The Supermarket Guru - Four (4) shifts in supermarket space that is going to change retail forever

October 01, 2020 | By HIVERY

Recognized as “The Supermarket Guru”, Phil Lempert is one of America’s leading consumer trend-watchers and analysts on consumer behavior, marketing trends, new products and the changing retail and supermarket landscape.

Phil brought us up to date with the ways the pandemic has been altering consumers’ shopping behavior and how these changes have been shifting both the retail, supermarketing and consumer packaged goods (CPG) sectors.

What is the current state of retailers and supermarkets?

Since the onset of COVID-19 crisis, things have been far from usual for retailers and supermarkets. For one, Phil emphasized that physical distancing, health protocols and safety measures have been limiting stores in providing a pleasant shopping experience for consumers. 

“We’ve gone from having a very pleasant experience where supermarkets built themselves to be experiential, to this. No one right now can present a terrific experience. From food carts, self-service bars to salad bars - everything they’ve been doing to provide an inviting shopping experience is now out the window.”

Phil also mentioned how customers have become more concerned about their health. Due to the rising cases of COVID-19, many people now resort to the “new normal” online shopping, curbside pickup and delivery. As expected, these come with serious implications for retailers. 

“Pre-COVID-19, the average American went 2.2 times a week to buy groceries and spent around 22 mins on every shopping trip. Now, however, the average American just goes once a week, in and out as quickly as possible.

To make stores more efficient, we will see many retailers reducing their number of skews on supermarket shelves. You can also expect online ordering, store fulfilment, in-store pickup and delivery to become popular approaches. As a result, a lot of stores will be decreasing their sizes.”

How do these recent events affect product assortment and shelf space?

The pandemic has brought significant changes to the formats and operations of retailers and supermarkets. It is expected, then, that variations around shelf space and product assortment will also arise.

Phil delved into how these retail spaces will be leveraged today and in the post-COVID-19 world:

1. A limited supply of certain commodities

A lot of grocers are worried about the possibility of a second phase of the pandemic. Aside from the health implications, they want to figure out how it will affect the supply chain. 

Phil explained, “When the pandemic began, Americans had experienced not having certain products on supermarkets’ shelves for the first time. They are wondering if it will happen again and the thought scares them. As such, they were buying everything they could – that is, hoarding.”

The limited supply, then, has left some shelves empty for months. For instance, Clorox’s disinfectant wipes will not be able to stock up until mid-2021. So, to provide people with alternatives, retailers must modify the product variations they offer.

2. Reconfiguration of stores as “ghost supermarkets” 

Phil highlighted why there is a major reconfiguration of stores right now. 

“Stores are being limited to 20-30% occupancy, which takes a toll on their bottom line. To keep the operations going, we are now seeing ghost supermarkets that focus mainly on delivery.”

He also believes that while the online assortment range can cater for over 40 thousand products, physical stores will see a reduction to 20 or even 15 thousand products. This means that a smaller assortment at a store-specific level must be optimized to gain profits.

3. Difficulty in attracting retailers’ attention with new products

“The whole new product introduction system is under evaluation as retailers start to cut products and space,” Phil stated.

With category "resets" happening just twice a year and now this limited launch of new products, it’s anticipated that there may be less variety of products available going forward.

4. Unpredictable demand that limits retailers 

Who would’ve thought that the demand for products related to the cold and flu season like medicines and vitamins would rise all year round? The unprecedented effects of COVID-19 have restricted retailers’ ability to predict which products will become a hit and which ones will fall flat.

Phil said, “The way it usually works is you will build promotions and collaterals 2-3 months ahead. But because of our uncertain conditions, I don’t even know one retailer who can guarantee what kind of products will be on their store shelves 2-3 months from now.”

How can retailers thrive in the new normal, then?

Phil shared some powerful insights to guide supermarkets and retailers in overcoming the current challenges of the industry, especially around assortment planning.

First, he advised retailers to thoroughly know and understand their customer base. Phil also put importance on zip code assortment specific recommendations.

“They have to know the kinds of food their customers want. They have to know about the demographics and health conditions. If your store is located in Florida with older Americans and higher cases of diabetes, you need to stock differently from a New York store with a younger population.”

He further emphasized the need for assortment planning at the individual store level.

"Gone are the days of the same assortment in all stores. That hasn’t happened for a long time - and frankly, it shouldn’t happen. When I go into the supermarket, I want to feel that the store knows me and has the right products for me. I don’t want to have to go to 3 or 5 stores to shop around, especially at this time of COVID.”

Phil also mentioned how retailers today are becoming less reliant on CPGs for category planning. Instead, they have been utilizing science and technology to make smarter decisions. For him, this is something that must be maintained.

“Typically, the category manager is not an employee of the retailer, but the manufacturer. This person is usually from the biggest brand in that particular category. Obviously, you can see some conflicts with that.

But that’s changing a bit. More and more retailers are now hiring their own category managers and using software like HIVERY to evaluate properly what products are put on, what shelves and where. We are seeing science becoming more involved, so it’s not about gut feeling anymore.”

What are the expected changes in the supermarket and other retail spaces post-COVID?

As our interview with Phil comes to an end, he discussed some of his predictions on the possible changes that might arise in the field of retail after the pandemic.

His main points include:

  • There will be more evident consolidation – Earlier this year, supermarkets bought smaller retailers to take advantage of consumers’ hoarding. Recently, however, we are seeing volumes go down - leading to the majority of these stores closing.
  • Aging truck driver force will affect the supply chain – There are not enough trucks to get supplies. Autonomous vehicles, indoor farming and local production are the most viable solutions.
  • Increased prices of imported products from Europe – This is because the US has not been exporting and importing a lot of products from European countries like before.

Phil concluded the discussion by challenging retailers. He asked them to identify and better understand what shoppers would want tomorrow. 

“How can we get into the head, heart and soul of shoppers? How can we be predictive? How can we get a much better success rate when we bring new products?”

If you like this blog, listern to the podcast with Phil Lempert's podcast on this topic

How can HIVERY help you? 

HIVERY is the pioneer of hyper-local retailing – combining artificial intelligence, optimization and design to help CPGs and retailers generate an increased return on physical retail space investment. 

 HIVERY Curate, is the world’s first truly hyper-local category management solution, offering the simultaneous optimization of assortment and space at store-specific level. More information about HIVERY Curate and other HIVERY solutions.

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