Undoubtedly 2020 was a year of unprecedented change for the North American food retail sector. The impact of the COVID-19 pandemic has been broad and long-lasting, accelerating change in several areas. We look at how the market is expected to evolve over the next 12 months against the backdrop of a prolonged pandemic and the resetting of many business models.
Source: IGD Research
1. Creating new retail experiences
The COVID-19 pandemic has been a catalyst for a major re-thinking of store formats and layouts. Walmart has been one of the leaders in this area, developing new store concepts, including developing the ‘omni-store’ in Canada. We expect to see more creative layouts and contactless experiences, including foodservice solutions, payments and checkout.
2. Resetting product and service offers
Linked to changes to the store experience are enhancements to the food offer. One of the most significant changes has been the rebirth of the centre store. Many major several suppliers have rationalised their ranges, for the long-term, while new retail partnerships are being formed as operators aim to capitalise on the traffic of essential retailers.
3. Improving ecommerce profitability
The surge in grocery ecommerce growth has been one of the defining characteristics of the pandemic. Many retailers experienced the growth they were expecting over two to three years, in a period of months. With channel margins lower than what is achieved in-store, the accelerated level of growth has fixed retailers’ focus on improving channel profitability. This includes the greater use of automation, developing third-party marketplaces and building new digital marketing organisations.
4. Emphasising value credentials
Although the full economic impact of the COVID-19 pandemic is unknown, the expectation is that more consumers will be financially constrained in 2021. High unemployment and business failures, along with the winding down of government support programmes, are likely to lead to a more challenging economic backdrop. However, with many consumers increasing their savings in 2020, some will have a strong propensity to spend. Expect to see more low price initiatives, a stronger focus on private label and a trading environment benefitting discounters.
5. Embracing a new era for health and wellness
One of the expected lasting legacies of the pandemic is that consumers will have a greater interest and focus on their health and wellbeing. Food retailers in North America are well positioned to optimise this trend given the role pharmacy has in their operations. Several recent developments point to an increased focus. These include plans to expand Walmart Health, the launch of Amazon Pharmacy and Loblaw’s new PC Heath app to support customers with their wellness journeys.
Retail Analysis subscribers: read our in-depth report, North America retail outlook 2021, for more detail on each of these trends, along with retailer examples.
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