Since the onset of COVID-19 early this year, grocery retailing has presented immense growth opportunities. Consumer behaviour has quickly shifted to contactless and hassle-free purchase of grocery products, which along with medicines, form the bedrock of human survival.
Mode of Businesses:
Offline – Brick & Mortar: These are traditional grocery businesses which consist of physical stores in one or multiple locations, where customers can browse items and buy in person. Common examples include hypermarkets like Big Bazaar, D Mart, Spencer’s Retail, Star Bazaar, Reliance Fresh and even your local standalone grocery or kirana store. In the initial days of COVID-19, as online groceries struggled to cope up with unprecedented demand due to panic buying, brick & mortar stores selling essential items were exempt from the stringent lockdown and witnessed steady sales.
Online – Local Grocery App/Webstores : With the grocery business model having undergone a transformation, smaller physical stores are now reinventing themselves to compete with bigger brick & mortar outlets and established online supermarkets like Big Basket, Grofer’s, Amazon Pantry, Flipkart Grocery and Nature’s Basket. Thus, all grocery stores now have
omnichannel models to service customers online through message and phone call driven personalized deliveries, local grocery apps and live webstores.
Amidst the backdrop of COVID-19, the online grocery shopping experience has witnessed a paradigm shift. Online shopping, home delivery services, sizeable discounts, mobile checkouts & digital wallet-based payments, buy online pick up in stores (BOPIS) and channel blurring (switching retail formats for product purchases) are now the retail trendsetters.
Challenges of other product businesses in COVID-19
Other non-essential product businesses have been affected by the pandemic, however. During the nationwide lockdown, shopping malls were closed due to which hypermarkets with higher inventory levels have been affected. For example, Clothing and Lifestyle stores have been plagued by a deluge of unsold stocks. End-of-season sales and massive discounts haven’t been able to change consumer sentiment, as sales of these high margin products have remained low. This had led to inefficient supply chain management overall.
Consumer Durables & IT Product stores have also been hit hard. Sales of seasonal products like air-conditioners have been severely affected, with the summer months clashing with the initial days of the pandemic. To make matters worse, manufacturers are facing supply chain bottlenecks due to supply disruptions from Chinese vendors, and this has coincided with pandemic blues. Shoppers are now postponing high-ticket purchases in times of uncertainty and gloom.
Other significant challenges faced by product businesses during COVID-19 include lesser workforce, delivery delays due to logistical bottlenecks and negligible in-dining numbers, with most food service outlets and restaurants only catering to takeaways which constitute less than 10% of its total earnings.
Benefits of a Grocery Business
Steady High-Volume business: Grocery stores generally sell products with lower margins, depending on higher volumes to sustain business profitability. Customers are mostly repeat ones, and tend to stock up items for day-to-day usage. A viable grocery strategy initially entails being a low-margin, low-price high-volume operator and then if successful, evolving into a more conventional retailer offering more services with higher operating costs, margins and higher prices.
Essentials not requiring a sales push: Grocery stores generally sell essential items for everyday use, i.e. food items like bakery and bread, dairy, cheese, eggs, rice, wheat, edible oils, fruits & vegetables, meat & seafood, disposable products, toiletries, and household cleaning products. Since these items are required for survival, purchases are guaranteed. With no window shopping done by potential buyers, little or no sales push is required. All these lead to low startup and overhead costs.
Online Advantage: As mentioned earlier, food is a basic necessity and so are grocery stores. Nowadays, people buy groceries online, which are home delivered with payment done through mobile digital wallets. After the online revolution, internet is now easily available and m-commerce is widespread. With work-from-home becoming popular during COVID-19, online grocery shopping has become the norm and an absolute must in every buyer’s to-do list.
Digital Groceries – Easy to setup: To start, all you need is to set up a mobile app and mobile-optimized webstore. For this, there are readily available zero coding mobile development apps (compatible for both iOS and Android operating systems, and website creation platforms), with multiple payment checkout options. Instead of a physical store, a warehouse and reliable suppliers are required for a digital grocery. Retail consultants can also serve as useful guides facilitating the entire startup process. Word-of-mouth references and inexpensive digital marketing campaigns also help in sustaining the promotional momentum. An example of this is advertising on exclusive telegram and WhatsApp groups operating inside multistoried apartments.
Opportunities in Grocery Business
Fluid and Safe Formats embracing the new normal: Even with life returning to a semblance of normalcy worldwide by the year-end and beyond, the fear of COVID-19 will continue to prevail amongst retail customers. To tackle this, retail grocery formats should be easily adaptable, focusing on consumer needs and preferences. Reallocation of space, downsizing of stores and developing new formats would become the order of the day. Strictly adhering to hygienic sanitization and disinfection practices, social distancing and re-evaluating how people check out and pay by offering self-checkout kiosks and touchless technology will also be in vogue.
Making your Business Model Tech Enabled and Future Proof: Business models (in which online sales represent 10% to 15% of revenue) have to be rejigged and made more agile. Stores could be cashless or virtually cashless, with replenishment processes automated. Machine learning could also be used to forecast supply chain anomalies. Other technology enablers could be implemented in merchandising, e-commerce, and the remote digital office workplace.
Shift from Mass to Targeted Digital Promotions: In order to handle sudden demand changes, targeted promotions tailor-made for online channels and considering specific consumer preferences will be more popular.
Innovations in the COVID-19 context – ‘Contactless groceries’: The concept of ‘ghost kitchens’ (where pick-ups and deliveries occur without eat-in dining options) could spawn the growth of ‘contactless groceries’, i.e. stores that are contactless pick-up and delivery hubs without letting in customers inside. 30-minute deliveries will also become widely prevalent, with drone deliveries taking care of the ‘disease safety’ aspect.
Unique Customer (Shopping) Experience fortified by AI: Generation Z today prefers a unique USP-driven shopping experience as it provides better memories. Online groceries would harness the power of AI to personalize the entire customer experience journey. Whether it is the answering of routine questions or store check outs through chatbots, everything will be AI-automated. This would pave the way for more meaningful human interactions, say for complex issues or getting customized product recommendations, thereby striking an optimal balance between the two.
Omnichannel grocery retailing promising a consistent, seamless shopping experience is here to stay. Now and in the future, brick & mortar stores will continue to coexist with digital groceries, as buyers will still crave for a personalized face-to-face shopping experience, trying out new apparel and ‘touch and feel’ for expensive electronics. As a result, food and beverages, electronics, health and personal care, and general merchandising products will continue to show promising sales.
Groceries have always been the evergreen business model. They will remain profitable, as long as relevant market research is undertaken to provide a granular view of the local market, employees and customers are protected, and a stable continuity plan and infrastructure maintained. Supply chains also should be diversified to build resilience against shortages, and effective digital marketing strategies embraced, to add more value than ever before.
To know more about omnichannel grocery retailing, get it touch with Your Retail Coach experts and explore the business growth opportunities.