Predicting the pandemic’s impact on the retail revolution

Predicting the pandemic’s impact on the retail revolution

SAN FRANCISCO — Consumer adoption of digital platforms accelerated during the pandemic. A panel of executives discussed the implications on packaged food brands, retailers and restaurants during a March 12 panel discussion at the virtual Future Food-Tech seminar.

“We are looking at a new era in grocery retail that’s going to be digital-forward with multiple formats and multiple channels,” said Walter Robb, former co-chief executive officer of Whole Foods Market and executive-in-residence at S2G Ventures. “At the center of all that is the customer as always, and our job is to serve that customer how and when they want to be served, and they’ve made it very clear their expectation is they want to be served in different ways at different times.”

Chipotle Mexican Grill began responding to a consumer transition to online transactions several years ago. Early investments in digital capabilities positioned the fast-casual chain to pivot successfully as in-store traffic evaporated, said Scott Boatwright, chief restaurant officer.

“Brands that fail to innovate and move their business to more of an omnichannel version will fall behind,” Mr. Boatwright said.

People will once again gather for meals in restaurants, he said, noting the traditional brick-and-mortar model will retain relevance for years to come. However, he said, the shift to digital was already underway prior to the pandemic.

“I think it’s important for all folks in this space as they think about where to take their brand from here, they’ve got to be thinking about increased access points, and those that are entrenched could get stuck and continue to lose market share,” Mr. Boatwright said.

“We are looking at a new era in grocery retail that’s going to be digital-forward with multiple formats and multiple channels.” —Walter Robb, S2G Ventures

The past few years saw an emergence in new ways to procure food. Represented on the panel were the founders behind two options gaining traction over the past year. Tovala offers a meal service that is paired with a countertop smart oven. Misfits Market is a direct-to-consumer grocery platform tackling food waste by offering imperfect or surplus produce and pantry staples at lower costs. Both businesses tracked strong growth following the onset of the pandemic, and the leaders of the companies said they expect continued momentum as recent consumer habits stick.

“In general, I think the trend was alternative e-grocery platforms like ours — we were alternative before — we got thrust to the main stage from the backstage,” said Abhi Ramesh, founder and CEO of Misfits Market, which he said saw a “massive spike” in new customers, as well as larger and more frequent orders.

His business partnered with suppliers to restaurants, theaters, sports stadiums and schools to repackage and sell products such as bulk popcorn kernels directly to consumers. Additionally, emerging packaged food brands began tapping into alternative distribution channels such as Misfits Market as the pandemic thwarted opportunities to gain shelf space at conventional grocery retailers.

“Building their own direct-to-consumer experience isn’t necessarily an option for all of these brands, so they’re looking for the marketplace or distribution channel, ours being one of them,” Mr. Ramesh said.

Data and analytics will play a key role in building an online shopping experience that benefits the retailers, manufacturers and consumers. Mr. Ramesh noted the possibilities and limitations of the virtual shelf model.

“One of the powerful things we have as a digitally native, direct-to-consumer brand is we have ton of data on every single consumer,” he said. “The power of that is I can build a grocery store specifically for you, knowing who you are. I can assume based on that data there are particular aisles you shop every week, and there are particular aisles you may never shop. There are certain brands you prefer versus others. I can auto-populate your cart with items you bought last week and the week prior.

“How we think about it is … there’s infinite shelf space, but we can’t have infinite products on a giant scrolling page. We have to be data-driven about what we put in front of a customer, when and why. I think data and machine learning is probably the way to do that.”

“Don’t be under any illusion physical retail is going away.” —Walter Robb, S2G Ventures

There are elements of the physical retail experience that must be replicated in the digital world, Mr. Robb said. For example, a significant portion of purchase decisions at brick-and-mortar grocery stores is driven by discovery or impulse. Digital retail should provide similar opportunities to explore and engage with new innovation.

“Don’t be under any illusion physical retail is going away,” Mr. Robb said. “People still love and miss the spontaneity that happens when you come to a physical store. I really believe folks will come back to the physical store and spend more time. The trips won’t come back in the way they have historically, but they will come back.

“It will be a combination of digital and physical that ultimately is the new normal, and it will be done in different combinations and different ways. That being said, the digital pathways that have emerged… all of these alternative formats will continue to thrive, and we just have a much richer food ecosystem than what we had or could have imagined a few years ago.”

Many grocery retailers continue to grapple with the challenge of last-mile economics, which Mr. Robb said, “are not economical as it stands right now.” Companies are experimenting with various approaches to fulfillment and distribution to effectively deliver on consumer expectations of immediacy, as well as transparency and quality. Technology will continue to blur the lines between physical and digital retail.

“You’re going to see the physical evolve,” Mr. Robb said. “You’re going to see the use of digital evolve in physical. In other words, in-store apps, new features in the shopping experience such as personalized selections or nutritional information or transparency to the source. And you’ll see the digital experiences evolve. Our future is very much going to be a blended one. It’s not like one’s going to take over for the other.

“What the customer has said very clearly is, ‘Please serve me in all these different ways,’ and the brands that will be most successful are those who are willing to meet the customer.”