As many social distancing guidelines remain in place, traditional grocery stores aren’t experiencing the volume of customers they typically do. In most cases, demand spiked. The way panelists who joined last month’s Kenan Institute of Private Enterprise webinar see it, this new norm could lead to major, long-lasting changes in the food supply chain.
During the webinar, “Food, Meds and Global Supply Chain Management Amid and Beyond COVID-19,” panelists discussed how consumer spending and shopping patterns have changed since the coronavirus pandemic began and how those changes will affect retail going forward.
Chloe Glaeser, an assistant professor at the Kenan-Flagler School of Business, said that before the pandemic consumer food spending was divided roughly evenly between grocery stores and restaurants.
Now, as many restaurants remain closed for dine-in services, many consumers have started spending less of their money on food from restaurants and more on food from grocery stores to cook at home.
“Once COVID-19 began spreading, and our government implemented lockdown, consumers almost completely switched to cooking at home,” Glaeser said. “That meant that the grocers saw a huge spike in demand.”
While grocers struggled to keep up with the new demand, commercial food retailers, such as those that distribute to restaurants, ended up with more products than they could sell.
“Unfortunately, when it comes to the perishable products, they’re watching perishable food rot with limited alternative outlets,” Glaeser said. “Once the industry realized that the COVID-19 shock is going to last long–term, some commercial suppliers were able to act on it, and they are now trying to market directly to the customer. However, the strategy only works for a subset of products that can be easily used for home cooking and easily transported to consumers.”
With grocery stores out of high-demand products and restaurants closed, other players in the grocery industry seized the opportunity.
Online grocers, like Amazon Fresh and FreshDirect; meal kit delivery services, like HelloFresh and Blue Apron; and restaurant delivery services, like Uber Eats, are being used by more consumers during the pandemic. Many of those consumers might not have tried the programs if not for the coronavirus pandemic — but since the pandemic presented the opportunity, they could stick around even after the pandemic ends, Glaeser said.
But it won’t necessarily be easy. As these companies offer new ways of buying and consuming food, they will have to ensure that worker and consumer safety are top priorities.
“As these companies continue to operate — and sometimes operate beyond their original capacity — they can easily overlook keeping the work environment virus–free,” Glaeser said.
Ali Parlaktürk, an associate professor of operations at the Kenan-Flagler School of Business, said that online grocery ordering will likely remain commonplace after the pandemic. While the service was once offered solely for convenience, it is now preferred by many consumers for public health and safety reasons.
“Before the pandemic, consumers visited stores for the touch and feel of products,” Parlaktürk said. “But now, many understandably fear the touch and feel and prefer fewer contacts and as many touchless alternatives as possible.”
Simply put, as a result of the coronavirus pandemic, consumers have become more mission-driven in their approach to grocery and retail shopping.
“The consumers don’t want to do cross-shopping. They want to have fewer visits. They want to get as much done as possible in one visit,” Parlaktürk said.
Other changes to consumers’ shopping patterns are currently being driven by the economic situation created by the pandemic.
As many consumers remain furloughed or unemployed as a result of the pandemic, it is also making them more value-conscious in grocery and retail stores, Parlaktürk said.
That might benefit overstock stores that sell private labels for steep discounts, like T.J. Maxx and Marshalls, which will receive more inventory as it becomes difficult to sell at full retail value.
Overall, Parlaktürk said, even if consumers do choose to shop in grocery and retail stores more frequently going forward, retailers must be prepared for changes in their shopping patterns — and to expect to deal with them for the long haul.
“This worked more like forced experimentation,” Parlaktürk said. “Years of transformation is happening pretty much in a matter of weeks or months.”