By year end 2020, the Food/Grocery retail segment had had a monster year. How the industry got there was a bit out of the ordinary; the first two months of 2020 saw significant sales gains of 4.9% over 2019. Then COVID happened, panic set in, and surge buying drove a 3-4 week period where sales were up 80% to 500%+ in some product categories.
What is clear, is customer behavior has changed, and while there’s no need to sound an alarm about the demise of stores (88% of Food/Grocery sales still have a store fulfillment component), there is reason to sit up and take notice that 27% of sales that are now digitally-mediated (pre-pandemic it was 3-4%). Going forward, we expect digital orders will continue to climb, but only as long as retailers address margin loss on these journeys. (Retailers cannot sustain 3-8% margin loss they experienced on digital orders compared to walk-in customers).
That is what this research is about. The pandemic changed the grocery industry permanently. The good news is that the pandemic has accelerated technology investments that were long overdue. The bad news is the peak and surge exposed many issues that were hidden before. And as long as these problems are not fixed, the margin erosion will become more acute.
