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Grocery’s great consumer shifts

Five lasting changes in shopper behaviour and the opportunities they present for grocers

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Old habits die hard, the saying goes. But when a deadly pandemic rips around the world and droves of North Americans suddenly start buying groceries online, take up home cooking and baking, and finally start paying with tap, it’s evident that old habits can, in fact, die pretty quickly.

As grocers well know, COVID-19 has ignited big changes in shoppers’ habits and behaviours. While the pandemic will end at some point, that doesn’t mean consumers will suddenly spring back to their pre-crisis ways. In an uncertain world, what’s “normal” is getting a reset and experts say several consumer shifts will stick.

“We’ve effectively seen a decade of change—in the way people live, work and shop—in a period of weeks,” says Robin Sahota, a managing director at Accenture who leads its retail practice in Canada. “Customer habits have changed and we would say these changes are here to stay.”

Here’s a look at five consumer shifts that are expected to endure, along with expert advice on how grocers can adapt to meet consumers’ new needs:

1. Online grocery shopping has arrived
Canada’s lockdown orders this past spring, coupled with people’s fears of catching coronavirus at the grocery store, led to a surge in online shopping. A July survey of 1,000 Canadians by BMO found the percentage of respondents using online grocery as their primary shopping channel tripled during the height of the pandemic, from 10% to 30%. The results also suggest that 22% of respondents—or double the pre-COVID level—will stick to online grocery shopping in the post-COVID world.

A June survey of more than 4,000 Canadians by Leger and lg2 ranked online shopping services people interacted with for the first time, such as buying groceries, ordering prescriptions or getting alcohol delivered. “Groceries with in-store pickup” came out on top, with 13.5% of respondents using this service for the first time, followed by “groceries with home delivery” at 9.7%.

For many online shoppers, there’s no turning back. “When people discovered cars, we did not go back to horses,” says Christian Bourque, executive vice-president of Leger. “When it comes to online shopping, it’s a bit the same … Some of the grocery shopping in Canada has moved online and will stay online because of the convenience factor and the fact that people like doing it.”

To adapt to the online shopping world—and make a profit—Sahota’s advice to grocers is to focus on order-picking automation and efficiency, such as micro-fulfillment facilities in store, or automating distribution centres. “They also need to scale last-mile fulfillment to drive delivery costs down, and that’s quite crucial to the overall cost model for e-commerce,” he says.

Retailers also have to keep in mind that the customer experience isn’t just in-store. “During this pandemic, for some retailers it was challenging to manage the pickup scheduling and volume of pick-ups that were happening outside,” says Sahota. “You have consumers who are frustrated that the online experience doesn’t mirror the store.”

To that end, grocers should look at how they can enhance the online experience, including ease of use of the website, the search function, navigation, ease of checkout and queue management.

2. The need for clean
Canadians’ new hygiene habits will be hard to break. Leger’s survey asked respondents which in-store health and safety measures they think should be permanent. The results point to a squeaky clean future: 71% said the availability of sanitizer inside the store (to be used at the customer’s discretion) should be permanent. This was followed by disinfected shopping carts and baskets (63%); mandatory hand washing at the entrance (49%); Plexiglass panels at the cash desk (49%) and no longer distributing printed flyers (40%).

“If at any point governments start relaxing some of the measures, I don’t know if retailers should hurry back to the old normal,” says Bourque. “People will expect that until we all get vaccinated, these safety measures will be around.”

To draw customers back into stores, grocers need to keep focusing on cleaning house. “We’re back to the basics in retail operations,” says Sahota. “Cleaning and hygiene in the store is the most effective way to improve consumer confidence in returning to stores—showing people the store is clean, demonstrating cleaning in progress, and adhering to guidelines around physical distancing.”

Hand in hand with back-to-basics is, oddly enough, a focus on in-store technology. The Accenture survey, for example, found that 54% of Canadians increased their use of contactless payments, and among those, 87% expect to sustain their increased level of usage.

“From a tech perspective, contactless payments and self-checkout were already important topics pre-COVID, from an efficiency standpoint and allowing shoppers to shop in the way they want to shop,” says Sahota. “Now, there is increased urgency for contactless payments and self-checkout given consumers’ desire and retailers’ need to limit person-to-person contact.”

There’s also a high-tech opportunity for CPG brands in the “clean” space. For example, manufacturers can communicate via QR code what they’re doing to ensure their products are safe, their facilities are clean, and their employees are healthy, says Dana McCauley, director, new venture creation at the University of Guelph’s Research Innovation Office.

“In particular, I think it’s a great opportunity for meat [brands], which have already done a good job highlighting farmers on their packages, given the tiny amount of real estate they have there,” she says. “This is a way to refresh that messaging and have a QR code so that a consumer can pull out their phone and instantly see a video of this incredibly pristine factory that’s being used to create the item that’s going into their cart.”

3. Functional foods, with a twist
While shoppers are doing their best to defend against COVID-19 in store, they’re also looking for foods that fight back against the virus. That means immunity-boosting foods and ingredients will play a significant role in the coming year. According to new research from Mintel, 60% of Canadians would like more information on how to boost their immune system, and 53% are more interested in boosting their immunity through food compared to a year ago.

While it might be tempting to jump on the immunity-boosting bandwagon, there’s a bigger picture to look at. “For grocers and food manufacturers alike, I would say don’t be like the horse with the blinders and think ‘we have to address physical health because it’s COVID-19,’” says Carol Wong-Li, associate director, lifestyles and leisure at Mintel. “When we think about functional foods, it’s not just about physical well-being, but also foods to address things like elevated anxiety and lack of sleep, as well as foods that help relax you and bring you joy.”

Wong-Li cites two U.S. examples that cleverly touch on these well-being elements. Nightfood is a line of ice cream made with “sleep-friendly” ingredients—not drugs or sleep aids, but minerals and amino acids the company says can support sleep quality, as well as less sugar and fat than regular ice cream so it’s not hard on the digestive system. “The message is, ‘we know you need comfort food now, but we’re going to make sure it doesn’t interrupt your rest because that’s so important,’” says Wong-Li.

Another example is Jeni’s Splendid Ice Creams, which launched its Sunshine flavour this past spring. The ice cream itself is grey but the flavours are citrus and tropical fruit—the message being these are grey times, but the sun always shines again. “Because we’re not going out for experiences to the same degree that we were, any sort of playfulness that we can get inside the home is even more important than before,” says Wong-Li. “These two examples showcase that yes, there is function, but let’s think a little broader.”

Grocery retailers themselves can also innovate in this space. “It’s about how to make functional fun,” says Wong-Li. For holidays and celebrations, she suggests grocers put together meal kits that can be delivered to two or more households, so family and friends can partake in the meal even if they can’t be together.

4. Squeezed spenders and the gen Z conundrum
Add “financial health” to the list of things people are worried about during the pandemic. According to Nielsen, two sets of consumers have emerged from the pandemic: those whose spending habits are constrained because of layoffs, unemployment or other COVID-related challenges, and those with insulated levels of spending who are still employed and remain shielded from day-to-day economic impacts.

Aslam Ghori, vice-president, client service at Nielsen, says in the longer term, constrained spenders will seek out cheaper alternatives, downgrading to value brands and private labels, mostly in staple categories. Insulated spenders, meanwhile, “may choose to supplement home cooking with prepared meals and meal kits, adding back [takeout foods] and home deliveries,” he says.

However, eventually everyone will be watching their wallets. “As horizons expand, even [insulated consumers] will become increasingly cautious with their spending, thinking they may be next,” says Hanif Mohamed, SVP retail services at Nielsen. This will result in a focus on savings and cutting back on higher-value discretionary spend, he adds.

Mintel research found that 22% of Canadians are very concerned about their financial situation right now, and 27% are worried about their financial situation over the next three months. While the lockdown measures severely impacted the labour market, Wong-Li says the impact was particularly severe for gen Z (18 to 25) in terms of job losses and limiting future job prospects. This, she adds, will have a cascading effect on the retail market for years to come.

“A lot of gen Zs have moved back in with their gen X parents, so there will be a delay in transfer in terms of who is going to be your primary household shopper,” says Wong-Li. “And because gen X parents are the ones buying for the household, gen Zs aren’t necessarily going to be learning how to cook or buy groceries for themselves until they move out.”

The unique challenge for retailers will be how to appeal to gen Z as the end users of products and services, while appealing to gen X parents as the actual buyers. “Obviously, we know that gen Z is a very tech-savvy group and that’s where they live, so that’s how [retailers] should think about engaging them,” says Wong-Li.

5. Help for homebound consumers
Many Canadians cooked their way through quarantine, and now that everyone has a sourdough starter, it’s time to move on. “I think everybody is sick of expressing themselves through the culinary arts,” says the University of Guelph’s McCauley. “People are now looking for shortcut ingredients, pantry-raid solutions and hack-style recipes.” In other words, it’s OK to use ready-to-use pastry or store-bought rotisserie chicken as part of a recipe. With these shortcuts, “people can feel like they have variety, while getting a bit of a break.”

For grocers, there’s a big opportunity to merchandise convenient meal solutions. “They don’t want people lingering in the store, but they do want people to have a full basket when they check out and they’d love to see everybody spend a little more on each trip,” says McCauley. “So, make it easy for people.”

For example, they could create a meal planner that’s highlighted in the online flyer and then merchandise some of the items together in store or online. “The idea is, buy these baking potatoes, this pre-marinated chicken, this bag of salad and this salad dressing and you’ve got your Monday night dinner,” says McCauley.

Mintel’s Wong-Li identifies two big opportunities to appeal to homebound consumers. One is offering meal kits geared towards kids, which is a way to offer both a meal solution and keep kids engaged. The second is grocers teaming up with restaurant brands to create frozen food offerings, since many people miss eating out at restaurants. “[Brands] could position it as a treat or reward, but it’s also a time saver,” says Wong-Li.

Homebound consumers are also putting local stores and products into sharp focus. In Accenture’s survey, 54% of Canadians say the pandemic has caused them to shop in closer-to-home neighbourhood stores, with 75% saying they plan to continue doing so long term. In addition, 54% say they’re buying more locally-sourced products, with 86% of those saying they plan to keep doing so long term.

Accenture’s report notes that consumers’ renewed focus on their local community will be long term, bringing about the “decade of the home” and forcing retailers and CPG companies to tailor their products and services to drive a more local experience. “For retailers, sourcing local is important, but equally important is tailoring that local assortment based on the needs, preferences, buying behaviour of local consumers,” says Sahota. “In this case, analytics is going to be king, so that [the assortment] is tailored to customers at a specific store.”

Beyond data, think delight. “Surprising and delighting consumers with partnerships with local vendors and restaurants, and other ways to create excitement at store level, will also be important to building greater engagement and encouraging customers to shop beyond their shopping list.” Local or otherwise, Sahota says because leisure shopping is on the decline, “finding ways for consumers to try new products and services and grow their basket with you will be equally important in standing out in the years ahead.”

This article appeared in Canadian Grocer‘s November 2020 issue.

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