Retailer capacity than by Customer demand. The digital tipping point is here, Customers convinced by recent experience that online represents a viable way to shop going forwards.</p><p>Retailers looking to optimise their online operations now should consider:</p><ul><li><strong>Expanding capacity via 'last mile' innovations</strong>, from offering click and collect in smaller stores to partnering with fulfilment companies in order to expand delivery networks.</li><li>Ensuring that <strong>new shoppers become repeat Customers</strong>, making first shops easy, reliable and value-laden.</li></ul>
6. Expectations for digital grow in tandem with the online boom<p>As frugality and wellbeing come to dominate the Customer mindset, their expectations around technology won't be limited to online channels alone. Digital innovations that make shopping easier, faster, safer and lower-contact will all be sought after, with shoppers looking to Retailers to deliver useful and helpful new applications.</p><p>Areas of focus should include:</p><ul><li>Pre-trip planning <strong>applications that enable crowd avoidance</strong> based on levels of in-store custom.</li><li><strong>Touch-free replacements</strong> for vouchers, receipts, lists and payment.</li><li>Additional investment in <strong>technologies that reduce one-on-one contact</strong> such as self-scan and self-service checkouts.</li></ul>
7. Public goodwill must not be misspent<p>In 2020, stores have become something more. Customers have come to see supermarkets, stores, and employees not merely as a means to an end, but as pillars of their local community – essential services and key workers helping them navigate a period of unprecedented disruption. This social capital will prove to be hugely valuable, but only for Retailers who demonstrate an unwavering willingness to operate for the public good.</p><p>Harnessing the power of this deeper connection with Customers will mean:</p><ul><li>Increasing or <strong>maintaining activities that benefit local communities</strong> such as food banks and charity initiatives.</li><li><strong>Supporting local and national food producers</strong> and minimising their overall supply chain.</li></ul>
8. Market consolidation will define the years ahead<p>As the economy contracts, competition will only get fiercer. As weaker operators begin to struggle, larger Retailers are likely to benefit from their scale, forming global alliances and buying groups that enable them to operate more efficiently and purchase key lines in larger volumes. A period of consolidation is likely to follow, these larger chains scaling up as smaller competitors fall away.</p><p>To prepare for this period, Retailers should:</p><ul><li>Focus on <strong>resetting and simplifying</strong> their assortments, as discussed in our <a href="https://www.dunnhumby.com/resources/blog/listening-learning-looking-ahead-retailer-responses-coronavirus" target="_blank">previous post</a>.</li><li><strong>Lay the groundwork for new partnerships</strong> that can enable more efficient and productive operations.</li></ul>
Continuing our regular series exploring Grocery Retail's response to the Coronavirus pandemic, this week we analyse the results from dunnhumby's latest piece of consumer research, the increasing importance of Category Management, and the actions that Retailers need to be taking now to ready themselves for an eventual recovery.
Checking in on Customer concerns<p>In our <a href="https://www.dunnhumby.com/resources/blog/en/What-can-Customers-tell-Retailers-about-how-to-plan-ahead-right-now" target="_blank">last post in this series</a>, we unveiled the dunnhumby Customer Pulse, a survey of consumers from 19 global markets conducted at the end of March. Keen to develop our understanding of how Coronavirus continues to shape Customer demands, we moved ahead with a new wave of surveys using the same geographic and demographic framework.</p><p>Once again, three key issues came through loud and clear from our respondents.</p><ol><li><strong>As worry declines, Customer perceptions are changing </strong>The 'worry score' – the number of respondents in each country who self-identify as concerned about Coronavirus – went down for more countries than up. While this may not be surprising in isolation, where worry scores decrease, so too does interest in the preventative measures being taken by Retailers. As worries ease, many Retailers may find themselves pressured to <a href="https://www.dunnhumby.com/resources/blog/en/how-food-retailers-manufacturers-serving-protecting-their-customers" target="_blank">loosen restrictions</a> faster than originally planned.</li><li><strong>Customer satisfaction is on a knife edge </strong>Across all markets, we found little evidence to suggest any correlation between preventative measures and Customer satisfaction. Instead, satisfaction is dictated primarily by one defining issue: stock levels. Where customers acknowledge having noticed out-of-stock items, their satisfaction levels are likely to be much lower than those who have not. Raising prices on, and limiting availability of, virus-related items can have a similarly corrosive effect on Customer satisfaction.</li><li><strong>Simple actions can have a big impact </strong>While Retailers may continue to find stock levels difficult to control over the coming weeks and months, other avenues may help them to mitigate dwindling levels of Customer satisfaction. Actions that are seen to have a major positive impact on perceptions include removing delivery charges for certain Customers, discounting virus-related products, and increasing the frequency of store cleaning.</li></ol><p>A third wave of the dunnhumby Customer Pulse will be available soon.</p>
Keeping pace means clever use of Category Management<p>As is apparent from the results above, one of the only constants for Grocery Retail during the Coronavirus pandemic is the speed at which Customer demands continue to change. While it might not be possible to prepare for every eventuality, adapting or refining your approach to Category Management can be a smart and effective way to keep pace with those shifting need states.</p><p>We believe that Retailers should funnel Category Management activity towards three areas.</p><ol><li><strong>Aim for nimble management of product assortment </strong>As product shortages and changing demands continue to impact Customer experience, agility is vital. Customer decision trees and need states should be used as a guide when managing supply levels, emphasising higher-order needs in each category. Breadth – not depth – is one of the most pressing factors here, and Retailers can best serve Customers by ensuring that the most important need states are addressed above all else.</li><li><strong>Ensure your Private Brand is fit for the future </strong>Customers are looking to find increasing value in every shop as household budgets come under intense pressure. Private (Store/Own) Brand labels can provide shoppers with just that kind of reassurance, and we believe that now is the time for Retailers to shore up those lines. Reassessing the relevance of Private Brands on a category-by-category basis is a good starting point, as it is likely to reveal prominent gaps or areas that would benefit from further investment.</li><li><strong>Maintain your investment into essential online channels </strong>Soaring demand for online grocery has become one of the defining trends of the past few months, and there are no signs that this will change post-pandemic. Loyalty data can be a major differentiator here, providing an opportunity to create a frictionless experience by surfacing in-store favourites and relevant recommendations in a similar manner online. Retailers will also be well served by ensuring the accuracy of substitutions (particularly by arming packers with good suitability metrics) and emphasising issues of hygiene and quality around fresh produce.</li></ol>
The journey towards Recovery<p>Much of the work we're doing to help Retailers through these unprecedented times revolves around anticipating changing Customer needs at three distinct stages of the crisis: Insecurity, Transition, and Recovery. As we move through Transition, we believe that Grocery Retailers must take action now to ensure their business is ready for the new challenges ahead.</p><ul><li><strong>Reset your categories to focus on what Customers care most about </strong>The product assortment you have today may not be right for tomorrow. With economic challenges almost certain to trail the Coronavirus pandemic, Retailers need to begin looking at wholesale category resets that will make assortments leaner, fitter, and more relevant for cost-conscious Customers. Prepare to maximise shelf space for categories where variety is essential and scale down categories where it is not.</li></ul><ul><li><strong>Bring a Customer First approach to assortment and space planning </strong>Reviewing your latest customer data sets will identify changing category roles and importance of key marketing levers such as price, variety, and channels. There are already new adjacency and layout opportunities to implement by looking at the changing mix and frequency of purchase in the Customers shopping basket, especially in categories like personal hygiene and cleaning, fresh food and cooking from scratch missions. As Customer behaviours continue to change, understanding and monitoring these changes by different customer groups and different shopping missions will be critical in order to make the most informed and best retail decisions.</li></ul>
In the past few months the shift to online sales in grocery has been significant, increasing across all geographies. We now expect to see online grow to 5-7% of sales in most grocers and up to 15% for those retailers who have the ability to capitalise on that demand.
Online satisfaction and adoption<p>Whilst satisfaction with online is higher than stores during the Covid-19 crisis, getting customers to fully adopt this new way of shopping can be massively influenced by delivering on what matters most:</p><p><strong> 1. Amplify your offline strengths</strong> – shoppers tend to use their preferred offline grocers for online if they can, so reflect your brand strengths fully be it key categories, private label, your loyalty programme. Most customers will be using both offline and online channels going forward and expect a seamless experience</p><p><strong>2. Make the first few shops easy and quick to do</strong> – baskets are bigger online, typically 60+ items, so quick and easy basket building is essential. Instant favourites – where Shoppers can see all their normal items they've brought previously in-store when they register can save significant time and frustration.</p><p>Simplicity is the key in eCommerce grocery. It's a convenience-oriented experience, so you can ultimately drive the greatest convenience by providing customers with the quickest path to locating items of interest, allowing them to easily build their basket, and check out quickly.</p><p><strong>3. Go big on Fresh</strong>. Shoppers are keen to do their full weekly shop, so fresh is the key category. It needs special care and attention in terms of picking and delivery routines, as well as the right shopping cues for Shoppers such as date codes, provenance, seasonality, and ease of choosing the right quantities and weights.</p><p><strong>4. Focus on reliability</strong> – late deliveries, missing items, poor substitutes are the most common reason for leaving or switching service. Set outstanding operational metrics on these and improve functionalities such as integrating substitutability science into picking and ordering routines. Services such as reminders for forgotten items and amending your order before delivery also make a big difference to service satisfaction.</p><p>With out-of-stock challenges retailers need to be proactive with easy options for Shoppers to pre-select preferred substitutes and have a reactive approach to substitutes with great data supplied to personal shoppers for when the Shopper hasn't selected their preferred substitute.</p><p><strong>5. Personalising the shopping experience</strong> – online enables many things that just aren't possible in-store. Relevant product recommendations, personalised merchandising of associated products or specific ingredients, displaying the most relevant promotions, help improve the experience and the basket size by 10-20%.</p>
Improving the customer economics<p>Making the online service drive incremental value to the business is key to success.</p><p>Many retailers make the mistake of treating eCommerce like an IT project. Simply standing up a nice looking front-end eCommerce experience, while simultaneously ignoring all of the major operational considerations and many nuances of eCommerce grocery, will lead to failure. Collectively, these considerations can make or break the success of an eCommerce grocery business. Just like grocery retailers obsess over the details in their physical stores, they must do the same with their eCommerce business in order to drive profitability and ultimately sustainability.</p><p>This requires continued choiceful investment and focus in the following 4 areas:</p><p><strong>1. Track customer value not just channel performance.</strong></p><p>Having a cross channel view of shopper impact is key for right investment decisions. In most cases online sales at 70% incremental driven by existing shoppers spending more and attracting brand new shoppers to the business.</p><p>It's important for retailers to cultivate multichannel shoppers by augmenting an integrated digital experience with promotions that drive in-store customers to shop online and online shoppers to shop in-store. This ultimately will lead to increased visits, improved loyalty, and greater share of wallet.</p><p><strong>2. Maximise basket size and frequency.</strong></p><p>Whilst already 3-4 times higher than the store continuously growing average Shopping basket is essential for bottom line profitability. Dynamic product recommendations, forgotten item reminders, and delivery subscriptions are a few examples of activities to have in place.</p><p>Making "sale items" immediately accessible as a distinct category with filtering options (i.e.; past purchases, dietary preference, brand preference, etc) is helping drive basket size. This is an area where eCommerce is simply 10x more efficient than the store as you can essentially browse all promotional items of interest in a matter of a few clicks vs. traveling to the store and walking each aisle.</p><p><strong>3. Drive operational efficiency.</strong></p><p>Expanding current capacity is clearly important but equally reviewing ways to maximise pick per hour rates and delivery rates is key. Systematic reviews of picking by zone, planogram mapping, labour scheduling, dynamic routing of delivery orders are necessary.</p><p>One way GrocerKey is driving efficiency is by creating incremental staging capacity via temperature controlled totes. This is far less expensive than adding freezers / coolers – so there's major capex savings, more efficient from a space allocation standpoint, growth can be handled in a modular fashion, and the retailer can then promote never breaking the chill chain because the product is kept at the appropriate temperature from the time it's picked until it's in the customers hands.</p><p><strong>4. Provide suppliers a combined data asset across offline and online.</strong></p><p>Multichannel insights and activation that enable brands to grow the channel with you through highly personalised digital onsite and offsite media will be very beneficial to the economics of and profitability of your service.</p><p>The tipping point for online grocery is underway and retailers need to be ready to make the most of this opportunity.</p>
In our two previous blogs looking at the Coronavirus pandemic's impact on grocery retail, we explored themes including the dual challenge of protecting and serving Customers and pricing, promotions and the pressing need to protect employees.
As Retailers around the world work tirelessly to keep shelves stocked and their employees safe, in this latest post we're putting the Customer back in the spotlight once again. With Customer needs changing rapidly as Coronavirus continues to spread, we're turning our focus to the vital issues of loyalty building and communications during these unprecedented times.
Listening to the voice of the Customer<p>Helping Retailers make sense of Customer behaviour is one of our key areas of focus here at dunnhumby. While we normally do this by using granular purchasing data to deduce what Customers might do next, we're also keen to provide Retailers with a view of some of the bigger issues affecting the shopper mindset right now.</p><p>It's with that thought in mind that we created the dunnhumby Customer Pulse, a survey of shoppers from 19 countries across Asia, Europe, Latin America, and North America. Around 400 consumers were surveyed in each market, with online interviews conducted between March 29th and April 1st 2020.</p><p>The first survey provided us with a great deal of insight and three key observations.</p><ul> <li><strong>We believe that a new value wave is here </strong>Customers may be making fewer visits and shopping at fewer stores, but they are buying more when they do, and spending more on groceries as a result. Above all else, though, fears about personal finances mean that Customers are looking for greater value from Retailers.</li><li><strong>Satisfaction with online shopping is outpacing shopping in-store </strong>The majority of Customers believe that physical stores have done a good job of responding to the outbreak (54%), but satisfaction with both online delivery and online pickup services both outweigh that of brick-and-mortar stores.</li><li><strong>'Worried' shoppers provide great insight into differing need states </strong>One of the key questions we asked survey respondents was the degree to which they found themselves worrying about the pandemic. 34% of respondents identified as 'worried', and answers to subsequent questions from this specific group allows us to gain insight into their evolving needs, something we plan to explore further in future surveys.</li></ul><p>We plan to conduct two subsequent surveys over the coming months, so please stay tuned for the launch of future editions later this year.</p><div></div>
Building loyalty in a time of crisis<p>Amidst all of the challenges facing Retailers and their Customers at present, it can be hard to focus on anything other than the vital tasks of keeping stores open, clean, well-stocked, and as safe as possible. Nonetheless, opportunities to improve Customer loyalty do continue to exist, and those Retailers that can build a greater connection with their shoppers during this time have much to gain.</p><p>We believe that the pandemic will be defined by three key stages: Insecurity, Transition and Recovery. At present, we find ourselves somewhere between Insecurity and Transition – uncertainty remains rife, but the world has started to adapt to the consequences of the outbreak.</p><p>In speaking to our colleagues, partners, and Customers around the globe, we feel Retailers need to focus on three primary areas when looking to improve Customer loyalty during this phase.</p><ul><li><strong>Reinstate (or maintain) personalised promotions </strong>One immediate response to stock shortages by many Retailers was to remove digital and in-store promotions. While this was an entirely sensible reaction during the early days of the outbreak, there is clear evidence that now is the time to reintroduce promotions.With supply chains continuing to normalise, Customers are now acutely aware of the absence of promotions. A third of Customers (35%) in our Customer Pulse survey say that they have noticed price rises, and while a huge number (80%) acknowledge the necessity of basket restrictions, fewer than a fifth (18%) believe the same is true of promotion removal.As the economy contracts, Customers will look to Retailers for continued value in their shop. The reintroduction of promotions is a simple way to make this happen.</li><li><strong>Make reward schemes flexible, clear and easy-to-use </strong>Loyalty schemes might not be top-of-mind for many Customers at the moment, but Retailers can help make those programmes work harder with just a few tactical changes. Reminding Customers of the benefits they're entitled to presents a low-level way to demonstrate your commitment to them.Tactics to consider include the waiving of voucher expiration dates, offering additional redemption values for limited periods, and generally helping Customers get greater value from their incoming and existing rewards, particularly as shopping budgets tighten.Finally, consider allowing Customers to divert their rewards towards local communities and charities, or giving them the option to convert points into 'pay it forward' gift cards for local businesses.</li><li><strong>Prepare for tomorrow with lifecycle marketing plans </strong>Getting an accurate forecast of Customer behaviour has become much harder, with trends changing dramatically week-by-week. At the same time, keeping track of attitudes as they change is an essential task for anyone who wants to be ready to respond as new patterns emerge.Broadly speaking, this means focusing on a deep understanding of how and why Customer needs are changing. Retailers must strive to understand key indicators like how and why the dynamics of Customer value are changing, whether specific demographic attributes contribute to behavioural shifts, how shopping behaviour has changed, the new need states driving that transformation, and how different messaging can influence Customers on a segment-by-segment basis.A nuanced appreciation of these factors, combined with a consistent commitment to keep listening, will help Retailers develop effective loyalty-building strategies as we move gradually towards recovery.</li></ul>
Recommendations for Retail Media advertisers<p>For anyone involved in advertising to Customers via Retail Media, the past few weeks have been characterised principally by widespread uncertainty.</p><p>Trade uncertainty has seen products disappear from shelves, promotions halted, and a shift in focus from Retailers towards effective operation. Channel uncertainty has been defined by the cancellation of major events, the removal of 'touch-based' media like coupons and sampling, and the removal of out-of-home advertising as social distancing takes effect. At a brand level, advertisers have been faced with the unenviable task of staying relevant while striving not to be seen as uncaring, insensitive or – worse – profiting from a crisis.</p><p>To navigate these waters, advertisers need to show that their business is committed to doing right by their Customers. And the only way to do that is to demonstrate a clear understanding of what 'right' means. To us, this requires a focus on three areas.</p><ul><li><strong>Truly understanding Customers </strong>These are unprecedented times, and what worked yesterday may no longer work tomorrow. Only granular behavioural insights can tell us what Customers are truly thinking and how brands can help them overcome their fears, worries and needs.</li><li><strong>Tailoring, targeting, and personalising communications to them </strong>Huge swings in Customer behaviour are now commonplace, particularly with the pandemic unfolding at different speeds across the world. Communications must be tailored using aggregated insights, deliver the right messages to the right segments, and personalised to provide Customers with the support they need at that moment in time.</li><li><strong>Implementing sensible targets and KPIs </strong>With new approaches and new techniques of reaching out to Customers comes the need to implement new targets and KPIs. Advertisers must be mindful not to let the pursuit of their objectives outweigh their focus on helping Customers.</li></ul>
Since our update last week on How Food Retailers and Manufacturers are Serving and Protecting their Customers in the midst of the Coronavirus, food and pharmacy retailers and their suppliers continue to work tirelessly and heroically – in the face of health risks to themselves – to ensure their customers are able to feed themselves and their loved ones.
As the crisis continues to escalate, this week we look at how retailers are putting employees first and protecting them as part of a Customer First strategy, as well as determining the right way to offer value for money to customers and future considerations for pricing and promotion strategies.