Updated: Jun 14
Over the past 18 months, the grocery industry has seen a significant shake-up. The pandemic has both accelerated and halted various plans in the grocery pipeline. E-commerce has boomed. What started as a temporary preference for shopping online has, to an extent, cemented shopping habits that will likely remain for years to come.
Although the industry focuses often on this rapid growth of e-commerce, what does this mean for the future of the humble grocery store? We know 80% of grocery sales in 2020 still took place in a physical store. And currently, total UK online retail sales are falling back month on month, as well as year on year, as shoppers return to stores in 2021 (ONS). While things may continue to be in a state of flux until after the coming winter, these are comforting statistics for bricks & mortar stores.
The last two years have seen significant movements, such as Walmart’s sale of Asda and Morrisons accepting an acquisition bid from private equity firm Fortress. Changes such as these don’t happen without industry confidence in the business model, in which the store network remains their biggest – and arguably most costly – asset.
European discounters Aldi and Lidl have also continued their aggressive store opening plans, to the detriment of the big four. Both retailers have confirmed they will be matching each other’s £1.3bn investment into new stores up and down the country. Additionally, Russian supermarket chain Mere is also set to open its first UK store this August, with the potential for another 200 stores over the next five years. Whilst e-commerce grows, investment in bricks & mortar stores has by no means halted.
We’re also seeing significant investment from retailers to reimagine what stores of the future are going to look like. Sainsbury’s launched its new Hempstead Valley store earlier in the year, home to the first Sainsbury’s Fresh Food Market as well as Argos, beauty, clothing and home departments. This particular store represents one of Sainsbury’s largest single store investments in 20 years – a marker for where its focus will undoubtedly be placed going forward. For brands, this in turn opens up cross-category marketing opportunities.
This means physical stores are certainly not dead – far from it. For the next 10 years, they will likely remain the most important part of the channel mix for brands and retailers to get right.
Indeed, the pandemic has made consumers more demanding, and we want our shopping to fit seamlessly into our lifestyles. We want to enjoy physically shopping for important meals we’ll cook from scratch, while wanting heavy, non-perishables delivered to our homes at the best price possible, at the quickest speed.
The brands who will win in this new era of post-pandemic grocery shopping are no doubt the ones who manage to cleverly interconnect the physical world (where most still buy) and the digital world (where we all now browse, perhaps a bit too regularly). Omnichannel will no longer be a buzzword, but the only way forward to keep up with the significant demands consumers will now make.
More than ever, digital and physical are increasingly linked, with digital experiences happening in-store and the support shoppers receive in-store being found online. Of course, online is no longer limited to the grocer’s website. Walking down the aisles in-store, consumers are interacting with platforms on their mobiles, and the likes of social media have become part of the connected journey consumers are now taking every day.
Change is afoot, and when it comes to in-store and online, it’s not a question of investing in one or the other. As shopping becomes truly omnichannel, it’s increasingly important to consider better connecting the two.