Grocery sector to focus on online, click & collect and revamp strategy

Ireland’s grocery sector will focus heavily on online commerce especially click and collect in the coming months, says Bank of Ireland’s head of Retail Owen Clifford.

The Irish grocery and convenience sector continues to perform strongly, acting as a catalyst for investment in online and offline channels.

According to the latest Retail Convenience H1 2021 Review by Bank of Ireland’s head of Retail Owen Clifford, the sector continued to deliver a robust performance as a result of Covid-19 shopping trends.

“The current low levels (under 5pc of total grocery sales) conducted via online demonstrate that a real growth opportunity is available if a frictionless, efficient, reliable service can be delivered”

The sector is committing to reducing its carbon footprint with store revamps, fleet management and use of alternative energy sources all being practically utilised.

Store purchase activity was particularly strong in H1 2021 and store revamp activity is expected to continue in throughout the second half of the year.

Take-home grocery sales linked to Covid-19 grew 18pc compared to 2019 (Kantar) while SuperValu and Dunnes Stores continue to compete strongly for the number 1 spot in market share.

Centra and Eurospar neighbourhood stores also put in a strong performance. However, convenience city centre stores however have struggled due to lower footfall linked with increased working from home practices and the reduction in tourism and sports events.

Forecourt stores continued to perform strongly, particularly due to enhanced use as regional top-up stores.

Increased footfall linked with vaccination roll out

According to Clifford the Irish grocery/convenience retailers demonstrated “admirable agility and proactivity” over the past 16 months in terms of health and safety measures and being a beacon within their local communities.

“It is a testament to the professionalism of our retail community that the level of Covid-19 cases within the sector was kept at a very low level ensuring this essential service was maintained across the country.”

It is no accident therefore that Irish consumers are more comfortable visiting supermarkets as the vaccination rollout gathered pace with an additional 2.1m trips to the supermarket recorded in June compared to the previous year.

“Whilst 2020 saw the return of the ‘big-weekly shop’ linked to health and safety concerns/preferences, the remainder of 2021 should see a return to more normalised store visit frequency levels.”

Digital revolution

The biggest changes are being seen in consumer spending habits, with consumers preferring a frictionless and accessible shopping experience with strong investment in click and collect now featuring across all leading grocery brands.

“Irish shoppers will certainly be more mindful of their sense of value to the community and the planet in their purchase decisions in the future”

Accordingly, grocery retailers will double down on online shopping services in the H2 run up to Christmas.

“The future of online grocery will be under the spotlight in the coming months,” Clifford predicts. “The existing platforms were stretched when dealing with the unprecedented volumes over the past year leading to some consumer disengagement with the channel.

“However, the current low levels (under 5pc of total grocery sales) conducted via online demonstrate that a real growth opportunity is available if a frictionless, efficient, reliable service can be delivered. It will be interesting to see if further partnership models develop via Ocado, Buymie, Deliveroo, Just-Eat or internal ‘dark stores’.

“The cost of picking and delivery linked to the online channel remains a deterrent to retailers. I would expect a greater emphasis to be placed on user-friendly click and collect offerings from all the leading brands in the coming months. The development of more intuitive/extensive brand apps linking personalised offers, loyalty rewards, click and collect, community initiatives and nutritional advice etc will be a priority for all brands to maintain customer engagement.”

Crucially, retailers will want to get their messaging and presentation right for the crucial second half of 2021.

“The ‘value’ message will be key for all Irish grocery and convenience retailers in the coming months. It will be interesting to see if they focus on a purely price-led model.

“I believe that a more rounded approach is now required. Covid-19 has reminded us all of the importance of health, wellness and community. Irish shoppers will certainly be more mindful of their sense of value to the community and the planet in their purchase decisions in the future.

“All of the major operators in Ireland have committed to reducing their carbon footprint via reduction in single-use plastic, food-waste and inefficient energy usage. The practical implementation of same will require investment and this has commenced in 2021 with increased use of solar panels, LED lighting delivered via recycled parts, roll-out of electronic labels etc being announced by Supervalu, Spar, Aldi and Lidl to date.

“Aspects such as product authenticity, product traceability, healthiness and impact on the environment will all feed into our shopping preferences. It is incumbent on retailers to make the Irish consumer aware of their efforts/bona fides in this regard – active communication and engagement will be required. Competitive pricing will be important but the consumer will also expect more from their retailers.

“The Irish consumer has high expectations in respect of in-store standards and presentation.  This has only been heightened during Covid-19 with consumers now seeking excellent standards in cleanliness, hygiene and overall store presentation. Progressive retailers nationwide recognise that investment is required to sustain customer engagement and an increased volume of revamp activity is expected in H2 2021.”

H2 tips for retailers

Clifford said that as well as quality experiences for consumers, now is the time for grocery retailers to maintain a laser-sharp focus on health and safety as well as on human resource strategies to retain their top-class teams.

“Independent grocery/convenience retailers (those operating under the Supervalu, Centra, Eurospar, Spar and Londis brands in particular) need to focus strongly on preserving/growing their margin without entering a ‘price war’ in a competitive environment.

“As their cost base is increasing linked to the ‘living wage’, statutory sick pay entitlements, auto-enrolment pension requirements etc, they need a robust margin platform to absorb same.

“Linked to the above point, given the shortage of skilled staff available at present, the implementation of an appropriate staff development/reward structure should be prioritised to support the recruitment/retention of a top-class team.

“Retailers need to focus upon their operational succession strategy as well as the ownership succession strategy. Covid-19 has been a catalyst for a number of grocery/convenience retailers to sell/retire from their business – the operators with the most balanced/experienced teams are the ones best placed to grow their store portfolio in this environment.”

Investing in the future

Clifford said that anticipated store revamps need to reflect the individual communities in which stores are located.

“A revamp can support the delivery of an improved store performance with industry averages of 5pc-10pc turnover growth and 0.5pc-1pc margin growth being delivered pre-Covid-19 levels. Detailed analysis pre- and post-revamp will be an imperative to ensure that the maximum return on investment is delivered via sales mix improvement, margin preservation/growth and cost saving.

“A robust investment plan draws on feedback from existing and targeted customers, employees, suppliers – it’s a holistic, interactive process ensuring that the retailer remains engaged with the customer and the wider community.  A revamp needs to reflect the individual community in which the store is located – a cookie-cutter format won’t allow the store to maximise it’s potential.

“The maintenance of a laser-focus on health and safety within their stores and opposite customers, suppliers and their team is critical in the months ahead. Whilst challenging from an operational perspective; appropriate rostering, social distancing and up-weighted hygiene standards will remain an imperative,” Clifford recommended.

John Kennedy
Award-winning editor John Kennedy is one of Ireland's most experienced business and technology journalists.