COVID-19 and the Moment of Opportunity for Supermarkets

Part one of a four-part series.

The effect of COVID-19 on the retail sector has been mixed. Most retailers have been forced to close their doors, and non-essential sectors have struggled to take those lost sales online, but for supermarkets, the experience has been very different. They have never been busier.

According to Kantar, March saw a staggering 20.6% rise in grocery sales. At the end of April Sainsburys, chief executive revealed that for five days running it sold more than it would normally sell in its busiest day at Christmas. So far, this revenue boost has offset by the costs of hiring more staff and installing social distancing measures.

However, with restrictions likely to continue for many months to come, that inflow of revenue looks set to continue, and with safety measures and new staff in place, and supply chains now adjusted, the costs are likely to reduce.

This, in short, is a once in a generation opportunity. It is a chance for supermarkets to do all the things they have known for decades that they should be doing but have been held back by a lack of resources. This is the moment for supermarkets to innovate.

Long queues at the beginning of the UK lockdown

Retail’s Innovation Problem

Retail as a whole has long had an innovation problem. Where once it led the way in fresh ideas, from the department store, to the barcode, the home shopping directory and the out of town retail park, these have all but dried up in the past few decades. The supermarket of 2020 looks very much like the supermarket of 1980. The products have changed but the retail experience is almost identical.

When I worked on the launch of the Next Directory back in the mid-1980s we all expected it was just another step in ongoing sector innovation. None of us on that team could ever have imagined that we’d look back in 2020 and think of it as more or less the last retail innovation. In the many years since StormBrands has worked with a host of retailers, from Morrisons to Halfords, from ALDI to Despar, and we’ve been privileged to be involved in some brilliant, forward-thinking projects. But I feel there’s so much more we can do.

And it’s vital we do it. The COVID-19 revenue surge should not be allowed to mask the problems retail face. According to Deloitte’s 2020 Retail Trends report, 2019 saw the slowest rate of spending growth since 2010 and the industry faced large-scale business restructuring: 85,000 jobs lost, a third of FTSE 350 CEOs changing, and 9,169 store closures.

For too long retail has been like an animal frozen in the headlights of incoming threats from online retailers and the inexorable rise of Amazon, to German discounters and declining high streets. It’s time to respond.

Photo courtesy of Pleasant Family Shopping

The Moment of Opportunity

The speed with which the sector has responded to the crisis of recent weeks shows just what can be done. The sudden realisation of just how vital supermarkets are to our economy and lives has reframed how both customers and employees see them. This shift in perception, together with a hard-earned revenue bump, can provide the foundation for innovation.

As an agency that’s immersed deeply in retail, and particularly supermarkets, we’ve been thinking deeply for the past few weeks about what this moment of opportunity means for supermarkets. How can they best use it? What can they do with their formats, their positioning, and their online and physical offerings to emerge strongly from this? We will be sharing these ideas over the next few weeks in our Retail Innovation series.

Many retailers will choose to avoid these difficult questions. They will put all their focus on the operational issues of today. They’ll make the case for putting aside any excess revenue “for a rainy day”. They’ll tackle tomorrow when it comes.

But the retailers who seize this moment of opportunity, who spend these weeks thinking through how the world of tomorrow will look and how they can be most relevant to customers in that world, will be those best placed to avoid that rainy day. The retailers who innovate today will be those who succeed tomorrow.

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