Retail Research Associate Nelson Blackley explores the impact of the coronavirus crisis on UK grocery and supermarket shopping trends
Throughout 2019, the UK food-on-the-go sector continued to grow by 3.7% and was thought to be worth £24bn, according to market research firm NPD – whether it was grabbing a lunchtime sandwich from Pret, a Big Mac and fries from a McDonalds Drive-Thru or a vegan sausage roll from Greggs. Add to that the millions of school dinners, pub lunches, and restaurant meals that we are not currently allowed to enjoy, and it is easy to understand why sales across the major food supermarkets have soared over the past six weeks.
The latest UK Grocery market data published by Kantar Retail last week confirmed that total grocery sales grew 5.5% over the last four weeks. Unsurprisingly, grocery sales have slowed since the 20.6% increase recorded in the ‘panic buying’ month of March, when COVID-19 first hit the UK and grocery shoppers spent over £500 million more than in March 2019. During April, consumers have started to adapt to life under lockdown, looking to buy just what they need, at the same time as on-shelf availability of most foodstuffs in supermarkets has improved greatly.
Meanwhile, Tesco has achieved an increase in online capacity of 103% in the space of a few weeks, growth which would normally take years to achieve. The other supermarkets have also ramped up availability of online home delivery slots. Last week, Tesco broke through the one million online delivery slots a week for the first times. The retailer says it is now aiming to offer 1.5 million a week within the foreseeable future. Their staff also picked over 10 million items (for online orders) in one day – again for the very first time.
To deliver this unprecedented step change in their online capacity, Tesco have hired 12,000 new pickers and 4,000 extra drivers as well as adding 400 new vans to take full advantage of emergency changes in regulations allowing van drivers to work longer shifts.
Unlike online specialist Ocado, which uses robot-driven warehouses to pick groceries, 90% of Tesco’s home deliveries are picked by hand in stores. That crucially has given it the flexibility to expand its capacity so quickly in just six weeks.
The data published last week by Kantar Retail, and the metrics from Tesco and other food multiples highlight the seismic changes that have been taking place across the UK Grocery market over the past few weeks. It also raises some very interesting questions about whether, or not, some of the recent changes in grocery shopping behaviours will become permanent.
I think two of the most significant are the acceleration of one existing retail trend (the sudden increase in the use on online grocery) at the same time as the reversal of another retail trend (the move back to a ‘big weekly shop’ rather than frequent food shopping trips).
Before the crisis, only about 7% of all groceries in the UK were ordered online. Online sales now account for 10.2% of the grocery market which is a huge swing in just a few weeks. However, within these numbers there is some interesting evidence of an ever wider demographic switch to digital. In particular, online grocery spend among over-65s has increased by 94% year on year during the coronavirus crisis – and so it’s no longer just busy young families that are grocery shopping online.
Richard Lim from consultancy firm Retail Economics highlights that COVID-19 has forced shoppers who had never shopped on the internet to give it a try: “Sections of society are being forced to go on a customer journey they wouldn’t otherwise have embarked on. People who couldn’t be bothered to try online shopping are getting past the initial friction of setting up an online account and inputting their payment details.”
In his final earnings call with analysts at the end of April before he retires in June, Sainsbury’s CEO Mike Coupe supported the view that many shopping habits that have been forced as a result of the COVID-19 pandemic are likely to remain beyond the crisis. “When people get into the habit of ordering their groceries online it’s likely to be sticky”, he said.
It will also be interesting to see whether or not the ambitious online growth plans by Ocado/M&S and Waitrose that had been announced during 2019 help drive an increase in the use of online grocery shopping over the longer term.
When using physical grocery stores over the past few years, shoppers had increasingly moved away from a traditional weekly ‘big shop’ to making more frequent, ‘smaller shops’. The result was that the number of food shopping trips the average buyer made a year had increased to 179, according to Nielsen – nearly 3.5 food shopping trips on average every week.
Suddenly, because of understandable safety concerns about coronavirus and crowded environments, many consumers have reverted to shopping the way they did a decade or so ago by making one big weekly trip to the supermarket, according to NTU alumnus Dave Lewis, the CEO of the UK’s largest grocery retailer Tesco.
In an interview with the BBC at the end of April, he said that the number of transactions in Tesco stores during April nearly halved, but the size of the average basket had doubled.
This is reflected in the overall UK trend reported by Kantar, where on average, households shopped only 14 times for groceries in April, a record low and down from 17 visits every month in times before COVID-19. Conversely the Kantar research found the this drop in frequency of food shopping visits to grocery stores was matched by a significant increase in the spend per visit, which in April was £26.02 – the highest figure ever recorded by Kantar and £7 more than this time last year.
However, whilst there are many uncertainties around when things in UK retail will settle, and whether these consumer behaviour changes will be temporary or permanent, there seems to be no doubt about one thing: that safety has now replaced convenience as the key driver for consumer decisions about how, where and when to shop for their groceries.
Find out more about Nelson Blackley’s research.