The COVID-19 pandemic has affected businesses in every sector of the domestic economy. While negatively impacting some, others have just seen shifts in the way commerce occurs.
This change is most evident in the shift in retail trends that we have seen since late this winter. Consumers flocked to retailers buying up entire stores of CPG goods in preparation for the pandemic in late March. However, this did not last as retail sales had one of their worst collective months in April
Despite the latest lockdowns and newest virus concerns, retail sales have bounced back though from abysmal spring lows. According to the US Commerce Department, sales increased by 7.5 percent in June from their considerably rebounded May levels.
Moreover, the US Commerce Department states that spending is up 1.1 percent in a year-over-year comparison, which marks the first annual increase of the pandemic.
These stats show that it is not where US consumers are spending their money that has changed. It is how and through which channels. We are still only a few months into the global outbreak, but the impact the virus has had on consumer behavior has already altered the food and beverage industry.
Consumers Jump Online in Response COVID-19 Outbreak
As noted above, US consumers have continued to spend their money on essential items like food and beverage products as well as retail goods. But these transactions are now occurring digitally with more frequency.
According to a report from McKinsey & Company about COVID-19 influenced consumer spending, “Most categories (of consumer products) have seen a 10 percent growth in their online customer base during the pandemic and many consumers say they plan to continue shopping online even when brick-and-mortar stores reopen.”
This retreat in foot traffic started before the COVID-19 outbreak, but it would appear that this event has kicked the retail trend into another gear.
Despite a widely publicized e-commerce “boom,” only 3 percent of grocery transactions occurred online before the pandemic. Other areas industries have long reported robust online sales, but grocery transactions were some of the last in the country to go mostly digital.
That is no longer the case as total online sales have reached $73.2 billion in June, according to Digital Commerce 360, an increase of 76.2 percent from the year prior. Rolled into that accumulation is a healthy portion of grocery spending.
“Online grocery sales increased as much as fivefold to between 10 percent to 15 percent of total grocery sales, said Steve Caine, a retail expert and partner for Bain & Company in an interview with CNBC.
Caine continued by saying that he expects this trend to continue even as the pandemic wanes. That possibly permanent trend will impact food and beverage brands as they look for new ways to retain their consumer base.
Food and Beverage Shippers Connecting with Consumers Differently
With a rapid, dramatic shift in consumption patterns, many brands have begun to think about selling to customers differently.
Some Zipline Logistics customers in the space witnessed a dramatic uptick in the direct-to-consumer purchases. At the same time, others have begun selling more product to big-box retailers like Sam’s Club and Costco.
Consumers are now more likely to purchase products in bulk than in previous periods. The reason is due to reduced overall population mobility and increased panic buying behavior.
Customers attempting to limit in-store visits or purchase more goods online have become more likely to increased product quantities.
According to a survey conducted by Shopkick, 76 percent of people polled are adjusting their shopping habits, including 47 percent of respondents buying items in bulk. Additionally, 60 percent of those surveyed reported that they are worried about shopping in stores.
What the above equates to is, consumers are more frequently buying larger quantities per transaction. Brands can no longer solely rely on the way they found consumers of the past.
Buyers are less likely to buy one-off transactions of your product. They are more likely to stock up on several items, purchase cases, or other large quantities.
With fewer shoppers in-store, impulse buys are a less likely reality for brands.
It may be helpful for food and beverage manufacturers, that built a steady customer base with center aisle displays or eye-catching packaging, to instead focus on digitally connecting with consumers.
Retailers Changing Ordering Patterns
Another retail trend affecting the industry is the shift in demand for shelf-stable products. Considering consumers are making fewer trips to the store, their desire for products with a longer life only makes sense.
According to a market research report from Nielsen, US sales for frozen fruit rose by 24 percent since the outbreak, while demand for shelf-stable fruit increased by 17 percent. Likewise, sales of frozen vegetables increased by 19 percent and 32 percent for shelf-stable products.
Furthermore, nut and seed butter sales have risen by 163 percent over this period, according to Research and Markets.
And this trend does not stop there. Several of our customers that produce shelf-stable meat products saw an uptick in retail order volume by as much as 20 percent during the outbreak in March.
These consumer staples have remained on retailers’ shelves since early spring. In contrast, others have not been as fortunate. Retailers have, by-in-large, reduced SKU counts in their stores to increase overall supply chain efficiency.
According to Fresh Plaza, “retailers chose to maintain the staple items, which also are seeing the highest demand right now.”
This reduction allows them to manage inventory and sell products with higher demand more effectively.
However, its impact on vendors and consumers translates to less variety. For manufacturers, one product line may be in demand while another completely drops off. You must assess your business to determine which products will be most ordered by your customers to ensure that you meet production
Logistics Increasingly Important to Keep Up with Retail Trends
With all that has changed in how consumers purchase which products, it is as vital as ever to optimize your logistics function to ensure that your product remains in stock.
Whether consumers are finding your product in-store or online, you must maintain an efficient supply chain to keep up with customer demands.
These trends may become permanent fixtures of the industry or may again shift as the pandemic situation continues to evolve. The best way to stay in front of a changing retail grocery industry is to work with a true logistics partner.
Zipline works exclusively with CPG brands on a consultative level to ensure they stay up to date with the latest happenings in retail.
We understand the importance of keeping your product on the shelf and can work with you to ensure that it does.