As predicted by world health organizations, COVID-19 is accelerating in Europe and other parts of the world for a second time. Similar lockdown rules apply, where non-essential business like restaurants and bars are closed, but this time, many schools remain open. Interestingly, in grocery retail many of the trends witnessed earlier in the year are similar, for example there is a degree of panic buying occurring, however it is definitely happening to a lesser degree. In this blog, a follow up to our first blog on this topic, To promote or not to promote? Our advice to retailers in the wake of COVID-19, I take a look at a few interesting trends as Europe braces for the second COVID-19 wave.
Similar trends occurring, but to a lesser degree
We’ve begun to analyze this second lockdown to date and it’s interesting to see a few early trends emerge. While still in the early stage, we see that customers are displaying similar behavior as was witnessed in the first lockdown period – only slightly muted when compared to last time. For example:
- Customers are pantry loading, most of which occurred the week before official lockdown started, but this time at about half the rate as before (18% now vs. 30% during the first lockdown)
- Basket size is again increasing, but compared to the first wave where retailers saw a 30-35% increase in basket, this time we’re seeing about 20-25% increase
- Online shopping is again up, but the current to previous comparison is 70% / 90% – again, slightly less than we saw the first time around
Though there has been similar consumer behavior this time, retailers should be credited for doing a very good job of communicating with customers, ensuring them that there will be plenty of product available in stores, and that there’s no need to stock up. Of course, with human behavior being what it is, as mentioned above, there still has been an uptick in stockpiling.
Toilet paper wins again!
If there’s one product that could be called a “poster child” for the pandemic, it’s toilet paper. In the first wave, we saw a 140% increase in sales, compared to a 100% increase now. Of course, we have seen other “staples” such as flour, pasta and canned goods increase in sales in this second wave, but not at the same levels as before.
The online dilemma: Does more online mean more customer value?
Of course, online shopping has been growing at very fast pace. However, retailers are wondering if the growth translates to overall customer value and increased sales compared to before. For sure, if you’re not a strong online retailer, you are losing a lot of sales opportunities, but we’ve found an interesting dynamic. We’ve analyzed customers who significantly increased their online engagement compared to last year – excluding the first lockdown period – and we’ve found something very interesting.
We split these customers into two groups, the customers who still shop in-store from time to time, and those who now solely shop online.
Note that while the omnichannel shopping group increased its spend by 12% on groceries, we’re seeing a decline of non-grocery (-7%) and traditional fresh items (-25%). For retailers, looking at the customer group that shops online only, the news is worse. This group’s total spend is down 11%, but has reduced its non-grocery spend by 80% and its traditional fresh spend by 95%! So, though we’ve always known that the omnichannel customer provides the most value to the retailer, it is not the case across all categories.
Fresh, bakery, sweets and impulse buys are down
One of the consequences of the increased use of online, and the worst news for retailers, is that spend for traditional fresh items – fresh meats, fish, cheese, fresh-baked pastries, etc – have not only dropped for some customers, but almost completely disappeared. This presents a very big loss for retailers in terms of customer value. We know that these traditional fresh categories are the ones where loyalty is built. When customers stop purchasing these items, it means they are fulfilling those needs in other ways – either by switching or by shopping somewhere else. Either way, it’s not good news.
During both lockdowns we saw that shoppers were increasing their spend in pre-packaged meats, cheeses and frozen foods. However, the simple switch does not completely compensate, and this loss of traditional fresh “counter” sales is quite important. So, what should we do about it?
Something we’ve seen recently is retailers saying that they are considering shutting down their in-store meat, fish and deli counters, because there is a lack of shopper demand. Even with decreased demand during lock-down, is this the right decision? No, it is not. For shoppers that remain in-store, they are maintaining their spend across these categories. The issue is that those products are not available online and more and more customers are buying online.
Take, for example, the Holiday season, which is very important for fresh items. While no one is quite sure how we will all celebrate, customers will still want to eat many of the same products – pastries, meats, cheeses etc. – that they traditionally purchase. How do retailers make sure they are offering the right products online and offline to their customers?
So, we are suggesting that retailers prepack some of these traditionally popular counter items for purchase online as well as offline. We believe that the availability of some of these “lost items” online will grow sales and increase overall customer value. There’s still a demand. What we are doing with the retailers we’re working with, we are helping them making customer-centered decisions, especially in this case, we are saying, “Okay, those are very important products on the specialty and fresh counters – so, in order to ensure that all of our customers have access to them, we need to make them available online.”
Learn more about the vital role of omnichannel optimization in today’s retail in the whitepaper, Omnichannel Imperative: Meeting the needs of a new consumer