Trying to escape or avoid the impacts and implications of the COVID-19 global pandemic is proving for those who might attempt to do so to be an act in utter futility. Touching just about every walk and facet of life, the effects of the virus’ spread linger demonstrably, everywhere we look, posing potentially long-lasting ramifications that are yet to be fully understood by even the most astute of experts and observers. It makes the job of providing predictions and forecasts based on market trends and analysis that much more difficult and prone to greater discrepancy and error. For grocers operating in Canada, the same uncertainty prevails. But despite the unpredictability of the current landscape, according to Sylvain Charlebois, Senior Director, Agri-Food Analytics Lab at Dalhousie University, consumer sentiment around an increasing appetite for online grocery shopping, coupled with the availability of state-of-the-art technologies, could lead to a transformative digitization of the Canadian grocery experience.
“The impacts of COVID have obviously been quite severe for many,” he says. “It doesn’t really matter which industry or sector we look at. Everyone has been affected. The landscape on which retailers and other businesses operate today has changed dramatically as a result of the pandemic. For grocers, the current situation is presenting some difficult challenges which they are all trying to figure out. With so many different considerations to make related to assortment, banner portfolios, private label offerings, and everything else, it’s nearly impossible at the moment, with so many variables at play and an underlying uncertainty about the future, for grocers operating in Canada to understand what they should commit to. However, one area that presents huge potential is around the continued development of omnichannel strategies and infrastructure which, when combined with a greater use of technology, can help to move the entire grocery experience forward.”
Record Grocery E-Commerce Sales
There’s no mistaking the bluntness of the strike with which retail sales in general were hit by as an initial result of the pandemic. It helped to set an early and ominous precedent and trend that resulted in the demise of many. But, as sales continue to slowly recover, and those who have survived begin to plot out strategies for 2021 and beyond, the accelerated migration of sales from physical bricks-and-mortar retail to the online channel is a shift that is being monitored closely by all. Early reports issued by Statistics Canada reflected staggering online numbers as e-commerce sales in the country hit a record $3.9 billion in May, representing a 2.3 percent increase over April and 99.3 percent increase over February. What’s more, e-commerce sales more than doubled year over year, posting a 110.8 percent increase compared with May 2019.
As substantial as these gains have been for the industry as a whole, however, results of the shift in purchasing behaviour have perhaps been even more significant for grocers. According to a survey conducted by PayPal in early April, 2020, the number of Canadian online grocery shoppers jumped 58 percent during the four weeks that followed the government’s declaration of a pandemic. The numbers were generated based on a comparable survey that had been conducted just a month prior, translating to fully 30 percent of Canadians shopping online in order to fulfill their food needs when the crisis first hit. In addition, recent Nielsen numbers indicate that food retail online sales in Canada represented close to 3.3 percent of all sales in 2020, compared to 1.7 percent in 2019. Though these numbers have been influenced by lockdowns and physical distancing protocols, the shift in consumer behaviour and purchasing preferences may well be sustained into a post-pandemic landscape. And if it is, Charlebois suggests that it could result in an altered approach by grocers operating in the country with respect to their service and offering.
“There’s been very obvious growth in interest among Canadian consumers to shop for groceries online,” he recognizes. “It was a trend that had already started to take hold prior to the pandemic. But people across the country have become really comfortable with the notion over the course of the past ten months or so. Because of the level of comfort that’s been developed, I don’t see this behaviour reverting too drastically. In fact, it’s possible that the consumer will be encouraged to do more of their shopping online in the future. Grocers have already invested a lot of money in developing infrastructure and platforms to support their e-commerce initiatives. They’ve been focusing a lot of effort toward improving their e-commerce service and getting better at selling food online. And if this is a trend that’s sustained, the Canadian consumer can expect continued and consistent improvements in quality and the overall experience.”
Potential Digital Transformation
As the levels of quality and service increase, however, so too do consumer expectations of the experience. Prior to the onset of the pandemic, it wasn’t uncommon for grocery orders placed online to take days to be put together and readied for the customer. Today, in some parts of the country, orders are often received, packaged and made ready for curbside pick-up or delivery within hours. This enhancement alone reflects the greater emphasis that grocers put toward the development of their omnichannel offering throughout 2020. And, in order to keep up with increasing demand and heightened consumer expectations, Charlebois suggests that grocers across the country will begin leveraging the full potential of available technologies, which could result in a complete transformation of the grocery experience in Canada.
“There’s a lot of room for grocers to grow and quite a bit of work for them to do in order to truly digitize the grocery experience,” he admits. “Of course, the potential growth and amount of work that can be dedicated toward an undertaking of this magnitude depends on the capacity of the grocer to execute. But, for those with the required capacity, things from a technology point-of-view will move very quickly. There will be an embracing of the tools that can help them achieve their goals, predictive analytics and machine learning in particular. There will be an evolution from the traditional use of intuition toward more of a data-driven approach in order to understand what’s happening in the aisles and on the shelves in stores and online. It will lead to more accurate forecasting and a greater understanding of consumer needs and behaviour for the grocer, and a better, more convenient experience for the customer.”
Charlebois points to Sobeys’ introduction of its Smart Cart — the first intelligent grocery shopping cart — as one of the ways grocers are starting to wade in to the use of technology, exploring and discovering different means through which they can receive more pertinent consumer data that can yield insights, action and positive changes to the grocery experience. Although he also recognizes that current innovations of this sort are relatively few and far between, he suggests that the effective implementation of such technologies and tools may well revolutionize operations for grocers, informing decisions that could have a ripple effect through entire organizations.
“When you look at the amount of business that’s conducted online, it’s hard not to see how the marketplace is already overstored,” he says. “And if this grocery e-commerce upsurge continues, supported by predictive technologies, grocers across the country will look to realign their overall real estate strategies rather than simply focusing on bricks-and-mortar. They’ll also be reviewing their banner portfolios and considering store conversions to make sure they are offering the right services to the right customers in the right locations. It’s very quickly becoming more about allowing consumers to choose the way they’d like to receive services. Insights generated by predictive analytics engines will provide grocers with a more accurate and holistic understanding of their store networks and banners as well as ways to optimize them for greater success.”
Redefining the Competition
In addition to facilitating a review of store networks and banner portfolios, Charlebois believes that the digitization of the grocery operation will also result in changes to the traditional food service supply chain. He asserts that grocers in Canada are currently trying to mitigate the effects of any shocks in their supply due to COVID, and that they’re consistently exploring and reevaluating their supply chain strategies with respect to efficiencies and the vendors that they work with. But he says that the advent and growth of grocery e-commerce will require food service providers to take a much closer look at their strategies, perhaps through a slightly different lens than they’re accustomed to.
“There’s a lot more competition and noise online,” he says. “As soon as you present e-commerce as a viable way by which your consumers can shop with you and purchase product from you, you’re all of a sudden dealing with a much different competitive landscape. A lot of the grocery vendors – farmers and food processors – are moving more and more online to sell directly to consumers. When you factor in e-commerce, the supply chain becomes much more open and democratic. For grocers to succeed, they’ll need to learn how to operate in this new environment, redefining their competition and what that means for their business.”
Despite the online noise and escalated competition that will come as a result of e-commerce growth, however, predictive analytics can actually serve to strengthen grocers’ relationships with preferred vendors, helping them find the right balance within their supply. With insights that can inform decisions related to conventional grocery challenges like product assortment, the mix and placement, in-store and online, can be optimized, leading to maximized product performance, and a scenario in which the grocer, vendor and consumer all win. As Charlebois rightly notes, it may take a little while for those operating within the highly competitive sector to achieve this type of supply chain equilibrium. But, implementation of the right technologies can help them realize their goals and objectives without the need for guesswork while minimizing costly missteps along the way.
Rise of a Grocery Revolution?
Though the realization of a true digitization of grocery in Canada will require a massive amount of investment and work on the part of grocers, and consists of an inordinate number of moving parts, the benefits seem evident. And, when considering the razor-thin margins that are perpetually at play within grocery and the predominance of price as the main factor by which most consumers still base their food purchase decisions, the rollout and use of technology and tools like predictive analytics and machine learning may well be in store for 2021 and beyond. And if that’s the case, Charlebois suggests that Canadians will be set to witness the rise of a revolutionary new grocery experience.
“When looking at and developing their strategies this year, grocers in Canada are going to be looking to areas within their businesses where they can make gains in efficiencies while reducing costs. These types of predictive technologies can help grocers tighten up their operations, across their entire organizations. They can help them find those efficiencies and uncover opportunities that they may not have recognized before. But, at the end of the day, the investments and work that grocers put into their operations is all about the consumer. It’s about continuously improving their shopping experience, whether in-store or online. It’s about making sure that every interaction with them, at every touchpoint, is exceptional. And it’s about providing them with choice, with respect to service and offering, and allowing them to shop and make purchases the way they want. E-commerce and the digitization of grocery offers a means to satisfy all of these things and, if executed properly, could result in a food shopping experience unlike anything the Canadian consumer has ever seen before.”