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Jun. 5, 2020 | Friday
Editorials and Opinions
COVID-19: The Checkout: Pandemic forces food stores to improve online retailing
Pixabay photo.

NOTL resident John Scott is chair of Niagara College, as well as a former CEO, current board member and retail adviser in the grocery industry. He offers his perspectives from the grocery aisles in the era of COVID-19.

John Scott

Special to The Lake Report

There's nothing like a crisis to stimulate creative thinking resulting in permanent change in the food retail sector.

The Great Depression led a small-town store manager named Michael J. Cullen to develop a revolutionary shopping model called the “King Kullen Supermarket” on Long Island, which focused on low food prices by assembling as many products as possible under one roof.

In the recession of the late 1980s Sol Price (having sold his supermarket chain in California) started the concept of the “Price Club” (later merged with Costco) the idea of which was to provide wholesale prices to small business and professional consumers.

The same difficult economic period also put wind into the sales of Walmart as that fledgling chain moved into grocery retailing. Each of these new innovations “stunned” the industry but induced welcome and lasting adjustments by literally every player.

So, when internet shopping was first introduced, the industry experimented with a plethora of models but none seemed able to gain significant traction. Europe and Australia performed better than North America, but overall success was sporadic and somewhat sleepy at best.

All of that changed in 2017 when Amazon purchased Whole Foods for the princely sum of $13.7 billion. Here was an industry interloper – a tech giant – moving into the sector clearly needing a foundation of physical stores but with obvious intentions to move to efficient online delivery. Everyone in the sector immediately reviewed their offering and assessed appropriate future options.

If I say online was “sleepy” to that point – I overstate the reality. The amount of business done online at that point was 1.5 per cent of the $100 billion Canadian industry.

The sticking points were twofold: first, there had been a huge consumer swing to fresh product and since online made it impossible see or squeeze a product, it created a reticence to the selection of produce or meats; second, delivery times were scheduled at a future date in two-hour “slots” and our mobile society had limited patience in accommodating non-instant delivery.

Despite these issues the industry persevered and several new models were implemented. The most successful wide-scale concept was “click and collect” which has been adopted by a number of chains worldwide and is successfully used by Loblaws and its franchises (including Valu-mart in Niagara-on-the-Lake).

However, there were other sound methods, such as the dedicated “picking” warehouses and delivery used by Grocery Gateway or the massive robotic concept successfully developed by Ocado in the U.K. (and which will soon operate in Canada in partnership with Sobey’s). Also experiencing varying degrees of success were independent services such as Instacart, which purchased from any outlet specified by the consumer (in essence a personal shopping service).

Over the years, the retailers have been working with the fresh product sector to design packaging that preserves and displays freshness and safety in both produce and meat. The purpose was not only portion and in-store convenience but also to enable the consumer to have confidence in ordering fresh branded product online.

It quickly became much easier to order certain brands of tomatoes, berries, strawberries, grapes, beef, pork or chicken by clicking the labelled item rather than taking a chance on bulk. Score one for the industry: impediment number one – how to buy fresh online – was gradually being resolved.

The result of this concentrated effort and significant investment over two years was a paltry increase in online shopping to 4 per cent. Increasingly retailers were seeing online as a necessary incremental service rather than a main avenue of business.

Enter COVID-19. We weren’t ready. The systems for online were in place but not geared to handle the sudden deluge of orders.

Issue number two: the difficulty in scheduling delivery was eliminated overnight by the isolation requirement. With no barriers to ordering fresh, together with the new flexibility in delivery times, demand surged.

In late March, the percentage of online grocery sales increased in some areas to an astounding 22 per cent before settling in April to a constant 12 per cent.

Some chains in urban areas temporarily closed a couple of low volume stores to facilitate full-time order “picking” by staff. Others added picking to the responsibilities of newly augmented night stocking crews. The volume became so intense that the delivery slots backed up to as long as 10 days. Sobey’s and Ocado moved up the launch of their new Toronto offering to April. In short, the industry was once again moving quickly to accommodate a changing consumer responding to a crisis.

Through April, the industry found its legs and developed the capacity to respond more quickly to all orders. In addition, consumer habits have evolved and most are now placing large orders less frequently.

Picking mistakes have substantially lessened and consumer satisfaction appears to be increasing. It’s unlikely that the current high levels of online shopping will be sustained after the pandemic but it's equally unlikely that there will be a return to 4 per cent.

Consumers have experienced the offering and they like what they see. That being the case, look for continued adjustments and innovation over the months ahead. After all, the role of our industry is to delight the consumer with the best possible offering at the most reasonable price and we will ensure that objective is achieved in all of our delivery systems.

Have questions about the grocery business? Email editor@niagaranow.com.

 

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