Post-Pandemic Grocery Retailing Landscape
(5 minute read)
The Covid-19 pandemic and lockdown has had a dramatic impact on consumer grocery shopping habits. McKinsey in a new report, undertakes a quick survey of grocery retail consumers in five key European markets – France, Germany, Spain, Italy, and UK. Based on the findings, the report identifies five key themes and discusses some implications for grocery retailers and Consumer Packaged Goods (CPG) manufacturers.
Theme 1: Back to stores but low-key
Lockdown induced panic buying saw a dramatic increase in demand for groceries especially online. Online ordering drove huge growth in web traffic with consumers also willing to try new websites as they hoarded groceries. The post-pandemic grocery landscape indicates that consumers may view online buying as a temporary phenomenon. Consumers are making a marked but tentative, somewhat muted return to physical stores and online shopping is set to stay with us for a while.
This trend illustrates the importance of grocery retailers expanding online service provision including availability of delivery slots, expanding delivery services, providing click and collect options, and other facilities.
Theme 2: Food for health and fun
Lockdown has forced consumers to re-examine their relationship with home which has now become the centre for work, learning, play, and entertainment. Consumers are now focusing more on healthy foods, cooking from scratch, but also having fun with food. This is reflected in the increased sales trends for alcohol, snacks, and baking products.
Retailers and CPG manufacturers must keep consumer interest in products alive by continuing to introduce new, exciting offers and following product innovations.
Theme 3: Watching the wallet
Consumers are more mindful of how they spend. While many consumers have effected a lot of savings because their discretionary spend has been curtailed, lockdown has also impacted consumer earnings and livelihoods extensively and has also forced consumers to rethink how they spend their money and value they derive from it. It is evident that consumers are becoming more price sensitive as they switch to less expensive brands, move towards affordable, discount, and budget stores, shop more in bulk, and develop a keener eye for sales and discounts.
It is important for retailers and CPG manufacturers to clearly differentiate price and value positioning amongst brand and non-brand offerings.
Theme 4: Small is big – sometimes
For some time now, the market hegemony of big brands has been continually challenged in the marketplace by the rise of smaller brands. Fuelled by consumer demand for authenticity, personal stories, and core values, many small brands have moved into niche spaces overlooked by big brands and have indeed challenged big brands and their market positions. Despite the market revival of some big brands, the rise of small brands is here to stay.
Many retailers and CPG firms are either building, launching, or incubating and acquiring small brands with unique stories that speak of authenticity.
Theme 5: Mindful buying
Consumers are now exhibiting a strong preference for retailers and brands with a sense of purpose. This seems to follow the trend of consumers returning to basics after a crisis. The financial recession of 2008 saw consumers demand social responsibility from corporations. Current consumer concerns around climate change and sustainability will drive consumer demand.
It will become important for brands and retailers to communicate a strong on-point message about purpose and values in their brand stories.
