The ‘Back To Normal’ From Pandemic Will Not Be Entirely Beneficial For The Grocery Stores

With people’s movement restricted because of the lockdowns imposed to prevent the spread of the Covid-19 pandemic last year, more and more customers were shifting to ordering their weekly and monthly groceries online which augured well for the large grocery chains all over the world.

But the companies now say that the pandemic induced boom was over. 

The largest supermarket chain of the United States – Kroger, said this week that the company now expects to see a decline of between 3 per cent and 5 per cent this year in comparable sales, or sales at stores open for at least one year. in 2020, its sales had grown by 14.1 per cent.

Rupesh Parikh, analyst at Oppenheimer, said in a note to clients Thursday that this was now “quite a challenging setup for grocers”.

A slowdown in sales for the current year compared to last year is also expected by other grocers too. In the first quarter of 2-021, there is likely to be a decline in the high-single digits in comparable sales, said discount grocer Grocery Outlet. The company saw a growth of 12.7 per cent last year.

Last year there was a 6.9 per cent growth ion comparable sales at Sprouts Farmers Market. But the company now expects to witness a drop to low-to-mid-single digits this year. and after clocking a 8.6 per cent growth last year, comparable sales at Walmart were projected to grow by low single-digits this year.

This drop in expected sales also coincides with the roll out of Covid-19 vaccines which will allow consumers to shift back to eating more meals at restaurants and outside of their homes.

UBS analyst Michael Lasser estimated in a January research report that there was an 11 per cent growth in grocery sales in the US on the overall which is predicted to drop to 5 per cent in the current year. He noted that the drop will be a first for the industry in the last 20 years.

According to analysts, such a drop will force changes across the industry.

The changed consumer habits during Covid-19 was beneficial in particular for independent and smaller chains but analysts predict that there can be store closures for this segment after the end of the pandemic shopping trend

“Smaller, less differentiated retailers remain at a disadvantage compared to retailers with scale and greater buying power,” such as Walmart, Costco and Aldi, Lasser said. “They also have fewer resources to invest in their online offerings.”

However analysts predict that there is likely to be more items on sale in stores for consuemrs in the changed situation. 

“You’ll see aggressive promotions,” said Burt Flickinger, managing director at retail consulting firm Strategic Resource Group.

With most customers focused on purchasing products instead of finding the lowest priced ones, promotions on products had largely disappeared last year. But according to Flickinger, this year will be different and consumers are likely to find promotions as being most notable among big consumer brands which are trying to fend off cheaper store brands.

(Adapted from CNN.com)



Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability

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