Deloitte predicts the future grocer will be small format

Demand for local and entrenched omnichannel habits are having an operational impact on stores, including their layouts.

The demand for fresh and local products are having an impact not just on grocery stores’ selections, but their footprint as well.

That’s a key insight from Deloitte’s new report, titled “Fresh, Focused and Sustainable: The Role of the Grocery Store.”

The adoption of home cooking, health and wellness trends, as well as an entrenched minority of shoppers drawn to online shopping convenience, are just a few of the shifting consumer habits that are informing grocers operationally.

Sangeetha Chandru, retail strategy and transformation leader with Deloitte, says that when it comes to convenience, pre-pandemic, there was a gradual shift happening toward ecommerce. But the rules of the game changed completely over the course of the last year, and grocers have gotten so much better at click-and-collect and home delivery, speeding up the convenience factor for the customer.

During the past year, 25% of Canadians ordered online curbside pickup for the first time, while 15% had food delivered, according to Deloitte insights.

“I don’t think we’ll ever fall back to pre-pandemic levels with respect to online shopping,” Chandru says, now that between 25% and 30% of all customers described themselves as being “happy and settled into” using online.

Chandru tells strategy that there’s going to be a shift away from larger format stores, to smaller ones, as grocers are taking on the role of micro fulfilment centres, especially with respect to curbside pickup.

“We may see more and more of that, especially to use square footage differently in the future,” Chandru says.

That’s even true for banners that have been built around large footprints. For example, a Real Canadian Superstore that opened in Calgary last year is 36% to 48% smaller than other stores in the immediate vicinity, with an emphasis on “peak growing season” produce.

Large format stores are still going to have a place, Chandru says, but their operations will be optimized using predictive AI and analytics.

Most retailers are using small space and prioritizing fresh food, whether that’s meat, dairy, seafood or plant-based alternatives, part of a big health and wellness trend.

This is happening in line with heightened interest in “local,” as according to Deloitte, 71% of respondents feel it’s important to know where food comes from, while 42% are committing to buy more local products.

“This is a bit of a shifting marker at this point, as we understand consumer preferences more and more,” Chandru explains.

This is already having an effect by changing the middle aisle of the store, and the types of products carried, to more innovative, niche brands that are also more healthy, Chandru says. And this may spill over to end cap displays as well, traditionally the domain of unhealthy snacks geared to kids.

As the store undergoes a healthy revolution, and customers look for healthy options, end caps could potentially be replaced by food adjacent items, Chandru says, and that “there are opportunities there for sure.”

Typically, multicultural consumers have frequently turn to middle of the aisle at mainstream banners for things like cereals, then finish up their baskets at mom and pop stores for fresher items.

“That is changing,” Chandru says. Bigger grocers are doing a much better job of offering them a full basket assortment, and it’s all meant to reduce trips for fulfilment. Conventional food retailers have also broadened their ethnic foods product assortment, like Walmart teaming up with Al Premium Food Mart, a specialty purveyor of multicultural offerings to tap diverse customer sentiments.

Product assortment of all kinds, however, is changing, with in-store assortment being simplified, switching to fresh veg and also frozen foods.

Home meal replacement is also growing massively, and “grocery stores want a piece of the action,” Chandru maintains. It’ll grow more and more, she says, as ready-to-cook and ready-to-eat will deliver on the “convenience equation” for the customer.