Dr Kris Hamer, VP Research, Retail Insight
Social distancing and a life lived largely online has been the reality for over a year. But, as the world gradually emerges from lockdown, is the shape of retail really changed forever?
Shoppers have flocked online out of concerns for safety and convenience over the past year, but a business model skewed towards e-commerce is not necessarily one that they are keen to pursue post-pandemic.
However highly online grocery shopping rates on the customer experience scale, the fact remains that it is an expensive and inefficient channel for retailers to maintain. Then again, economic pressure on the brick-and-mortar model means grocers have to make their assets work harder than ever.
As in-person sales of non-food categories have fallen significantly – the majority moving online – retailers are over-spaced. Grocery is being asked to shoulder the cost burden despite its relatively small footprint. It’s increasingly clear that the pre-pandemic supermarket model is no longer fit for purpose in a post-pandemic world.
But as with many challenges, there is great opportunity.
First, it’s time to move away from binary thinking – that grocery fulfilment can be either online or in-person, either dark store, fulfilment centre or retail outlet. It’s time instead to look at a next-generation hybrid model.
Taking advantage of forward-deployed inventory, grocers can get product closer to shoppers than the majority of dark stores ever could. In-store fulfilment for e-commerce benefits customers who enjoy the convenience of in-person and online, wherever and whenever they need it. Recent research by Adobe has shown that 47 per cent of retail executives expect to open hybrid stores across 2021.
But reshaping the grocery retail space is not just about making the most of its footprint. Grocers should look to squeeze more out of their entire operation, from missed sales from poor inventory management processes through to the unnecessary costs caused by excess waste. UK supermarkets look set to lose £2.4 billion through waste in 2021 alone, and food waste levels are only growing. This might represent the only easy money left on the table for grocery retail as it can be quickly improved by adopting an effective dynamic markdown strategy to ensure product sells through at the right price at the right time. It’s only by delving into the vast amounts of data currently being captured that grocers can gain the insight to fix issues of over- or under-supply and cutting costs for the long-term.
Events such as pandemics have a tendency to bring out the hyperbole – the high street is dead, for example, and everyone will shop online for evermore. The reality will of course be more nuanced. From the perspective of both cost and experience, in-store retail is still vital for long-term growth. However, the future lies with a new type of store that will cater to the post-pandemic shopper and will be supported by a more efficient supply chain backed up by dynamic markdown strategies. In order to achieve this, supermarkets need to understand the data today to build an effective, efficient and responsible hybrid retail model for tomorrow.
by Paul Boyle, CEO, Retail Insight.