While Albertsons President and CEO Vivek Sankaran said the one thing he’s learned during the pandemic is “that it’s so dangerous to predict the future,” he did offer up three trends “that I doubt will reverse,” and two others that are more transient, during FMI’s Midsummer Strategic Executive Exchange conference this week.
In the session, “Retail 2021: The State of Grocery,” Sankaran and partners from McKinsey and Co. explored what will shape grocery retailing in the coming years as the world moves beyond the pandemic and into a new normal.
The three trends Sankaran doubts will reverse—and “could be very positive” for the industry—are digital engagement, e-commerce and remote work.
Digital engagement is a particularly sticky trend because “we are all engaged that much more with our phones, whether it’s for entertainment or for shopping,” Sankaran said.
This presents an opportunity for retailers to gather more data about their customers and, in return, offer them a shopper experience that is unique to them. “For me, digital engagement of a customer is worth its weight in gold,” Sankaran said. "Once you have someone digitally engaged, you can promote digitally, you can price digitally. The notion of personalization is becoming real and it just requires us to invest in technology.”
As for e-commerce, while both Sankaran and Bill Aull, partner with McKinsey and Co., admit it won’t continue at the levels it did during the pandemic, the demand for delivery and pickup will still be there.
“The desire to shop and the convenience of having something delivered at home or put in the trunk of your car is incredible, and I think consumers never give convenience back, so that trend will only continue,” Sankaran said.
"The desire to shop and the convenience of having something delivered at home or put in the trunk of your car is incredible."
In a survey of more than 40 CEOs, conducted by McKinsey and Co. and in partnership with FMI–The Food Industry Association, continued momentum in e-commerce was top of mind when chief executives were asked what trends will shape the grocery industry in 2021. “We do expect that grocery delivery … will continue to reduce over time but still be at a higher level than pre-pandemic levels,” Aull said. “Our view is somewhere in the range of 10% and 11% online penetration.”
And as the technology improves, it will only aid grocers in their e-commerce offerings. “Technology is going to become stronger. Technology when it comes to picking, technology around optimizing delivery, technology around improving in-stock conditions, technology on giving [the shopper] more choices, so on so forth, that’s going to get better,” Sankaran said.
And with regard to remote work, this is a trend Sankaran said he “never predicted” but is quickly becoming reality. Employees have gotten used to working from home during the pandemic—and the convenience it provides—and it’s expected that their employers will provide more work-at-home flexibility as offices reopen.
For the food and beverage industry, “that’s a massive difference when you look at total dollars involved when people stay at home, whether it’s a breakfast or lunch at home,” Sankaran said.
Sajal Kohli, senior partner with McKinsey and Co., agrees it’s a trend worth keeping an eye one.
“One of the things that we are watching is over the last decade you saw a set of low-scale, medium-scale and high-scale jobs move to urban centers. With the advent of the potential stickiness of remote work, you are seeing a lot of these skills potentially shift back to the rural center of America. … These things happen at a glacial pace, but … it’s one worth watching.”
While remote work and e-commerce are two pandemic-created trends with staying power, there are others that Sankaran believes have less-certain futures: cooking at home and trading up.
“People are cooking more at home, but will that stick?” Sankaran questioned. “I imagine restaurants will find creative ways to bring people back. It’s happened in the past. It’s happened slowly. But it’s likely to happen over time—over the next two, three, four years. My sense is we’ll just have to see.”
Kohli agrees there are several factors at play that make the cooking at home more of a transient trend.
“The growth in the category of kitchen appliances was at an all-time high during the pandemic and seems to stick, so we will see where that all ends up,” he said, adding that there is also “a whole new generation that has learned to cook during these times, so we’ll see how sticky that is.”
The pandemic also saw a lot of consumers trading up as they spent more of their discretionary spend on grocery and ate at home more often, but the question Sankaran asks himself is, “If you’ve gone and bought a $20 bottle of wine at a store and it tastes better than a $30 or $40 bottle of wine at a restaurant, or you bought a better cut of steak, do people just go back? Do they regress on quality? I don’t know.”
And the FMI-McKinsey and Co. survey seems to indicate people will be looking for deals once again, with 42% saying they will continue to look for ways to save more money when shopping.
“[During the pandemic], many grocers had pulled promotions due to availability and supply chain issues, but we anticipate that promotional activity will commence and that consumers will continue to search for those great deals,” Aull said. “As folks are evaluating products to buy, they are looking for less expensive and potentially private brand opportunities to increase value for the money.”
Regardless, Sankaran is optimistic about the future. “I think we have what people need and we have it pretty close to where they live and that makes a huge difference. And what we are doing is putting capabilities on top of that, so I’m very optimistic,” he said. “The pandemic has brought people back and they’ve appreciated what grocery stores offer, and it’s our challenge to keep them engaged and build on it.”