Kantar’s Amar Singh on the challenges and opportunities grocers might face in 2024
Once again, the grocery industry is poised for change – from the impacts of an aging population to the rise in multicultural consumers and, of course, inflation. How can grocers prepare? We asked Amar Singh, senior director, retail insights, at Kantar to share his thoughts on this and more. The interview has been edited for length and clarity.
A recent forecast from the Bank of Canada suggests economic growth will remain weak for the rest of the year and into 2024. How can grocers prepare?
On average, Canadians are spending about 67% of their disposable income on affordable housing. Ideally, it should be around 30% to 35%. So, that’s what grocers should think about. City dwellers are in smaller living spaces [like] condos, and immigrants – who are driving the growth in the country – are renting smaller places, so packaging sizes need to be attuned to this. Most Canadians are going to be very price sensitive and they’re going to be shopping for a lot of private-label brands. And private-label brands are going to earn you loyalty. When comparing private-label products across grocery banners, customers are looking for the best value, for products that are perceived to be a better quality, more innovative flavours and better product differentiation.
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The pandemic served as an accelerator for online grocery shopping in Canada. Where is e-commerce headed now?
E-commerce is not going away, but the acceleration we saw during the pandemic, we’re probably not going to see again soon. We saw a massive growth spurt during 2020 to the end of 2021. At one point, you could argue that about 10% of retail was online commerce, but now the number is slipping to about 5% to 7%. With retailers ramping up their last mile fulfilment capabilities… we’re going to see more penetration and more expansion. The biggest pain point for online [shopping] is price – you pay a premium to buy products – and it’s the time-lapse as well. The future of e-commerce will be 15-minute [delivery] or less.
The biggest growth opportunity for retailers is how to train the grey population to use e-commerce. And this is often ignored. The challenge to grocers, and to retailers in general, is keeping those shoppers in house as long as they can because once that shopper moves to the nursing home, the value to retailers is zero. But, as long as they can stay in their home and they can order, there’s a lot of opportunity for retailers to engage with them. How you empower the aging population to take care of themselves is going to be the game changer and the long-term opportunity, in addition to engaging new immigrants.
How do you do that?
It’s a two-pronged approach. Kantar ran a study a couple of years ago and the big thing across all different ethnic subgroups in Canada is they felt there’s a lack of empathy from retailers and brands. So, how you market your product, how you approach ethnic shoppers, try to converse in their language. For older shoppers, it’s going to be price. We see loyalty program usage, coupon redemption is high amongst older Canadians, but online grocery shopping is lowest amongst boomers. That’s the inconsistency and that solution will drive growth for retailers. How do you encourage older Canadians to be more engaged with the product and how do you simplify that browsing behaviour for them?
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Where does the in-store experience fit in?
When you talk about the shopping experience, there are four main drivers: steering, sensory, stimulation and streamlining. Steering deals with self-navigation and product availability. Sensory is the touch and feel part of the experience, the theatrics in store. Stimulation is the surprise and delight part of retail and how you make that trip more engaging and inspiring for your shopper and then it’s a digital integration of learning within the store. Lastly, streamlining is how you leverage your analytics for understanding shopper behaviour. Heat mapping, for instance, allows you to place high-margin products in areas that pop out more to drive growth. To be successful, it’s not enough to have product on the shelves—you need to be disruptive. You see all these curated display boards and pallet displays with information and QR codes. That’s table stakes now in the new age of retailing.
What is the most common use of AI in grocery right now?
The main use of AI right now is about responsiveness and efficiency. It's about demand prediction, it's about purchasing behavior – getting all the information on which products are selling faster or the volumes that are moving in-store and the pricing changes. Those are the basic analytics that were done on pen and paper or Excel, and now they’re more automated. So, you get a dashboard with live information of how your things are performing.
With your loyalty programs and your retail media networks, you're going to have more sophisticated dashboards. They're going to present the effect or the influence of your retail media network ads and your loyalty promotions on sales so you get more of those live dashboard metrics.
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The other thing that's ramping up right now is inventory management. So, you have tools right now in store that can give live feedback to the back room to say, “this product's now getting depleted at the shelf.”
Dynamic price changes with the electronic shelf labels is another thing we see across all grocers now.
COVID-19 and lockdowns served as an accelerator for online grocery shopping in Canada. Where is e-commerce headed now?
E-commerce is not going away, but the acceleration we saw during the pandemic, we're probably not going to see again soon. We saw a massive growth spurt during 2020 to the end of 2021. At one point, you could argue about 10% of retail was online commerce, but now we're seeing the number slipping down to about 5% to 7%. With retailers ramping up their last mile fulfillment capabilities such as Sobeys opening new CFCs… we’re going to see more penetration and more expansion. The biggest pain point for online is price – you still pay a premium to buy products – and it's the time-lapse as well.
The future of e-commerce is going to be 15-minute [delivery] or less. Right now, funds are dried up because VCs don't want to support projects when interest rates are 5%-plus. When the cost of borrowing money comes down, VCs are going to get back into the scene and support startups and companies to enable that [15-minute or less delivery]. Instacart is going to be a big player in that space because it's making a lot of investments in technology. So, with all those dark fulfillment centres, dark rooms that are popping up in big urban centers, we are going to see e-commerce grow a lot for essential products.
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For non-essentials, Canadians still love shopping in the store. So, in-store shopping is not going to go anywhere … But online is the growth platform for most of the retailers because it's starting from a small base. It hasn't matured yet, hasn't hit the point of saturation.
Some segments of the population are going to be more receptive to buying online… Parents who are stretched on time will outsource some of their daily activities to buy online, pick up in-store or curbside pick ups. Whereas gen Zs and younger millennials want to automate some of their purchasing for essentials with subscription programs – they over index with those services. So, we're going to see some kind of split, but I think the biggest growth opportunity for retailers and general merchandisers is how to train the gray population to use e-commerce.
And this is often ignored. There are more Canadians over the age of 65 than under 15… you have a lot of Canadians who are going to be moving into nursing homes and the challenge to grocers and to retailers in general is, how are you going to keep those shoppers in-house? Because once that shopper moves to the nursing home, the value to retailers is zero.
But, as long as they can stay in their home and they can order, there's a lot of opportunity for retailers to engage with them. So how are you going to simplify your e-commerce platforms? How do you empower caregivers to provide services to shoppers or solutions, meal kits, whatnot? How you empower the aging population to take care of themselves is going to be the game changer and the long-term opportunity in addition to engaging new immigrants.
When it comes to technology, how do grocers determine which tool is going to make the most impact on their business?
Simply put, it's a margin driver for most retailers. So, finding more efficiencies, better inventory decisions, demand predictions to streamline your supply chain operations and just make sure you have the right mix of products in your warehouses and in store.
But, the real growth opportunity for retailers is dynamic digital creation. That's customizing advertisements based on your consumer. If you look at Amazon, it has a tool that allows suppliers to target shoppers based on the weather patterns in the local area, based on the purchasing history as well as the seasonal retail forces.
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They can customize their ad for Halloween in week one, the second week will be all about Black Friday, third week's going to be about Christmas. So, you can go through the season seamlessly and without any human intervention, you can get the bot to do all those changes for you. Those are some of the dynamics that we are going to have in play.
We know Canadians are points-crazy. How does one loyalty program differentiate itself from another?
The main driver is penetration of your loyalty program. Secondly, how you entice shoppers and run those points promotions. The third-biggest driver, which I think is going to become the main driver, is how you collect data off your shoppers to glean meaningful insights you can use as predictive analysis. You marry that with store analytics and you find synergies to push out more localized promotions, localized marketing efforts and engaging opportunities. And I think that’s the long-term goal of any successful loyalty program – to marry different data points and bring them into one dashboard. It’s not about the transactional relationship or delivering products, it becomes about experiences.
It doesn’t feel we’re there yet in terms of predictive data and serving members with relevant offers.
And that is the biggest challenge – to have more capable data sciences departments within these organizations. The success of trade promotion optimization depends on the company’s advanced analytics. But something like COVID-19 happens that disrupts the market, and you’re left hanging because there’s no precedent so the AI or computer cannot tell you what to do. And that’s why human touch is important. But, the biggest point is the quality of data. You can get data from different touchpoints, it’s just how you bring the data together to speak with each other. It basically comes down to capabilities. It’s not about the size and the quality of data, it’s also how you’re going to execute it … it’s a long road, it’s a learning curve, but I think as we get more experience into it and we get more sophisticated analytics and analysts to work with that data, we’re going to see some progress.
This article first appeared in Canadian Grocer’s December 2023/January 2024 issue.
