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April 21, 2020

MBR/Kantar Webinar Tackles Merchandising ina Pandemic

COVID-19’s sudden, dramatic disruption of our lives has also demanded swift operational transformation by supermarkets and other essential retailers that have remained open through social distancing and shelter-at-home.

While overall retail sales plummeted by a record 8.7% in March, and food service sales plunged 25.6%, grocery sales surged 26.7%, and non-store/ecommerce sales rose 3.1%.

Over the past month, an unprecedented 22 million Americans have filed for unemployment. A New York Times poll conducted April 6-12 found six in 10 Americans saying they expect “widespread unemployment or depression” over the next five years.

In the midst of this upheaval and uncertainty about the near and long-term future, MBR hosted a webinar by David Marcotte, senior VP at Kantar Retail earlier this month.

Marcotte updated magazine category executives on rapidly shifting reality at retail, operational and policy changes to plan against, and strategies such as running “what if” scenarios to be prepared for the as yet unknown “new normal.”

Some of the macro factors in play at retail now and in the near term, according to Marcotte:

* Now that unemployment is widespread, cutting back financially will begin to outweigh stocking up on groceries.

* Starting in May/June, delinquency rates for large consumer loans, like mortgages, will rise sharply.

* If unemployment remains elevated into the summer, a financial crisis of potentially long duration will set in, regardless of the massive stimulus/relief payments, small business loans and other programs implemented in the U.S. and Canada.

* By May, delayed global shipments will hurt retail inventories, and it will be difficult to ramp up U.S. domestic production (once we decide what products are “essential”) to make up for lost imports. In addition, the food supply chain is in some cases being affected by the closure of warehouses (meat and poultry, in particular) and transportation hubs.

* With malls and department stores closed and suffering large losses, non-food retailers will be highly resistant to refreshing inventories until the coronavirus crisis is over or under control. “The mother of all clearance sales” will occur in the near future.

* Approximately 17% of all U.S. spending is severely affected by social distancing. Food/consumables-focused retail and mass stores, online, and digital platforms are in a position to capture some of the more than $2.5 trillion spent in the affected channels.

* The significant shift to ecommerce shopping for health safety purposes continues, with online sales of items like toilet paper, sanitizers, gloves, masks and cold/flu medications up by triple digits. Downloads for apps such as Instacart, Walmart Grocery, and Shipt are also up by triple digits.

* However, some items remain difficult to find online, with even Amazon overwhelmed by the upsurge in demand (and actually discouraging shoppers from ordering large numbers of items, for the time being).

Online out-of-stocks and delivery delays are causing consumers to go to grocery/essential stores, creating lines during some hours — especially now that many stores are capping the number of people in store at any given time. The availability of senior shopping hours, usually in early morning, have become commonplace.

* Food and drug chains are seeking to gain share and loyalty by demonstrating empathy and engagement with their brands. (Examples: Wegmans’ “Our brand is our family”; CVS’s “We stand ready to help”; Hy-Vee’s “We are in this together.”)

* Low- and middle-income consumers will get a boost, starting in mid to late April, from the $1,200-per-person U.S. government stimulus checks and additional unemployment of up to $600 for up to four months. Food and other open retailers should be prepared for a potential burst of spending, while also preparing for recession-driven declines in spending over the longer term.

Current and Longer-Term Priorities, Strategies

As more normal activities begin to resume, retailer/supplier relationships will be affected by retailers’ needs to get consumables inventory levels back up, cut back on pandemic-driven inventory, and update data and processes.

Suppliers, along with retailers, need to think out and engage in “what if” scenarios to create alternate scenarios based on how the disease might evolve (including the possibilities of more waves, or seasonal reoccurrences); how consumers might behave in each of these scenarios; and how governmental and other institutions might respond.

Kantar suggests that they do a state-by-state analysis of likely sales trends based on factors including number of reported virus cases; how impacted each region is by the closing of restaurants and entertainment/sports events and lost tourism; and other economic considerations.

Retailers and suppliers need to adapt to three core dynamics now and in the immediate future:

* Shoppers being at home, at least for a few to several more weeks. With much of the stock-up panic over, but stay-at-home still dominant through at least mid May, retailers and brands are shifting focus to help shoppers make staying at home more bearable — offering easy meal recipes and games and puzzles, for instance.

Product categories in these stores need to stay in communication with retailers to understand their plans for managing inventory as portions of the population, likely based on infection patterns by region, gradually return to work and social activities.

Next step: Category managers need to be thinking now about creating incentives to use their products and connect with their brands — incentives that are relevant and meaningful to consumers, given their current focuses on maintaining health, returning to work (or seeking new jobs), and for many, minimizing expenses and just getting by.

* Retailers, suppliers and shoppers all being part of the greater good. Aside from keeping the supply of food and household goods flowing, suppliers and retailers from all channels are contributing to national and local COVID-19 efforts. Shoppers are watching how companies react. Worthy responses can lead to longer-term brand value.

Suppliers should ask themselves what their brands are doing now to contribute, and how well they are communicating that.

Next step: Consider targeted communication to keep shoppers engaged, without overwhelming them.

* A new mix of commerce channels for grocery. The exponential growth in online grocery shopping and new users could accelerate the long-term adoption curve by five to 10 years.

Prior to the pandemic, 89% of users of online grocery shopping in a Kantar survey expressed overall satisfaction with such services, with 42% saying the service had improved over time, and 37% saying they were shopping some retailers’ stores less as a result.

But service times and product availabilities have suffered as online grocery use skyrocketed during the crisis. As a result, most users now report a negative perception of this channel. The varied approach that retailers and last-mile providers are taking to manage the subpar experience currently puts the long-term adoption and capture rate at risk.

Retailers need to update real-time messaging across platforms, adjust off-site media, offers and message; and assess technology and partnership solutions.

Next step: Reach out to shoppers to “reintroduce” the experience once it has been improved.

Other Dynamics in Play

* Social distancing in stores is isolating the shopper from the front end, with grocery and mass — magazines’ biggest channels — being the most extreme. The magazine category needs to work closely with retailers to explore alternate ways to display the product for visibility at checkout and other locations in the store, and use online grocery/curbside pickup as promotion vehicles for the category, among other opportunities.

* Consumers’ notions of “good” prices are increasingly convoluted, across income levels. In addition to “offers the lowest price on individual items I buy,” many factor in being able to buy more items for less money; the cost at checkout is lower than expected; store carries a lot of private label items, and other factors when defining good prices.

* The blurring of retail channels has accelerated. All of the major food, drug and mass merchant retailers have partnered with third-party grocery, restaurant meal delivery services to some degree. Instacart is the leader, but Shipt, Doordash, Postmates and others have grown rapidly.

* Travel/on-the-go and cashier-less or mobile/self-checkout formats are expanding. Amazon Go’s cashierless format is designed to be adaptable to larger spaces. Grocers and other retailers are beginning to offer pay-with-phone self service options in stores. 7-Eleven has been pushing into travel, mixed use and offices.

* Traditional discounters must prepare different strategies for each of three possible scenarios, as unemployment and recession set in: large numbers of shoppers switch to discounters, but ultimately go back to their usual retailers; large numbers switch and stay; or relatively few switch, because their usual retailers reset and enhance their prices, quality and service.

* Convenience stores strengthen loyalty, competitive advantage. Most of the nation’s 152,000 C stores have continued to operate — providing gas and food through the crisis and cementing loyalty among those medical professionals, first responders, delivery workers and those who have little or no access to other food retailers. Pizza chains and others that deliver food have also won new customers, and enhanced loyalty among existing ones, if they have served them efficiently.

* Smart buildings are expanding beyond the store, to create a full experience. Retailers are engaging consumers through ecommerce and digital signage and installations in real estate that had not previously taken commercial tenants.

* Retailers are now dealing with more active, empowered employees. Unions and other employee groups have stepped up to protect workers during the pandemic, and are likely to remain more engaged going forward.

MBR Publishing & Retail News
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