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07/19/2021

Exclusive Q&A: Grocery retailers must adapt to shifting landscape

Dan Berthiaume
Senior Editor, Technology
Dan Berthiaume profile picture

COVID-19, as well as supply chain disruption and sustainability concerns, are requiring grocery retailers to leverage innovative solutions and strategies.

Chain Store Age recently spoke with Sangeetha Chandru, national operations transformation and retail transformation practice leader for Deloitte Canada, about shifting consumer preferences and supply chain issues in the grocery sector. Chandru offered some concrete advice about how grocery retailers can apply technology and process to effectively adapt.

How are grocery retailers responding to increased consumer demand for omnichannel services such as BOPIS and curbside?
At the beginning of the pandemic, there were a lot of challenges around BOPIS that have largely been fixed. Food retailers are now better equipped to handle omnichannel orders and have made improvements to their technology platforms.

Grocery retailers are also getting better at reducing the number of substitutions, which were incredibly high at the beginning of the pandemic. Too many substitutions of products lead to customer frustration and dissatisfaction and tempts the customers to shift their online purchases to a retailer where substitutions are fewer. However, in the last few months, this has gotten a lot better as supply chain issues have been ironed out and there is better inventory management at the store level. 

What are grocery retailers doing to mitigate continuing supply chain issues?
Grocery retailers, now more than ever, are preoccupied with ensuring food security and supply chain stability since the onset of the pandemic. In response, they have shifted to more local sources enhanced by Canadian greenhouses and vertical growing systems. 

Grocery retailers are also constantly finding new sources of supply, carrying higher inventory, and exploring options for collaboration with other grocers, especially for regional players. We’ve also seen grocery retailers opting for longer term and committed contracts with their producers.

[Read more: Three solutions for a disrupted supply chain]

How is the interior of the grocery store changing?
Grocery stores by and large will start to shift towards smaller formats and reduce the amount of retail square footage. This is especially true for the current full-service format stores.

Retailers who shift towards smaller retail formats will find themselves redeploying extra retail space towards building out micro fulfillment centers in locations where it makes the most sense geographically. This will help with last-mile fulfilment. 

There will also be a continued emphasis on food retailers to carry home meal replacement (HMR) and other ready-to-eat meal solutions that are fresh and healthy. This will inevitably shift the interior of the store as more space is dedicated to these food convenience solutions. 

E-commerce fulfilment is definitely top of mind for food retailers as they continue to crack the code on how to make the last mile fulfilment process more economical. Moreover, grocery retailers will continue to improve the quality of produce delivered to customers via better quality control at the store associate level. They will also improve the range of products available online and focus on offering more flexible delivery options.

The ultimate goal will be to allow customers to have access to their food options anytime, anywhere – with convenience and speed. 

How are grocery retailers responding to increased consumer awareness of sustainability issues?
Food retailers are approaching the sustainability issue from all sides. First, they are focusing on reducing and eliminating food waste. It’s very promising to see the progress being made by grocery retailers to reduce waste by donating items that could go bad to food bank systems first. If produce and other food items pass their prime for safe human consumption, grocery retailers are also exploring how this food could be used by animal feed lots. Finally, once food is no longer salvageable, looking at how it can be composted properly to do the best for the environment and the larger food chain.  

Grocery retailers are also targeting issues like single-use plastics by offering recycling programs. More food retailers will also start offering refillable stations for key commodity items.

Sustainability is at the top of food retailers’ agendas these days, but there is a gap in communication to the public on what’s being done. Consumers are also ready for more transparency from grocery retailers on issues like product origin, carbon food labelling, and grocery store energy consumption. 

There is a huge opportunity for retailers to tell a better story about their sustainability efforts. The challenge is to find the balance between informing without seeming self-serving.