The food and retail industry has adapted rapidly to unprecedented challenges over the past year. COVID-19 has significantly changed some basics of modern retail and accelerated digital transformation. With that in mind, IGD’s Head of Innovation and Futures Toby Pickard outlines five trends that we expect to change and shape the global retail landscape in 2021 and beyond.
1. System upgrade: digitally enhancing operations
What we expect in 2021:
- Introduction of digital technologies that have a low capital investment and are easy to update
- Partnerships with third-party technology providers to speed up new tech introduction
- More use of machine learning and artificial intelligence at the store level to drive revenue and increase customer satisfaction
The pandemic has accelerated retailers’ and shoppers’ digital awareness and capabilities. Numerous companies have been testing and learning from new digital initiatives, and in 2021 companies will need to move beyond just testing and learning to improving and implementing at scale. Digital transformation will require new leadership and a fresh cultural mindset as companies create flexible and agile ways of working.
Successful retailers will introduce digital technologies that have a low capital investment and are easy to update. We expect to see numerous retailers partnering with third-party technology providers to ensure they can implement new technologies quickly. We also expect to see more retailers using AI and machine learning at the store level to drive revenue and increase customer satisfaction.
More than three-quarters of large retailers around the world either have AI systems now in place or plan to install them before the end of the year. To truly capitalize on the advantages of AI there will be a greater need than ever for retailers and manufacturers to share data and work together on shopper-focussed initiatives.
Retailers already using this trend:
Lenta – Russia
Lenta, one of Russia’s largest retail chains which operate the country’s largest hypermarket chain, is turning mobile self-scanners with Zebra technology into store navigation devices.
Aldi – Switzerland
Aldi Suisse added electronic crowd monitoring systems at 110 of its busiest stores at the beginning of April 2020.
Since then it has rolled out similar traffic light systems to stores around the world. Other retailers have also implemented comparable technology-driven initiatives.
2. Escalating eCommerce: driving online and profitability
What we expect in 2021:
- Retailers seeking to reduce their overall operating costs to accommodate online, improving processes and automation
- Encouraging shoppers towards click and collect
- Retailers assessing the options for rapid delivery, for example, the same day or in a few hours
Ecommerce was the winning channel during the early part of the pandemic. Although this growth is receding, online penetration is expected to remain at higher levels than pre-crisis. Retailers have increased capacity and enhanced the experience for shoppers.
Retailers will want to retain the newly acquired online shoppers, however, they will need to reduce the overall operating costs to accommodate a larger, unprofitable online business.
We expect to see omnichannel retailers encouraging shoppers towards Click & Collect to improve profitability. It is likely that retailers will still have to offer rapid deliveries, such as same-day or within a few hours. They will either let the aggregators do it, let a third-party do the last-mile, or accept the costs associated with last-mile rapid delivery and do it themselves.
Retailers will invest in processes and automation to reduce their fulfillment costs. We will also see businesses prioritizing growing online revenue by selling online advertising, and/or increasing delivery revenue through tiered subscription schemes and dynamic pricing.
Retailers already using this trend:
Tesco – UK
In April 2020, following a huge effort to increase online delivery capacity, Tesco became the first retailer in the UK to fulfill one million online grocery orders in a week. To achieve this Tesco hired 4,000 new drivers and 12,000 new pickers since the start of the crisis, and colleagues began picking in-store orders from 2 am.
Carrefour – Belgium
Vancouver-based Food X Technologies has signed a strategic partnership with Carrefour Group to accelerate the retailer’s eCommerce capabilities.
The partnership with Food X Technologies has been formed to support Carrefour in increasing the productivity and profitability of its eCommerce operating systems while enhancing its digital customer experience, under an exclusive agreement for the Belgium market initially.
3. Making a meal of it: creating inspiration and excitement
What we expect in 2021:
- Retailers creating inspiring meal solutions for all occasions
- Retailers seeking to capture shopper spend that was previously taking place out of home
Many shoppers will be looking to recreate the out-of-home experience at home this year. There is an opportunity for suppliers to partner with retailers to develop solutions, including digital platforms, that can support this. The evening meal at home opportunity is still up for grabs.
As the pandemic continues to create challenges for social interaction and people continue to work from home, we expect retailers to focus on inspiring meal solutions for all occasions throughout the day and week. By highlighting both values, ease of preparation, and cooking along with inspiration, retailers have a real opportunity to capture shopper spend that was previously taking place out of the home.
Retailers already using this trend:
Co-op – UK
The retailer has introduced ‘fake-away’ meal boxes for £8 for two people, offering a good value compared with foodservice equivalent. Shoppers have a choice of Thai, Tex Mex, fried chicken, Indian, or Peri-Peri. The boxes are available for delivery via partner Deliveroo in some locations.
FamilyMart – Philippines
In the Philippines, the retailer made its ramen available for customers to take home and enjoy. The ready-to-heat packs, usually consumed in-store, were made available for take-out and delivery. The retailer also introduced a pre-ordering service for the range.
4. Holistic health: supporting health and wellness
What we expect in 2021:
- A greater focus from shoppers on hygiene and sanitation products for individuals and the home
- Retailers and brands trying to differentiate themselves by helping shoppers and consumers live healthier lives
- More tailored solutions in-store, either through assistants or using digital tools like apps
Going forward retailers will aim to support both physical and mental health as a priority. We expect retailers to lead and respond to shoppers’ individual health priorities, which we anticipate evolve and become broader. They will span nutrition, immunity, exercise, work-life balance, and sleep.
We will see more retailers educating, informing, and rewarding shoppers for living healthier lives. Companies will look to champion both their health and sustainability credentials, as the two key trends merge, of their existing and new products. Personal health will increase in importance, but ultimately affordability may take precedence during economic downturns.
As health and wellness shape retailer formats and category developments, brands will need to consider what this will mean at a product level.
Retailers already using this trend:
DM Drogerie – Germany
The pandemic exposed the importance of being sustainable to boost good health and recuperate the environment.
Retailers seek to develop the trend through research and innovation. DM Drogerie looks to offer ‘climate neutralized’ products by 2021, that will inform consumers of the effect products have on the environment.
Loblaw – Canada
Loblaw has partnered with League, Canada’s leading health operating system (health OS) technology provider, to launch the PC Health app.
Through the app, Canadians will have free access to registered nurses and dietitians, who can provide advice and support, as well as receive rewards for completing customized health goals.
5. Recuperative retail: focusing on sustainability
What we expect in 2021:
- With climate change remaining a top priority, we expect retailers globally to push ahead with initiatives to support goals in this area
- Continued implementation globally of initiatives to reduce plastic and food waste
- Initiatives to build trust, loyalty, and better relationships with shoppers, staff, and communities
Climate change will remain a top priority in 2021, as it is recognized as the most likely source of major future disruption.
We expect to see retailers push ahead with sustainability initiatives as many have committed to supporting the United Nations Sustainable Development Goals and COP26 targets. While there will be much focus on how sustainability supports the climate change and resilience agendas, we will also see initiatives to build trust and loyalty with shoppers.
Retailers have been one of the few points of contact outside the home during COVID-19, with retail staff a vital part of their communities. Many businesses have also activity played their part through donations and support to vulnerable citizens. They will look to build on this and create deeper relationships between their staff and the communities that they operate in.
Retailers already using this trend:
Rewe – Germany
Germany-based Rewe announced a new food donation campaign, collaborating with Tafel Deutschland, which distributes food to socially and economically disadvantaged people. The campaign aimed to collect and donate €2m worth of food, to food banks.
Walmart – USA
Walmart is doubling down on addressing the growing climate crisis by targeting zero emissions across the company’s global operations by 2040.
Walmart and the Walmart Foundation are also committing to help protect, manage or restore at least 50 million acres of land and one million square miles of ocean by 2030 to help combat the cascading loss of nature threatening the planet.