Post-coronavirus (COVID-19): agile and flexible store formats - How will the global pandemic change grocery retail?
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Post-coronavirus (COVID-19):
agile and flexible store formats
How will the global pandemic change grocery retail?
June 2020
© IGD 2020
What next for This insight report was prepared by:
physical retail? Nick Miles
Head of Asia-Pacific
Nick leads the APAC Insight team at
IGD. He regularly travels to the region,
visiting stores and engaging with
Nick.miles@igd.com retailers and manufacturers. Nick has
been researching APAC retail for over
@retailanalysis eight years and brings seven years of
experience working for Tesco to IGD.
In recent years physical retail models have
come under increasing pressure, due to
the rising cost of doing business and the
growth of new channels.
The coronavirus pandemic has added to
these pressures and we are likely to see
more retailers disappear, due to being
acquired, merging with other companies or
simply through going out of business.
Coronavirus is expected to leave an
impression on physical retail. For grocery
retailers we believe this means:
• Retailers will need to find more
inventive solutions to provide safe and
reliable in-store shopping environments
in the short-medium term
• Physical stores will become increasingly
agile and flexible to accommodate
more extreme trading cycles
• Longer term there is likely to be a
lasting impact on store operations and
experience
© IGD 2020 Source: IGD Research Page 2
Executive
summary
The coronavirus pandemic has thrown the spotlight on the
excellent work retailers have done to support the communities they
serve. However, it has also highlighted growing issues with
traditional store-based operating models and whether stores
need to adapt at a faster pace.
In the short-medium term retailers have focused on three
areas; providing safe shopping environments, maintaining
availability and operations, and accelerating online and digital
contactless solutions. While some markets will resume normality,
others will see measures evolve and be in place for a while.
We believe the pandemic will result in retailers reviewing
their store operations and crisis management solutions. This
could produce further longer-term changes to stores, such as;
balancing operational efficiencies and theatre, omnichannel
realisation and the acceleration of contactless retail.
Although much might return to pre-pandemic situations, retailers
and suppliers that realise the need for stores to be more agile
and flexible will uncover new avenues for growth, discover
new opportunities to form collaborative relationships and,
ultimately, win shopper loyalty by being more relevant.
© IGD 2020 Source: IGD Research Page 3
In this report
1 Background: agile and flexible store formats
2 Short-medium term store solutions
3 Longer term legacies of Coronavirus
4 Implications: suppliers and retailers
© IGD 2020 Source; IGD Research Page 4
Background
Physical stores Despite the rapid growth of online grocery in recent years, as well as the
work to significantly increase online capacity during the Coronavirus
pandemic, it should be noted that the majority of food and consumer goods
remain vitally sales still remain in physical retail.
In many markets, hypermarkets, supermarkets and increasingly discount
important formats are the most significant channels in value terms. Large format
retailers therefore play a vital role for our industry. We believe that the
operators who can evolve their operations in these larger formats will
continue to thrive in the future.
“Between 85%
95%
and 90% of all
food bought will
require a visit to
food and consumer a store”
goods trade in APAC was
through physical retail in Dave Lewis, Tesco
2019 Group Chief Executive
(April 2020)
© IGD 2020 Source: IGD Research NOTE: combined market share forecast across 9 leading APAC grocery markets Page 5
Background
Our hypotheses With businesses starting to think about the short to medium- and longer-term
impact of coronavirus on food and consumer goods retail, we have created
for retail post-
10 hypotheses, focused around society, shoppers and retail.
This deck looks in more detail at agile and flexible large store formats. We
have been tracking the measures retailers have instigated in their stores to
coronavirus keep the supply of food and consumer goods flowing. However, what further
changes could we see going forward and how might this impact suppliers in
a post-COVID-19 world?
© IGD 2020 Source: IGD Research Page 6
Background
10 reasons for 1. Extreme trading
Although these events will hopefully be few and far
more agile and between, coronavirus has highlighted challenges
many retailers face in responding quickly to national
flexible stores
emergencies.
2. Cutting costs
There can be a fine line between delivering excellent
customer service and saving cash. However, not all
elements of a shop necessarily need to be
operational while a store is trading.
3. Aiding profitability
A ‘one size fits all’ approach towards formats is
efficient as it lacks complexity, but stronger
profitability can be achieved where retailers flex
space, range, services, equipment etc. to location.
4. Changing shopper behaviour
Many retailers measure store ROI on a 15-20 year
horizon. However, this can be unrealistic as shopper
behaviour is changing far more quickly, thus stores
will likely evolve multiple times over this period.
5. New technology adoption
Retailers that are slower to respond to new digital
trends and contactless technology tend to have less
of a test & learn mentality and are often held back by
legacy investment in IT systems and equipment.
© IGD 2020 Source: IGD Research Page 7
Background
10 reasons for 6. Omnichannel importance
Surges for online grocery, as well as growing online
more agile and grocery penetration highlight the need for stores to
play their role in meeting demand, but also ensuring a
flexible stores
seamless O2O experience for shoppers in the future.
7. Maximising seasonal events
These are vital for driving store revenue and footfall,
particularly in the face of growing online competition.
However, many retailers still have a rigid approach to
in-store space management.
8. Personalisation
Shoppers increasingly expect to be rewarded with
special offers and an experience relevant to their
needs. This is an area the online channel can do
extremely well, while stores continue to lag.
9. Competitive differentiation
As competition intensifies and retailers copy each
others' strategies, delivering a relevant and unique
offer can be powerful in driving loyalty. Mediocre
retail is unlikely to survive in this environment.
10. Local relevance
A cookie cutter approach can be uninspiring and
impersonal. While a core offer is often essential for
consistency, flexing around the edges can help better
serve catchments with differing demands and heritage.
© IGD 2020 Source: IGD Research Page 8
Short-medium term store solutions
We have seen retailers globally adapt their store operations to respond to the pandemic. This graphic summaries the actions
taken and on the following slides we assess how these could evolve further in the short to medium term.
© IGD 2020 Source: IGD Research Page 9
Short-medium term store solutions
Providing a safe Hypothesis: in the short to medium term stores will find
more inventive ways to accommodate social-distancing,
shopping environment while managing and maintaining high levels of footfall…
Solution to Coronavirus What have we seen? How could this evolve?
Retailers have flexed store opening hours to Opening hours in some markets have returned
Flexible opening provide time to restock shelves, while also to normal, but in others the restrictions could
hours better serving customers in need or who are continue for many months. Retailers could ask
members of the emergency services. shoppers to book times to do their shopping.
Customer numbers have been restricted in- To make queuing more pleasant, retailers could
Restrict customer store to aid social distancing. The most install covered walkways in car parks, while
numbers advanced retailers are using apps to help them new apps and data could be used to show the
count customers and regulate flow. best times to visit individual stores.
Some retailers have installed arrows and lines With social distancing likely to remain for the
on shop floors to encourage shoppers to take a short term, more retailers could start to adopt
One-way systems
one-way route through the store, as well as this approach. If required, they could enforce
keep 2m apart from each other. tighter restrictions on customers’ journeys.
Plexiglass screens were one of the first Having significantly invested in equipment,
Screens and initiatives rolled out to protect staff and screens are likely to be a feature for some time,
dividers customers, while dividers are now allowing the with even greater application as retailers look to
re-opening of more checkouts and counters. reopen more in-store services.
Small changes to macro store space have been To allow for improved social distancing,
made by retailers. Although not a major tactic to changed shopping habits and safe checkout
New store layouts
date, this could be employed if the coronavirus solutions, macro space could be reworked with
pandemic continues to have an effect. new and innovative layouts emerging.
© IGD 2020 Source: IGD Research Page 10Short-medium term store solutions
Providing a safe
shopping environment:
case studies
Flexible opening Restrict customer Screens and
numbers One-way systems dividers New store layouts
hours
Coop Liguria (Italy) Leclerc (France) has Tesco (UK) Lidl (Ireland) was one Aldi (Australia) has
introduced a digital used SmartOccupancy introduced one-way of the first retailers taken the decision to
booking service called technology from systems and globally to install cancel several of its
CoD@Casa. The Checkpoint Systems at navigational signage plexiglass shields at Special Buy sales.
solution enables its Wattrelos store to into all its stores. its checkouts. Internationally the
shoppers to book automatically count and Markings on the shop Walmart (US) has retailer also limited
(online or over the regulate shopper floors also encourage also introduced Special Buy products.
phone) an entry slot numbers. The live customers to keep 2m shields at its Space in-store was
for its stores. Slots are occupancy level will be apart, while the last pharmacy counters, in used for essential
available in half hour added to the store’s aisle in the store is addition to its grocery items and to
blocks and ensure the website for shoppers’ used as a zone for checkouts. help it maintain
retailer can limit convenience. safe and socially availability.
shopper numbers. distanced queuing.
© IGD 2020 Source: IGD Research, e-coop.it, Leclerc, Tesco, Lidl Ireland, Checkpoint Systems Page 11Short-medium term store solutions
Maintaining Hypothesis: in the short to medium term in-store space
will be flexed to accommodate high demand categories
availability and and operational needs…
operations
Solution to Coronavirus What have we seen? How could this evolve?
In the face of panic buying, retailers worked Retailers and suppliers will gradually bring
Range with suppliers to ensure core and simplified more lines back, but the primary focus will
rationalisation ranges. NPD was put on hold, helping restore remain on ensuring essential items have strong
product availability. availability in-store.
Retailers used floor stacks to quickly get stock We could see retailers continue to give more
into store, while shelf space has been shelf space to the best-selling items to maintain
Bulk displays
prioritised for popular and essential items, with availability. Some categories might adopt new
both tactics looking to reassure shoppers. easy to replenish solutions.
We have seen retailers remove space from In the medium term some categories could see
Category some categories and transferring either to other space squeezed even more. Retailers could
condensing high demand categories or to create in-store deploy equipment to allow for more flexible or
space for operational requirements. cross-category use of space.
Retailers have temporarily closed fresh food Counters and services will gradually re-open,
Counter and counters and their own / third party services, but with social distancing and high hygiene
service closures helping redeploy staff to help elsewhere, as standards in place. However, some will be
well as to ensure safe in-store standards. removed from stores completely.
Retailers have had to reduce checkout capacity Retailers will introduce new measures to enable
to ensure social distancing measures are them to open more checkouts. They could also
Checkout flexibility
adhered to, while signage has been used install more self-service checkouts, as well as
extensively to explain new processes. checkouts in new locations in the stores.
© IGD 2020 Source: IGD Research Page 12Short-medium term store solutions
Maintaining availability
and operations:
case studies
Range Category Counter and
Bulk displays Checkout flexibility
rationalisation condensing service closures
Coles (Australia) NTUC FairPrice Loblaw (Canada) in Sainsbury’s (UK) Carrefour (Taiwan)
quickly ensured (Singapore) arranged its hypermarket closed all its cafe, installed floor stickers
product availability for whole pallets of format, Real Canadian meat, fish and pizza at all checkouts to
remained high by products to be Superstore, counters to free up help maintain social
increasing the facings delivered to stores. It repurposed part of its staff time and its distancing.
of both essential lines, also stocked high clothing area to supply chain for Foodstuffs (New
products that it had demand products near support ecommerce essential items. Zealand) installed
available, as well as stores’ entrances, demand. This was However, it did keep wire and mesh fences
bulk buy packs. This helping calm panic used to stage orders Argos outlets in its around each checkout
made stores appear buying by reassuring for pickup orders from supermarkets open. to ensure it could keep
full and helped ease shoppers there was no its PC Express more open.
panic buying. need to worry about service.
supply.
© IGD 2020 Source: IGD Research, Carrefour Taiwan Page 13Short-medium term store solutions
Accelerating online Hypothesis: In the short-medium term retailers will use
stores better to increase capacity for online orders, while
capacity and digital
digital initiatives such as in-store apps, cashless payment
and the use of robotics will accelerate…
contactless solutions
Solution to Coronavirus What have we seen? How could this evolve?
Some retailers have dedicated store space to With demand out-striping supply, more space
Space for online online picking and storing of orders. Others and entire stores could be given over to driving
fulfilment have closed entire stores to try to meet the online capacity even further. Profitability,
spike in demand for online purchasing. personnel and equipment will cap volume.
Click & Collect facilities have been expanded to Click & Collect is a more profitable solution for
Click & Collect new stores, while existing sites’ capacity has retailers to win share. Car parks could be
capacity been increased as an efficient and contactless adapted to large drive-through facilities, with
solution for people to shop. increased storage facilities to meet demand.
Retailers have been promoting store-based The pandemic could be the catalyst for the
apps that include digital loyalty cards and adoption of more store-based apps, bringing
Store-based apps
payment functionality. Others have been the best elements of online (e.g.
upgrading and launching new apps. personalisation) to physical environments.
Retailers have been quick to employ temporary We could see more retailers adopt contactless
Cashless payment / higher limits for contactless payment methods. payment technology, as well as test new forms
Scan & Go They have also launched and encouraged of payment methods, such as mobile and facial
customers to use Scan & Go handheld devices. recognition.
Retailers have fast-tracked investment in digital Retailers will look to bring forward digital
Automaton and solutions, these have focused on providing investment they had in the pipeline for the next
robotics contactless environments, as well as improving two to three years, focusing on elements that
in-store hygiene and safety standards. can be automated.
© IGD 2020 Source: IGD Research Page 14Short-medium term store solutions
Accelerating online capacity and
digital contactless solutions: case
studies
Space for online Click & Collect Cashless payment Automation and
capacity Store-based apps / Scan & Go
fulfilment robotics
Franprix (France) Target (US) is planning Woolworths Asda (UK) was in the Central Food Retail
transformed several of to create additional car (Australia) launched a process of rolling out (Thailand) is using a
its stores in Paris into parking spaces and new app for its its Scan & Go app, UV-C Disinfection
micro-fulfilment expand the staging area Rewards loyalty however the pandemic Robot in its Central
centres. Stores are for orders to support the scheme. The app has seen the retailer Food Hall store in
closed during the growth of its Drive Up allows members accelerate this. Having Chidlom, Bangkok.
morning to enable service. In April, sales to activate bonus point originally been in 60% The robot operates
staff to prepare through the service offers, discover of stores, it is now in while the store is
orders. Click & Collect increased 1,000% personalised special all 581, allowing closed and emits 360-
and home delivery, in versus a year ago, offers, check their customers to scan and degree UV-C light to
partnership with serving more than 5m points balance, as well pack their groceries as disinfect areas and
delivery specialist shoppers during the first as scan their digital they shop, and pay on destroy 99.99% of all
Stuart, are available. quarter. loyalty card in-store. their mobile phones. pathogens.
© IGD 2020 Source: IGD Research, Woolworths Rewards, Asda, The National Thailand Page 15Longer term legacies of Coronavirus
Although we hope and expect a lot of things will return to normal following the pandemic, many retailers will use this period to
review their store operations, as well as assess whether their emergency response procedures are adequate for future
shocks. On this slide we have outlined three areas where stores are most likely to see a lasting impact as a result of
coronavirus, while on the following slides, we look at what each one could look like in reality in more detail.
Operational efficiency vs. theatre
Store operations will be impacted in the longer
term as a result of the pandemic. Some retailers
will likely prioritise operational efficiency over
theatre, while others might go the other way.
Changes to operating models will allow retailers
to better react to future shocks.
Omnichannel realisation
With raised online grocery penetration and the
requirement for greater delivery capacity in future
emergencies, retailers are likely to accelerate
omnichannel integration. Stores will become
better able to support surges in online orders.
Contactless acceleration
A major challenge during the pandemic has been
how to reduce social contact in an industry that
remains predominantly self service and is still
very manual. Expect many retailers to accelerate
their investment in digital solutions so operations
are faster, better and increasingly seamless.
© IGD 2020 Source: IGD Research Page 16Longer term legacies of Coronavirus
Operational 1. Efficient ranging
While range is likely to return to pre-COVID levels,
efficiency vs. retailers are likely to use the opportunity to be more
selective on ranging and NPD. This is likely to result
in-store theatre
in a greater focus on the best-selling SKU’s.
2. Space flexibility
The most sophisticated retailers will work out how to
flex space efficiently. Some might give more space to
create theatre, re-invigorate centre store categories or
drive differentiation, as more categories shift online.
3. Flexible equipment
We could see retailers install more modular, mobile or
cross-functional equipment into stores. This will help
each store adapt its the operating model and should
improve profitability.
4. Review opening hours
Retailers will review operating hours, either of the
entire store or individual elements. Some stores might
close on certain days, while they could still be used to
fulfil online orders, despite not being open.
5. Greater decentralisation
We could see further local sourcing, merchandising
and decision making at a store level. We would
expect most retailers, though, to maintain a core offer
for efficiency and consistency purposes.
© IGD 2020 Source: IGD Research, CHEP Page 17Longer term legacies of Coronavirus
Omnichannel 1. Micro-fulfilment expansion
According to Takeoff Technologies, many retailers are
realisation pulling forward orders and the deployment of micro-
fulfilment as they have been unable to meet shopper
demand for online orders during the pandemic.
2. Rapid delivery solutions
China was able to increase its online capacity rapidly
during the outbreak. We could see more retailers
adopt tech or partner with third-party delivery
businesses to speed up deliveries.
3. Store and equipment redesign
With lots of retailers still using comparatively
inefficient manual picking methods to fulfil online
orders, we could see more space set aside for online
and the installation of equipment to aid efficiency.
4. Click & Collect development
Click & Collect is likely to be rolled out to more
locations (both store-based and remote), while new
solutions that include greater automation could
emerge to help meet growth in demand.
5. Downsizing and store closures
As profitability becomes a focus, sales shift online
and space is given to omnichannel initiatives, we
could see retailers shrink their store footprints and
potentially close more stores.
© IGD 2020 Source: IGD Research Page 18Longer term legacies of Coronavirus
Contactless 1. Acceleration of cashless
Coronavirus has highlighted the advantage of
acceleration cashless payment methods and could act as a
catalyst for the adoption of more solutions or
advanced mobile and biometric payment methods.
2. Greater self service
Self service solutions and checkouts are likely to be
widely adopted following the pandemic, helping
retailers protect staff and shopper safety, as well as
drive in-store efficiency.
3. Mobile aided shopping
Expect more retailers to launch apps for in-store use.
These can help answer customer queries, highlight
information in real time, as well as provide digital
loyalty and payment solutions.
4. Tech, robotics and AI
Digital solutions that automate processes and
improve accuracy will likely be taken more seriously
and accelerated to allow retailers to continue
operating more easily in crisis situations.
5. Just walk out
Although widespread adoption remains unlikely, just
walk out tech and unstaffed stores could become
more prevalent as these would provide both faster
and the most contactless shopping experiences.
© IGD 2020 Source: IGD Research, EDGE shelf Technology Page 19Implications
Key considerations:
short-medium term
Area Suppliers Retailers
• Think of inventive solutions that can help your brands • This will continue to be a priority for shopper.
be front of mind for shoppers Therefore, think how you can further improve an
Providing a • With dwell time in-store limited, this is a good time to unpleasant experience by making it more enjoyable
safe shopping review whether your brands standout on the shelf • Ensure clear communication on your procedures, but
environment • With store movement restricted, can your brands also bring some fun and personality to them
deliver simple inspiration and solutions for shoppers • Assess whether there is more you can do to macro
that are relevant for the current situation space to help customer throughput
• Maintain a strong focus on your service levels and • Keep focusing on giving space in-store to essential
ensure that the best-selling lines have excellent items and give shoppers confidence in your operations
Maintaining availability • Deploy new equipment into stores that helps get
availability and • Use this time to review your portfolios and ensure they product on the shop floor fast and services open
operations are robust and relevant for shoppers and retailers • Checkouts are a pain point for the shopping
• Can you be more flexible in your merchandising to experience, is there more that can be done to grow
ensure availability and help retailer efficiencies capacity or improve queuing systems
• Make sure you have the right level of resource and • Keep working on solutions where physical stores can
Accelerating skills focused on this area; business can learn a lot from help boost both your online capacity and profitably
online capacity this experience • Consider driving more volume through Click & Collect
and digital • Make sure you have the right ranges available to suit and use existing infrastructure and assets to help
contactless online shoppers’ demands • Retailers that can accelerate the development of digital
solutions • Stay close to retailers' digital plans, consider what these will come out stronger. Shoppers will also most likely
mean for your business and how you need to adapt reward the most innovative businesses
© IGD 2020 Source: IGD Research Page 20Implications
Key considerations:
longer term
Area Suppliers Retailers
• Your catgeories could be given different levels of space • Balancing efficiencies and theatre in your stores will be
in-store, retailers will become more selective, so review challenging, but the same approach doesn’t need to be
Operational your approach to pack size, NPD and range applied to every store in the network
efficiencies vs. • Help retailers develop store initiatives that give their • When investing in new equipment, consider whether it
theatre shops differentiation from the online environment gives you agility or limits your ability to pivot
• Consider how your categories could be more agile and • Use data to dictate your decisions and focus on what
less rigid in their execution matters most to your customers, then tweak the edges
• As this accelerates, the transparency between store • Accelerating investment in omnichannel operations is
and online will blur. Make sure your brands are expensive, but it will help grow and protect market
delivering a consistent experience share. It should boost profitability in the future
Omnichannel
• Ensure your supply chain, pack formats and digital • Look internationally for inspiration on best practice and
realisation assets are fit for the evolution and have a plan in place the latest developments. Acquisitions and partnerships
if not; start with the basics and evolve are a good way to accelerate progress if possible
• Share best practice with retailers from other markets • Bring the best of the online world to your stores
• Consider how you can automate more in-store
• Store-based apps are a great way to reward your
processes to allow you to continue operating more
shoppers with greater levels of persoanlisation, as well
seamlessly in crisis scenarios
Contactless as convert new shoppers to your categories / brands
• Invest in technology that will make a big difference to
acceleration • Test and learn with innovations and digital technologies
your customers, making it easy for them to find the best
that help automate process and drive efficiencies for
offers, relevant products and reward their loyalty
retailers and shoppers
• Bring more innovation to checkouts
© IGD 2020 Source: IGD Research Page 21Reports you
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