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Rebuilding America: Touchless options the new norm in grocery industry

Staff Writer
Walton Sun
Walton Sun

The COVID-19 pandemic didn’t so much alter the future of the supermarket industry as much as hasten it.

Trends that had already begun — including online shopping, drive-by pickup, robotics and artificial intelligence — got a boost during the COVID-19 economic shutdown because they offered alternatives to shoppers wary of crowded supermarkets, increasing the threat of coronavirus infection, two industry analysts said.

“Online sales have gone up exponentially,” said Brian Choi, the chief executive officer at the Food Institute, an industry research organization. “We’ve seen sales up 100% and 200% in some cases.”

David Livingston, an analyst with his own firm, DJL Research in Hawaii, agreed he’s seen that trend nationwide in industry reports and in his own experience.

“A lot of people where I live are opting into home delivery and online shopping,” Livingston said.

Online sales soared during April at Sprouts Farmers Market, said Kalia Pang, a spokeswoman for the Phoenix-based natural foods supermarket chain with 23 stores in Florida.

“For April, Sprouts’ ecommerce sales increased over 950% from last year, representing 13% of sales,” Pang said in an email to the USA TODAY Network-Florida. “Pickup service allows customers to plan grocery pick up for the same day or to schedule several days in advance, subject to availability.”

Even before COVID-19, grocery industry analysts saw online shopping as a future trend. That became clear in 2017, when online retail behemoth Amazon purchased the Whole Foods supermarket chain for $13.7 billion.

But traditional shoppers, particularly older ones, were slow to embrace purchasing groceries online, Choi and Livingston agreed. It took COVID-19 to break that logjam.

“It has helped people take that first step,” Livingston said. “Because they’re home, it’s easier to have it delivered anyway.”

Instacart, one of the largest third-party grocery delivery services, has also seen a surge in demand, according to an April 10 statement on its website.

“Over the course of the last few weeks, the customer demand for our service and the sheer number of shoppers on our platform has surged in the wake of COVID-19,” the statement said. “Our order volume was up more than 300% year-over-year last week, and our shopper community has grown to more than 350,000 active shoppers, up from 200,000 just two weeks ago.”

The grocery industry benefited from the closure of restaurants in many states during the past two months, Choi and Livingston said.

Although restaurants have begun to reopen, the industry will continue to benefit as people remain reluctant to expose themselves to crowds, they agreed.

“The psyche of the American public has shifted,” Choi said. “They are much more wary of going to public places and exposing themselves to catching the coronavirus. More people will likely stay away from sit-down restaurants from fine dining to casual.”

“People are rediscovering their supermarkets,” Livingston said. “People are going to start appreciating what’s in their supermarkets more, discovering more.”

Additional sanitation measures, faster restocking and other pandemic-related measures forced grocery companies to hire more people, Livingston and Choi said.

Overall grocery companies have seen profit margins shaved by 1% to 2% because of the costs of COVID-19 measures, Choi said. That’s a significant share of the industry’s typical profit margins, which range from 2% to 5%.

That’s increased interest in replacing workers, such as cleaning staff and cashiers, with robots and other automated systems, the analysts agreed. That trend also was well underway before COVID-19, Livingston said.

“The advantage, from a management standpoint, when using robots is they don’t get sick and you don’t have to pay health benefits,” Choi said.

Amazon has pioneered replacing cashiers in its Amazon Go convenience stores with an artificial intelligence system that operates through a smartphone. The system detects when a shopper takes an item off the shelf, adds it to the shopping cart and removes it if the shopper returns it to the shelf.

Payment is made automatically when the shopper leaves the store.

The technology will likely be adopted more widely among supermarket chains because Amazon is already licensing the system to supermarket chains, Choi said.

“Eventually it will cost less than to have physical cashiers,” he said.

One change brought by COVID-19 – the increased sanitary measures, social distancing and mandatory masks for employees – will likely continue because customers expect it, Choi and Livingston said. Companies have adopted many of those changes as part of their risk management strategies.

“That’s going to continue because shoppers are going to feel safer,” Livingston said. “Managers will want to keep it that way.”

Kevin Bouffard can be reached at kevin.bouffard@theledger.com or at 863-802-7591.

This story originally published to theledger.com, and was shared to other Florida newspapers in the USA TODAY Network - Florida.

Consumer tips

Five things to expect at your favorite supermarket 10 years from now:

• More traffic at drive-by pickup areas as consumers increasingly shop online.

• Robots roaming the aisles cleaning floors and scanning shelves for stocking.

• Fewer or even no cashiers as check out is handled by smart devices through artificial intelligence technology.

• Clear plastic screens at deli and bakery counters and other work stations to prevent disease transmission.

• Continued emphasis on enhanced cleaning and sanitation of shelves, counters and other frequently touched surfaces.