Recap: Reinventing Grocery | The Timeline to the New Normal

by Natalie Tatum | Apr 30, 2020 12:00:00 AM

This past Tuesday, April 28th, Date Check Pro and Agilence, Inc. teamed up to deliver the Webinar “Reinventing Grocery | The Timeline to the New Normal.” A recording of the webinar will be available to view and download tomorrow, with an eBook version coming within the next two weeks. Below is a recap of Reinventing Grocery | The Timeline to the New Normal.

In this webinar, we will be referencing certain time frames that can be broken down as follows: Today (now to three months from now), Tomorrow (three to six months from now), and The Future (six months from now and beyond.)

Cleanliness is Sales: 

According to Acosta, a full-service sales and marketing agency, consumer concern regarding COVID-19 is up to 7.9 out of 10 (not all worried to extremely worried), compared to 6.9 at beginning of March.

Two weeks ago consumers were searching more using the keywords “cleaning groceries” than they were on “grocery coupons.” This is a trend line that’s never crossed.  This data from Google Trends shows that the general public wanted to know where to buy cleaning products &/or how to clean their groceries than they did coupons.​​

Luckily, we can see this trend line starting to normalize slightly, but “cleanliness” isn’t’ a trend that’s going to leave public discourse.

Grocery has already responded to the call for cleanliness and letting customers stay socially distant – implementing sneeze guards, limiting the number of customers within a store, creating one-way aisles, and in some cases even investing in robotic cleaning tools to lessen the number of humans in their stores. 

These extra steps help protect associates who are in constant contact with the customers and provide customers with extra reassurance as well. Grocers should be commended on the incredibly quick response and retooling of the store.  They’re truly amazing outcomes given how fast they were implemented. 

According to the January 2019 Dunhumby Retailer Preference Index, the needs that customers ranked in order of importance are :

  • Perceived Price (the titan of these rankings)
  • Quality
  • Digital/eComm 
  • Operations
  • Convenience
  • Discounts
  • Speed​​

As we see “a clean store” already ranked high under Quality. While this already ranked as the 2nd most important attribute to a grocery store, we might see this jump to #1 when the next iteration of this report reflects pandemic data.

Sneeze guards, masks, really any type of visual cue to highlight “safety & cleanliness” are only as good as they appear. A dirty sneeze guard is probably worse than NOT having one at all.​​

Infectious disease experts are starting to theorize that a second wave of COVID-19 could return in the fall. If we (the people presenting this webinar) can find this news, there’s no doubt the media will be running with this news at some point too, meaning shoppers will most likely have this pandemic on the brain for longer than just a few weeks. Remember this statement as you return to “business as usual” and what that means for you vs. your customers.

Turnkey – a concept to consider – is promoting “order ahead deli and pharmacy” programs. While this may only speed up a specific portion of the shopping experience, it can deliver a perceived “bubble” for the consumer who wants a “get in, get out” experience. This may have significant impact on shopping behaviors long term.  It’s also a place where the Buy Online Pick Up In Store concept may take place in a modified way.  The shopper may still want to visit the store but will want the security of picking up the package and not having to wait for a service department, coming back to digital investments and making them more flexile for the customer.

A final thought is how cleanliness & safety can play into your future brand messaging. Alaska Airlines & even Delta are quickly pivoting to prove they are “EXTRA” clean compared to other airlines. While it may or may not be true, Alaska Airlines was the first to plant a flag here. Who will be doing the same in the grocery industry – on a regional or very local level?

Consider Metcalfe’s Market – a small grocery chain based in Madison, WI – they’ve managed to capture the local news cycle by continuously publishing press releases & making updates related to cleanliness & safety. 

Pressure to Replenish:

Looking at data from three different regional Agilence customers, everyone rushed to buy more of everything. Internally, we’ve been calling this the Hanks Peak, because right when Tom Hanks & wife Rita Wilson tested positive for coronavirus things quickly got out of hand!​​

When we break it down by category we see that customers were stocking up on center aisle foods (your non-perishable goods like pasta and soup) but it eventually leveled off and those departments as people began getting into quarantine routines.  

People went nuts buying cleaning supplies but there was also a spike in items like sharpie markers & printer ink since people were forced to work and teach at home.

Based on trends we we’re seeing and hearing directly from grocery executives, grocers are focusing on the 20% of the items that produce 80% of the volume. In many cases, there’s not enough inventory to run “sales,” leading to higher average prices across the board, but consumers are adapting well to these shortages as long as they are getting “some” version of the item they set out to purchase.

In a recent interview, Scott McClelland of HEB Food/Drug Store said “Rather than 40 kinds of bacon, let’s bring in two. And the customers have been super understanding and they realize that in a time of crisis, everybody has to be flexible.”​​

Even though consumers may have less of an ability to get “special” items, these reductions will also help put less stress on Operations, which will have a long term impact on the breadth of varieties.  Some very successful grocery customers already limit variety in center store and some cold items focusing only on core movers, which may have some major impact on grocers and suppliers creating winners.

It’s also important to recognize how our current dash to fill shelves will impact expired shrink in the long run.

We tend to focus on the slowest movers as the driver of expired shrink. Rightfully so, as the the 25% of a stores inventory that turns the slowest accounts for more than 1/3 of expired losses. However, the 50% of inventory selling the fastest in stores also accounts for roughly 1/3 of losses as well. On a normal day, high turn products expire due to a lack of rotation when stocking.​​

It’s entirely feasible that this data throughout 2020 and into 2021 shifts toward an even higher portion of loss coming from these top sellers as that dash to fill shelves leaves rotation practices at the wayside and we de-emphasize reordering and filling slow movers.

As you are able to get your head above water, its time to put a microscope to your SKUs. Due to movers taking larger priority to non-movers, there will be less SKUs after this is over.​​

While some of your top mover inventory may settle back into the their regular groove, what about the items that were selling poorly during the pandemic? How these items are purchased and displayed need to be taken into consideration as you update or design future planograms.

The New Shopper:

During the pandemic, grocery stores have become a one-stop shop for most consumers. 

Grocers saw a spike in General Merchandise sales during this event.  This may be temporary, but if it sticks, what decisions will grocers make to merchandise mix?  Big box grocers are better suited for this.  There’s been a lot of space given to organics and other specialty items or maybe the need for less SKU’s we talked about all provide a place to stock a little more general merchandise. 

Right now our grocery customers are seeing massive increases in items like printer paper, teaching products, and all types of home office supplies. This could be a short-term spike but something to consider as we head into the future.

Looking at my own household, we have placed orders with every grocery option nearby over the past month and all struggled with the gluten free category. Limited pick up times meant waiting several days to pick up our order only to find they too didn’t have gluten free bread. Eventually, we ended up abandoning all nearby options in favor of a store 40 minutes away, one-way, just to get the gluten free bread, which has since become our go-to weekly. We’d rather commit to one-time consuming shopping trip that meets our needs than a half dozen nearby trips that could all turn up empty on the items we desired most.

Essentially what’s happening is digital – referring to having a simple and easy way to shop online is shaping up to be similar to loyalty programs. You need to have it, but it doesn’t need to be best in class. Instead, the operations and convenience surrounding your digital experience are what will drive and keep shopper preference.

For 2020, we expect Operations and Convenience will become much more competitive with Digital for that #3 spot.

With increased social distancing measures being put into place within many municipalities and states, customers continue looking to delivery services in order to avoid contact with large crowds and while providing grocery services.  Looking into some Agilence grocery customers, we went to find that the data supports this trend.

But we didn’t find exactly what we expected:

  • Threat of strikes
  • Services too busy
  • Start with Company 1- they’ve seen a 65% increase in Instacart Transactions from previous peak
  • Company 2- Lost control of their Instacart due to strikes & outages in service

The real story is those that invested in technology and in making sure they could fill these orders are winning.  This change is here to stay.

  • Some grocers are building these capabilities internally and being less dependent on third parties in order to control the customer experience.  The ability to control the whole stack as technology companies call it has serious benefits, just look at Apple.  By that we mean, owning the digital front end which interacts with he customer, the back end that interacts with the store associate and owning the delivery.  That’s owning the stack which also provides control of the experience. 
  • We can look to the industry that’s been ahead of this trend, restaurants.  Although they may use third parties to deliver the most successful own the stack.

The reason we are talking this much about restaurants is simply because many grocers brushed off c-stores as a competitor  – which turned out to bite them. ​​

The concept of restaurants trying to displace grocery seems like it would be a supply chain nightmare, but there is a chance some larger brands will emerge selling directly within a niche category.

Our suggestion is that District and Store Managers should keep an eye on their transactional data to see if their proximity to a restaurant selling a grocery product(s) direct to consumers is having an impact on sales. This is not a today problem, but more something to be aware of.

Your Hero Associates:

Morale of employees is excellent. Consumers see them as “front-line” first responders like health care and first responders. In many cases, customers are actually thanking them for “their service.” While Operations and Quality of the store might be a the front of your mind, make sure you prioritize your workers and their safety. Without grocery store workers, we have nothing. 

Thank you for attending our webinar. Like previously mentioned, we will be posting a video download of the webinar tomorrow, Friday, May 1st, and producing an eBook version as well.

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