Retailers have had a tumultuous year because of COVID-19 and a recession that has challenged consumers and supply chains to levels not seen before. National Retail Federation CEO Matthew Shay said there will still be hurdles to clear in the coming months.
Shay said as COVID-19 vaccines begin to be widely administered in 2021, public health, the economy and the retail industry look to have a promising future. He points to innovation and changes brought on by the pandemic that will likely make retailers stronger on the other side of the crisis.
“Retailers have adapted and evolved their businesses at speeds we have not seen in decades, implementing changes in days and weeks that would have normally taken months and years. It has improved the consumer experience and yielded new efficiencies and capabilities in every part of the industry,” Shay said.
Bill Bishop, chief architect and co-founder of retail consulting firm Brick Meets Click, said over the next 12 months, there will be five trends to watch that have the potential to revitalize retail, particularly the grocery industry. Bishop shared his comments in a recent webinar hosted by The Food Institute.
He first expects to see significant improvement in the online grocery shopping experience. Bishop said the pandemic increased online grocery shopping. Comparing weekly household spending and online market shares from August 2019 and August 2020, the increase has been robust. Weekly household spend rose from $148 to $202 in the period, and the online share of groceries grew from 6.4% to 11.9% of total weekly sales in the period.
“We are seeing improvements in the front-end of the shopping experience and the back-end, and retail is making some progress at solving for customer needs on everything from healthy prepared meals to easy reorder. There is still plenty of opportunity in this space, and the retailers making these investments will be rewarded,” Bishop said.
Bishop also expects breakthroughs in the cost of last-mile delivery that will make it more feasible for retailers and consumers. He pointed to Walmart’s recent expansion of its autonomous delivery with autonomous vehicle startup Gatik. Walmart has been piloting deliveries in Bentonville for the past year, taking orders picked in a dark store to a pickup location 2 miles away.
There has been a driver sitting in the passenger seat of the autonomous truck for the delivery routes. Walmart is expected to remove the safety driver, and the trucks will go on their own in 2021.
Walmart is expanding the Gatik pilot in Louisiana with deliveries between New Orleans and Metairie, a 20-mile route. During this phase, the autonomous trucks will make deliveries from a Walmart Supercenter to a designated pickup location where customers can retrieve their orders.
“Our trials with Gatik are just two of many use cases we’re testing with autonomous vehicles, and we’re excited to continue learning how we might incorporate them in a delivery ecosystem,” said Tom Ward, Walmart’s senior vice president of customer product.
Bishop said delivery costs are between $10 and $12, and often the grocer ends up subsidizing part of that. He said retailers are already underwriting the cost of online shopping, and they put an average of $3 toward the delivery of the order.
“As we teeter between pickup and delivery, we are going to see a tilt toward delivery because people are going to find much more efficient ways to pass that grocery over the last mile. Lockers may be part of the solution as well as autonomous vehicles and expanded crowd-sourced deliveries,” Ward said.
Personalized meal and food recommendations is the third trend Bishop expects to pick up speed in 2021. He said as more is learned about the microbiome, explained as the microscopic organisms found in the gut and nose, consumers will know which foods are tolerated better by their bodies.
“We already see Kroger piloting food prescriptions in a program they call RxDiet,” Bishop said.
In 2020, Kroger developed the OptUP app, a personalized nutrition assessment that also considers genetic information, a patient’s lifestyle, and concerns around nutrition. Then a dietician provides food recommendations that can be fulfilled by nutrition teams within the store.
“When we say ‘food is medicine,’ we want to make clear that it very much still involves the holistic healthcare team, and it always involves primary care,” said Bridget Wojciak, a registered health dietician at Kroger.
She said the nutrition prescription should fill the gap between the physician’s guidance and the foods that will yield health benefits based on a patient’s unique body functions.
Bishop said next-generation loyalty programs are the fourth trend he expects to grow in 2021. He said this trend has consumers paying for memberships into loyalty plans such as Walmart+ and other retailers like Walgreens that have revamped their free loyalty programs. The new loyalty plans do more than save people money. It’s another intrinsic value to them, whether it’s a convenience of time-saving or perhaps a form of relaxation.
Bishop highlighted the new myWalgreens loyalty plan that is far more personalized than the former points system. The revamp allows members to earn cash rewards on store purchases and provides for the pickup of essentials in the drive-thru within 30 minutes of the order being placed. The program also includes health and environmental forecasts, and it rewards members when they reach specific health goals. The program also allows members to donate their cash rewards to a charity of their choice.
The fifth trend Bishop expects to continue is increased tension between retailers and consumer packaged goods (CPG) manufacturers. He said it’s hard to imagine why that doesn’t occur, given that times are challenging and each company is doing all they can to survive.
“Retailers need to advance their private label brands, and many are doing a good job. Meanwhile, CPG companies need to go direct to consumers, either in sales or in relationships, and that is being done. But what’s intriguing to me is when you look at the economics of retailers and CPGs, you realize they cannot sustain their current business models without heavy dependence on the other.”
EDITOR’S NOTE: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.