Retail

COVID-19 Is Changing The Grocery Business

Perhaps no retail category has been under as much pressure during the past six weeks than grocery. As the COVID-19 crisis hit in early March, stores had to contend with supply chain issues, panic buying and safety issues as a stunned public stocked up on essential items. Now that the panic has subsided, it’s evident that grocery shopping is seeing a reduction in overall shopping visits as well as a substantial digital shift.

First, PYMNTS data shows that the number of consumers who have reduced their overall grocery shopping activity has jumped from 20.9 percent in early March to 76.5 percent as the month closed. Drilling down into those numbers, changes can be seen from mid-March to March 27 in two details. One: consumers who said they had reduced going to the grocery store to buy food to prepare at home grew from 52.2 to 59.1 percent. Among consumers who bought pre-packaged foods, that number grew from 45.4 to 50.8 percent. The data indicates that consumers are using food delivery services more, which is exactly what 8.4 percent of the respondents said.

A fair amount, but not all, of the grocery business is going online. At the month’s start only 3.9 percent of consumers shopped for groceries online, rising to 9.1 percent by month’s end. That was driven mostly by consumers who were “extremely” concerned about coronavirus exposure.

Who drove that shift? The data shows that 73.5 lived in smaller cities and towns of below 500,000 inhabitants. Millennials accounted for 32.9 percent of the shift and the largest difference occurred among Gen Z. That group only makes up 8 percent of the total grocery shopping market but took 14.8 percent of the digital shift. Baby boomers and seniors made up 39.4 percent of the total market but only 29.2 percent of the digital shift.

While the main reason for the overall decrease in grocery was due to COVID-19 concerns (35.4 percent) it was interesting to note that stock outs played a part. The data shows that 26.5 percent of respondents said they were shopping less because their local store had empty shelves.

Although stock outs were much more common early in the crisis due to panic buying, supply chain issues still plague the grocery vertical. Some analysts say the largest disruptions could hit the food supply chain hardest in May. “Immediately, it’s not a serious problem,” said Subodha Kumar, a professor of marketing and supply chain management at Temple University’s Fox School of Business, in a report by NJ.com. “People will not be starving or be out of food. We will have supply, but certain types of product will be impacted or delayed.”

Many chains are being proactive by limiting sales on some items. “We understand our customers want to prepare by stocking up on the essentials. Texans must continue to prepare, but panic does not promote progress,” said Dallas-based H-E-B said in a statement. “For the long term, H-E-B is in a good in-stock position on many of the items our customers need, and we are working around the clock to restock our shelves. In order to help ensure all can secure the products they need, when they need them, we’ve implemented temporary purchase limits on certain items help protect the supply chain in Texas. While our customers might find our supply of some products low or temporarily out of stock, we encourage customers to check back with us if they cannot find what they need, as we’ll continue to restock our products.”

Among the subset of consumers who decreased grocery shopping due to the coronavirus it was clear that external events would be the key to returning to their previous spend levels. A vaccine would be the deciding factor for 53.6 percent of respondents, followed by CDC clearance (50.8 percent).

This comes as many grocery chains are starting to require masks and gloves of their employees. While many shoppers take such precautions, one official says they should be required to do so.

“I honestly believe that someone needs to step up to the plate and say if you’re going to go to a food store, then put a mask on and put on gloves,” said Marc Perrone, president of the United Food and Commercial Workers International Union (UFCW). “The coronavirus pandemic represents the greatest health and safety crisis that America’s grocery and food workers have ever faced. Since the beginning of the outbreak, these workers have been on the front lines of this terrible pandemic. While tens of millions of Americans were told to work from home for their safety, grocery store and food workers have never had that option. More must be done to protect them and our food supply now.”

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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