Photo: RetailWire
Will grocery basket sizes be cut down to their former size?
For grocers, significantly larger basket sizes more than made up for fewer transactions due to lighter traffic during much of the pandemic. Whether in-store grocery basket sizes return to pre-pandemic levels appears to depend on a number of factors.
Grocery basket sizes were lower year-over-year against severely depressed traffic levels a year ago, according to Catalina’s CPG Shopper Insights for the four weeks ended May 2. Compared to typical traffic patterns in the same period in 2019, however, basket sizes were up 18 percent, shopping trips were down nine percent and dollar sales per store rose seven percent.
Recent first-quarter results from Sprouts Farmers Market and Natural Grocers have likewise shown basket sizes continuing to remain elevated despite improving traffic trends.
The home cooking craze could continue to elevate baskets. Fifty-one percent of Americans were cooking more and 41 percent were baking more, according to a survey from December from research firm Hunter. Of those, 71 percent plan to continue to do so after the pandemic ends, the leading reasons being to save money (67 percent), eat healthier (56 percent) and feel good (56 percent).
A return to eating out, however, will likely work against home cooking. U.S. Census Bureau data showed sales at eating and drinking establishments recovered to $64.9 billion in April, just below the $66.2 billion in February 2020 before the pandemic arrived.
The shift toward online grocery will also take away from in-store grocery spend. The online basket size has been found to be much larger than offline. At BMO Capital Markets’ Farm to Market conference, Kroger officials said the average digital basket size is close to three times that of in-store.
The work-from-home trend may also impact basket size.
Natural Grocers CEO Kemper Isely said on an investor call last month that an internal study found the higher baskets were largely due to fewer shoppers popping in for lunch, a drink or a snack.
“Until the office workers come back and are working in the office, I don’t think we’re going to see that impulse of smaller baskets come back to our stores,” said Mr. Isely.
- As COVID-19 Vaccination Rates Rise, Grocery Shopping Behavior Dramatically Evolves – Catalina/PRNewswire
- America Keeps On Cooking – Hunter/PRNewswire
- Consumers ramped up their restaurant spending in April – National Restaurant Association
- US Online Grocery Survey 2021: Post-Surge Prospects (Select Findings) – Coresight Research
- The Kroger Co.’s (KR) Management Presents at Virtual BMO 16th Annual Farm to Market Conference Call (Transcript) – The Motley Fool
- Natural Grocers by Vitamin Cottage, Inc. (NGVC) Management on Q2 2021 Results – Earnings Call Transcript – Seeking Alpha
Discussion Questions
DISCUSSION QUESTIONS: Will supermarket basket sizes return to pre-pandemic levels as comfort with in-store shopping returns? Will the online shift, home-cooking, work-from-home or other factors likely to elevate or reduce basket sizes?
Poll
BrainTrust
Shoppers will shop for groceries more frequently, and that’s exactly what grocers want. Impulse buys probably took big hits during the pandemic, and the candy is still at eye level for the kids — if they’re back in the stores. And for those who discovered the joys of cooking only recently, they’ll likely be making shopping trips for ingredients more frequently. The pent-up demand for restaurant meals will cut into basket sizes for a while, but once a chef, always a chef. They’ll be buying groceries at a bit above pre-pandemic levels soon.
Eventually it will return to pre-pandemic levels – some slight elevation might occur as “new” cooks and bakers have formed, but for the most part this is need-driven – your family only needs so much food. Restaurant openings will reduce and if unemployment remains an issue, we may see some decline in basket value as more economize.
It seems unlikely baskets will drop all the way back to pre-pandemic levels. Food inflation is on the rise, which will bolster basket size across the board. In-store trips, at least initially, may also benefit from impulse buys as shoppers discover or rediscover products on the shelves. For a lot of consumers, online grocery shopping — especially for pantry restocking and for bigger/bulkier items — is likely a new permanent behavior, which will also help keep the average basket size higher.
During the pandemic retailers, grocers included, did everything imaginable to get shoppers to buy online. You can’t blame them because it was all about survival. Grocers did an exceptionally good job because consumers like shopping online. Now the dilemma is how to continue to keep those services going strong while enticing consumers to visit the stores again.
I am a cook so I like to shop for myself, my daughter also likes to cook but she loves the convenience of curbside pickup. If grocers want to entice shoppers like my daughter they are going to have to step up what they offer in-store. Right now it’s the same old, same old. Events need to go beyond sampling and cooking demos – things shoppers already expect. If grocers want people to return to stores they have to make the visit worth the trip.
That last comment from Natural Grocers is the one that I think is the most important, about no one doing drop-in shopping during the pandemic. Averages can hide a lot of variability and big basket sizes during the pandemic might have been some reflection of not eating out, but it was also a reflection of wanting to only expose yourself to the grocery store one time per week max. Already with full vaccination under the belt and a loosening of restrictions, I’m seeing many more “hey will you run to the grocery store and pick up X” trips in my household, where before we were asking ourselves “is it worth it to get COVID-19 just for X?”
As for long-term shifts, I just read an article about how many of the behavior shifts that happened during the pandemic will not return to pre-pandemic levels. Working out was one. Eating out was another – consumers will return to it, but also are keeping hobbies and activities from the pandemic that they enjoy, and cooking for yourself turns out to be one of them. So it seems wise to plan that nothing will return to pre-pandemic levels, but also that nothing will stick around at pandemic levels either.
I believe that the trips will be less but the basket size will increase. While people are beginning to go out more, some people learned to cook and liked it and will continue to cook at home.
The pandemic-induced basket size increase will fade away as shoppers venture out more frequently and get back to their old impulse behaviors. Online baskets will likely grow as shoppers get more comfortable with new options, and begin to merge online and offline behaviors.
I suspect that basket sizes will trend downward as people return to work in offices and more people eat out more often. However retailers can affect these trends (sorry if this sounds self-serving, but it’s just true, I swear!) with personalized promotions that influence related items, impulse items, etc. to increase basket size.
On a macro level there will be a natural increase in frequency and decrease in basket sizes as the economy recovers and vaccination rates rise. The good news for retailers is that they can control their own destiny on this front as there are several proven strategies and tactics to increase frequency and/or basket sizes depending on priorities. The right analytics and technologies can help. Some classic examples are advanced affinity/cannibalization analyses and having effective “trade up” strategies. Great customer analytics can also help identify pantry loaders vs. frequency shoppers and allow grocers to create more targeted approaches to help achieve intended objectives. The best grocers don’t have to sacrifice frequency or basket sizes if they take a balanced, customer-informed approach and make the right choices.
If the pandemic is over or when it is over and people cascade back to a pre-pandemic lifestyle, essentially, basket size will return to what it used to be. Some people that discovered or rediscovered home cooking will persist and buy more, but many people will drop it. Additionally, inflation is hitting food prices and is only expected to worsen and the overall economy and stock market are raising concerns, so in time, shoppers may have to economize on their grocery spending.
Things will normalize over time, but I don’t expect they will ever be exactly the same as before the pandemic. More people are comfortable with a broader set of options around how to shop. That would suggest that we will trend towards fewer trips to physical stores (after the “post-fear” return peaks), and smaller basket sizes. However I fully expect that people will miss the exploration they can do in-store, and CPGs will respond to that with vibrant packaging, in-store promotions and other tactics for driving impulse buys to capture these shoppers’ attention at levels higher than what we saw pre-pandemic. The fight to grow basket size will continue and once we are firmly in the new normal, I believe the trend will begin to bend slightly up.
As pre-pandemic activities roar back to life and competition for consumers’ wallets intensifies, grocery basket sizes will decline.
Certainly many shoppers will retain pandemic habits like home cooking and e-grocery convenience. Consumers will also flock to stores for their immediacy, unmatched sensory appeal and to escape from their families after a very long year.
However consumer choice keeps expanding beyond essential stores like grocers. As service resumes for restaurants, events, travel and “non-essential” retail, these industries will compete for shoppers’ time and disposable income.
The pandemic drove some key changes in grocery shopping: increased sales of masks, hand sanitizer, and health kits; reduced traffic to the store; increased safety precautions at the stores; home eating patterns; and more online grocery deliveries.
These conditions contributed to increased basket sizes at lower in-store frequency. Removing these conditions, which has already begun in parts of the world, we will see less shopping for masks, more store traffic, slightly less precautions at the store, and certainly more eating out and visiting restaurants. Online grocery deliveries will also diminish – if only because the delivery costs are high for consumers and the supermarkets are just down the street. The bulk purchasing will start to diminish as customers are more comfortable returning to their stores to pick up their favorite brand of food or beverage. There may be some residues from online shoppers and customers still highly health conscious, but these will be transient and select niches. The customer is pining for a return to the “old normal” which might not be there in its entirety, but they still want it. Some new trends like work from home and the general trend for in-house kitchens, delis and added perimeter shopping for grocery will experience a boost as customers find new ways of preparing lunch and midday meals. Expect a return to a lower basket size and higher frequency of purchase by fall/winter.
Without the pandemic fueled shopping phenomenon, we should expect that consumers’ grocery shopping journeys become more normalized, with multiple weekly trips to the store. We should also expect with the opening up of our economy, and the loosening of the COVID-19 restrictions and restaurants reopening up beyond outside seating, that people will eat out more often.
The consumer behaviors have also shifted to the point that consumers are looking for grocery stores to offer ancillary services, premium packaged foods, prepared foods, meal kits, and takeout options. These are prime areas of opportunity for the grocery industry to capitalize on revenue and margin growth as the center store consolidates even further.
With the return to pre-pandemic shopping baskets, now is the time to revitalize profitable grocery industry growth by focusing on a customer-first strategy and value-added customer experiences.
It seems unlikely they will not fall. As eating establishments open up again and people are more willing to eat out grocery volumes are likely to fall. Another factor is that shoppers were previously attempting to minimize their number of trips, leading to an increase in average basket size. As that effect diminishes, basket size will likely drop for that reason too.
I think there are a few things in play. The world has fundamentally changed. Pre-pandemic “normal” will never return any more than pre-9/11 air travel will return. There will be new variants of the virus which may or may not reintroduce social behavior restrictions, but there will be a segment of the population that will avoid crowds.
Because the shift was so large and fast last year regression to the mean will move basket size closer to pre-pandemic levels.
I believe online shopping will hold at least 40% of its increase even when people do go back to a physical office environment. Curbside pickup is a great time saver. There probably is not much chance the home cooking spike will remain; restaurant dining is a blessing when you worked all day.
It’s a mixed bag (or basket). Some grocers will go back to pre-pandemic baskets, while others will keep the larger carts. Some shoppers will remain pleased with fewer trips to the store, which larger baskets make possible. Others will embrace anything and any service that brings them back to normal — that is, pre-pandemic living.
Shoppers have learned that retailers will do their shopping for them, without a premium. And they’ve had time to build online shopping profiles, to make re-ordering easier, and a make online shopping a habit. Why would a shopper volunteer to trudge through a store when they’re getting exactly what they want delivered to their door? It would be like giving up online banking for teller lines. A little less supermarket spending from more restaurant visits. But still more online than ever before.
Depending upon how shopper-efficient and adaptive the physical store has become, basket size item count will continue to rise in the efficient stores, but likely decline in stores that expect the shopper to revert back to their pre-pandemic expectations. If food inflation continues at current pace, it will be difficult for any food retailer worth their weight not to experience increased dollar rings and positive year over year dollar comps.
People who enjoyed cooking during the pandemic will continue to cook more even as eating out becomes available. As people go back to commuting there is less time to home cook and the ability to eat out easily will take away the incentive to cook for the new WFH types. Basket size, I think, will go back to pre pandemic levels with a boosts depending on the region.
It may take some time for the alarming supply vs demand trauma to wear off that many experienced with the onset of the pandemic. Consumers need to rebuild their trust in retailers and see consistent stock levels. Undoubtedly, may consumers still have a ‘safety-stash” of essentials at home–just in case. When consumers relinquish that safety stash (or, reduce it to pre-pandemic levels), then we may start to see basket sizes return to pre-pandemic levels.
For now, consumers are operating on a learned behavior over the past year; expect out-of-stocks and buy what you can, when you can so you are not desperate later. It will take some time to unlearn this. How retail inventory levels show up in the second half of the year will help consumers decide when to take their fingers off of the panic button.