Reshaping the supermarket post-pandemic

Social distancing and a life lived largely online have been the reality for over a year. But, as the world gradually emerges from lockdown, is the shape of retail really changed forever?

Shoppers flocked online out of concerns for safety and convenience but a business model skewed towards ecommerce is not necessarily one that supermarkets are keen to pursue, post-pandemic.

However highly online grocery shopping rates on the customer experience scale, the fact remains that it is an expensive and inefficient channel for retailers to maintain. Then again, economic pressure on brick-and-mortar means grocers have to make their assets work harder than ever.

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How can grocers thrive in a post-pandemic world?

As in-person sales of non-food categories have fallen significantly - the majority moving online - retailers are over-spaced. Grocery is being asked to shoulder the cost burden despite its relatively small footprint. It is increasingly clear that the pre-pandemic supermarket model is no longer fit for purpose in a post-pandemic world.

But as with many challenges, there is great opportunity.

First, it is time to move away from binary thinking, that grocery fulfillment can be either online or in-person; either dark store, fulfillment center, or retail outlet. It is time instead to look at a next-generation, hybrid model.

Taking advantage of forward-deployed inventory, grocers can get products closer to shoppers than the majority of dark stores ever could. In-store fulfillment for ecommerce benefits customers who enjoy the convenience of in-person and online, wherever and whenever they need it. Recent research from Adobe has shown that 47% of retail executives expect to open hybrid stores across 2021.

But reshaping the grocery retail space is not just about making the most of footprint. Grocers should look to squeeze more out of their entire operation, from missed sales from poor inventory management processes through to the unnecessary costs caused by excess waste.

An effective dynamic markdown strategy is key

UK supermarkets look set to lose £2.4bn through waste in 2021 alone and food waste levels are only growing. This might represent the only easy money left on the table for grocery retail as it can be quickly improved by adopting an effective dynamic markdown strategy to ensure product sells through at the right price at the right time. It is only by delving into the vast amounts of data currently being captured that grocers can gain the insight to fix issues of over or under-supply and cutting costs for the long term.

Events like a pandemic have a tendency to bring out the hyperbole – e.g. the high street is dead, everyone will shop online forevermore. The reality will of course be more nuanced. From the perspective of both cost and experience, in-store retail is still vital for long-term growth.

However, the future lies with a new type of store that will cater to the post-pandemic shopper and will be supported by a more efficient supply chain that is supported by a dynamic markdown strategy. In order to achieve this, supermarkets need to understand the data today to build an effective, efficient and responsible hybrid retail model for tomorrow.

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Written by Paul Boyle

Paul, a Master's graduate in Engineering, became CEO of Retail Insight in 2011 having previously served as COO since the business was founded in 2005. He enjoys everything about Retail Insight; our people, products, and partners. Prior to Retail Insight, Paul worked at P&G and HJ Heinz in Commercial and Strategy.