It is no surprise that grocery stores have done particularly well during the pandemic — everyone needs to eat and stock up on dry goods. What is surprising is the way COVID-19 is changing our buying habits.
People are spending less time in stores, but when they do go, they buy more. There is less human contact as people shop more online and have goods delivered. And stores have become more transactional, with less focus on merchandising as people want to get in and out quickly.
During a discussion about the new era of grocery retail sponsored by SAP as part of The Retail Summit, experts from a home delivery food kit business and an unmanned grocery retailer shared insights and new developments.
Mindful Chef’s “Corona Cohorts”
Robert Grieg-Gran, co-founder of Mindful Chef, the UK’s highest rated home-delivered recipe box, recounted how the team sat down to make some strategic decisions at the start of the pandemic. Before COVID-19, the company was delivering 12,000 fresh food boxes a week, each containing five or six meals. When the crisis hit, people stopped eating out, and cooking at home was the only option. Panic buying emptied supermarket shelves, supply chains were disrupted, and competitors were closing their doors. Suddenly, Mindful Chef was delivering 35,000 boxes per week.
“We asked ourselves what we could do differently, so people could access fresh food when they need it most,” Grieg-Gran explained. The team was determined to keep its doors open throughout. This meant dropping the menu, increasing the supply chain lead time, and making a lot of last-minute substitutions.
“Was the service amazing? No. Was the supply chain perfect? No. But we thought it was important for our customers to get something, rather than us to just shut our doors,” the chef said. “We added new packing staff, expanded our relationships with our warehouse and delivery partners to scale the business, and maintained ownership of our end-to-end fulfillment process.”
The strategy paid off. People who signed up in March have become repeat customers. “We call them our ‘corona cohorts,’” Grieg-Gran said with a grin. “They keep coming back because they know they’ll get what they want. After all, food is still a very intimate thing. You’re going to put it inside your body, so you need to trust the people you buy it from.”
Technology and data analytics play a key role in the business. Mindful Chef customers expect the team to curate options so they don’t have to think about what to cook. Data science makes it possible to give each customer the best recommendation because they won’t see menu options they would not like. The company uses machine learning models to figure out what customers like based on their purchasing histories.
Unmanned but Personal at LIFVS
Daniel Lundh, co-founder of LIFVS, Sweden’s first fully digital unmanned grocery chain, also has a tech tale to tell. “As an unmanned grocery chain in sparsely populated areas, we use tech and smart communications to deliver what customers want 24/7,” he explained. “Even without staff in the stores, customers can always communicate with us through our app.”
Lundh described the post-COVID-19 scenario as one rife with opportunity for his company, which started as a chain of self-service stores in rural areas. The model is incredibly simple and highly effective. Catering to remote communities, LIFVS has established a chain of standardized stores around the country, each with more than 500 key items that would typically be found in a regular grocery store, enough to satisfy basic needs. The business is based on innovative technology solutions, like machine learning, to drive replenishment. Store entry, goods scanning, and payment are all done using an app. Through the app, LIFVS has access to all customer data, leading to multiple opportunities for personalization and tailor-made communication.
At the start of the pandemic, LIFVS already had the right business model in place. “Customers felt safe because they could be alone in the store, with fewer touchpoints,” Lundh said. “They could shop at their leisure 24/7.” At first, supply and replenishment was a bit of a challenge, but the chain worked with suppliers to iron out glitches within the first week.
The big opportunity with the pandemic was to add home delivery. “Being an unmanned chain, we didn’t have any staff to do the deliveries,” said the entrepreneur, who sees his company as more of a tech startup than a grocery retailer. “We solved that by partnering with local associations in the communities, who would send someone out to pick up the groceries and deliver them to the house.”
None of this works without technology. By tracking everything, the company can customize highly personalized journeys for every individual. “Thanks to data analytics, we’ll never send a minced meat coupon to a vegetarian,” said Lundh, who took the opportunity with his team to open a new store every second week in order to meet mounting demand. “At this rate, we’re set to open a couple of hundred stores over the next years.”
Short Queues, Clear Aisles
The pandemic has created new challenges for traditional grocery retailers like supermarkets, where most sales go through the checkouts. Neither employees nor customers felt safe going into stores, so the first step was to create a secure environment — for example, by implementing additional sanitary measures.
Such retailers had to extend opening hours and add extra staff to reduce queues at the checkouts. Their main challenge was to make it easy for customers to go in and out quickly to reduce the amount of time in the store. Removing physical barriers such as displays in the aisles, adjusting layouts and adding signage made it easier for customers to find what they were looking for.
These measures helped eliminate many friction points, so that customers could feel safer while enjoying a positive shopping experience. At the same time, chains like Coop, the Swiss retailer, had to adapt quickly to keep shelves stocked and stores open. At the start of the pandemic, Coop implemented technology that optimizes supply chain logistics and helps increase transparency in the supply chain, cut surplus stocks, minimize stockouts, and reduce manual labor though automation. That strategy paid off as the retail giant even increased market share during the crisis.
Sammar Farooqi, industries leader for Retail and Consumer at SAP, moderated The Retail Summit webinar and summed up the situation succinctly: “The food retailing industry is experiencing a spectacular surge in demand for digital experiences as a result of the pandemic. Both in store and online grocers are adapting, innovating, and scaling at an incredible pace. The result is the rapid deployment of new experiences such as personalization and contactless stores to fit a new consumer landscape.”
Follow me on Twitter: @magyarj.
