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INDUSTRY INSIGHT 5TRENDS SHAPING GROCERY IN 2021 The past 12 months have been a rollercoaster ride for the Australian grocery market. Surges in demand and lockdowns have led retailers to respond, flex their operations and support communities like never before. BMy IGD Head of APAC Insight Nick Miles. any retailers have fast tracked their pipelines of innovation around online, digital and product innovation, while areas such as convenience and operating responsibly have also continued to evolve. In this article, IGD looks at five key trends expected to shape the market and influence retailer strategy, as we begin to navigate our way out of the pandemic. Acceleration of online grocery Over the past few years, Coles and Woolworths have significantly increased their focus on online grocery, but Covid-19 has led to an even greater surge in demand for the service. Following initial challenges to cope with the demand in 2020, online has grown significantly for both retailers, while others have rapidly set up new operations, and the capability and capacity continue to increase. With penetration hitting record highs, we forecast online to make up five per cent of total grocery sales by 2022. New solutions to fulfil orders, boost capacity and drive profitability will keep emerging. We predict that online grocery will stay inflated post-pandemic. Online growth of 47.7 per cent in the first half of the year at Countdown (Woolworths) in New Zealand, a market that has been predominantly Covid-free during the period, suggests that this is likely to be a longer term trend. Woolworths has launched its first store with automated Takeoff micro- fulfilment technology at Callum Downs in Melbourne. The 2400sqm facility can despatch five times the order volume of a standard store, and it helps improve order accuracy as well as picking and delivery speed. Woolworths has also partnered with Sherpa, Drive Yello and Uber to improve last-kilometre delivery of online orders. Coles has invested to almost double its online capacity through expanding home delivery and contactless click and collect to more than 450 stores. Its Ocado online fulfilment centre in Melbourne is under construction, with work at its Sydney site due to begin soon. 7-Eleven has begun offering online delivery in Melbourne and Sydney in conjunction with Tipple, an on-demand delivery firm in which it acquired a majority stake in 2018. Metcash launched a food (IGA Shop Online) and liquor online service (shopmylocal.com.au) in 2020. Using its network of independent stores to fulfill orders, the platforms were fast tracked to market. Metcash will continue to add more product features and delivery areas throughout 2021. Digital marketing evolution Retailers are increasingly building their capabilities to shift marketing strategies away from traditional methods, placing greater focus on new digital solutions. Coles and Woolworths both have well established loyalty programs. However, evolution of the schemes and capability to use the data to drive strategic advantage has been slow. In 2020, we began to see some significant developments in this area, with retailers utilising digital solutions in-store, via smartphones and on new platforms. Coles has replaced its printed catalogues with a new solution, coles&co, a digital channel to inspire customers with offers, products, tips and recipes. The service provides shoppable features, content that changes daily, and a more personalised experience. WooliesX will focus on three areas: digital and media, e-commerce and fulfilment, and loyalty and fintech. The digital and media area includes demand generation, digital experience, and the Cartology digital media business. Cartology screens are now in more than 950 Woolworths stores and are being rolled out to Dan Murphy’s. Woolworths relaunched its Everyday Rewards app in 2020, with more than 2.3 million downloads. The app’s user numbers continue to grow, strongly supported by smart shopping lists, meal inspiration and customers able to activate personalised specials. 7-Eleven has revamped its My 7-Eleven app with exclusive offers, an integrated My Card, a free reward for every seventh visit to store, and the capability to lock in the best local fuel price at its forecourts for up to seven days. It has also partnered with Adobe and Microsoft to accelerate digital. ‘Healthy living’ differentiation As in other markets around the world, the health and wellness trend continues to grow in prominence. Shoppers are more aware of their diets, with a recent survey by Woolworths showing that 60 per cent of surveyed Australians seek out products they perceive to be healthier. Retailers are responding to the demand by prioritising health in their strategies and are using the opportunity to help drive differentiation in their offers. A great example of this was Coles’ ‘Healthier Living’ campaign. Over a 28-day period, the retailer offered daily special offers, recipe inspiration and fitness tips from Australian sports stars, and rewarded shoppers with double flybuys points on all fresh fruit and veg and selected Coles Brand products. 20 RETAIL WORLD MAY, 2021