While governments forced many in the foodservice sector to close in 2020, on the retail side, most suppliers and grocers were positioned to handle higher volume, but not 25 percent or more.
And although some retailers, both food and otherwise, were already enjoying some success with ecommerce, demand exploded.
“The big race in home delivery has not been online shopping, per se, but rather same-day delivery,” explains Bruce Peterson, CEO of Peterson Insights, Inc. in Bentonville, AR.
“New distribution facilities have been going up at a fantastic rate to accommodate this—Amazon had the lead, but Walmart and others are catching up.”
“The pandemic accelerated consumers’ utilization of click-and-collect options,” says Steve Lutz, senior vice president of insights and innovation at Category Partners, LLC in Idaho Falls, ID. “It turned from an anomaly to a habit.”
The pandemic also led to SKU rationalization.
Ed Treacy, vice president of supply chain and sustainability at the Newark, DE-based Produce Marketing Association, BB #:153708 says the solution for many retailers was to decrease the listing base—instead of seven different varieties of red bulk apples, there were three.
“They also stopped ordering some specialty items,” he says.
This is likely to continue long term, due to changing shopping patterns solidified by the pandemic. Peterson believes well-stocked produce departments will ultimately feature 230 to 250 SKUs, down from 600 today.
“Click-and-collect is not friendly to a large selection of SKUs,” Lutz says. “You can’t offer 40 varieties of apples, you offer the 10 that drive 90 percent of sales. That scrutiny will be applied to all assortments in terms of SKU rationalization.”
Omnichannel Strategies
Nearly 80 percent of consumers shopped online for groceries from March through the end of May, according to Inmar Intelligence.
Further, the Food Retailing Industry Speaks 2020 survey, by the Food Industry Association, FMI (Food Marketing Institute), noted online grocery sales rose more than 300 percent, on average, in first few months of the pandemic. McKinsey & Company estimates that 35 percent of grocery shopping will occur online by 2025.
Efforts going forward are likely to focus on improving offerings and user experience. Goodwin sees plenty of investment going into ecommerce solutions, and Peterson agrees.
“Retailers with robust omnichannel capabilities are clearly winning,” Peterson says. “Virtually every retailer recognizes this and is employing strategies to compete in this space.”
Although there were failures and missed opportunities early in the pandemic, says Kristen Park, extension specialist at Cornell University in Ithaca, NY.
“Any company that developed expertise online will have the advantage in the future.”
This is a feature from the cover story of the January/February 2021 issue of Produce Blueprints Magazine. Click here to read the full article.
