It’s still unclear what Christmas and the winter holiday period will look like for many of us this year.
For grocery retailers, this uncertainty has been present throughout 2020, with the unpredictability of the Covid-19 crisis disrupting traditional festive planning (which typically begins in the summer).
The new tier-based restrictions present in the UK mean that many people will be unable to spend Christmas with extended family or friends, instead confining celebrations to their own immediate household, or a maximum of six people as per the ‘rule of six’. As well as celebrating at home instead of going out, tighter restrictions are likely to mean that people avoid shopping in-store. While this is bad news for restaurants and hospitality venues, it is likely to further accelerate the growth of online grocery retail.
Consumers are expected to tighten their belts this Christmas but food and drink is one area where people are expected to splurge. Savings elsewhere, such as on travel or commuting, could also contribute to people splashing out on treats.
So, how have UK supermarkets planned for Christmas amid such uncertainty, and what trends could play out this year?
Supermarkets expanding delivery partnerships
A Retail Week survey found that a third of shoppers expect most of their Christmas spend to go on grocery, making it the highest-ranking category. According to Kantar, take-home grocery sales rose by 9.4% during the 12 weeks to 4th October 2020. And overall, online sales in the four weeks to 4th October were up 76% on a year ago, with one in five households now ordering groceries through the internet.
Securing a delivery slot as early as possible will undoubtedly be at the forefront of consumers’ minds as Christmas approaches. Fortunately, supermarkets have already increased capacity since the March lockdown, with Tesco now leading the way with 1.5 million delivery slots per week (compared to 600,000 before lockdown). Demand could increase even further, however, which is why some supermarkets have been experimenting with alternative delivery options.
Both Aldi and Waitrose have recently expanded their online delivery trials with Deliveroo, enabling customers to order items for delivery within 30 minutes. According to Waitrose, expansion of the service to new participating stores will help the supermarket reach 3.1m UK customers. Both supermarkets have also increased the number of items that customers can order via the app, with Aldi now offering 400 items and Waitrose more than 650.
Exciting news! Today we are welcoming @Waitrose to the app in a number of locations across the UK. Check out the thread below to see if you can order #Waitrose ingredients and essentials on deliveroo #HereToDeliver pic.twitter.com/CUpVj8y05Q
— deliveroo (@Deliveroo) September 1, 2020
Click and collect expansions confirmed in time for Christmas
As well as delivery trials, Waitrose is expanding on its click and collect partnership with John Lewis, which now enables customers to pick up their John Lewis Partnership purchases from 337 Waitrose stores. Other retailers are also part of the deal, with Sweaty Betty purchases available for click and collect in 297 Waitrose stores, and Nespresso purchases from 48 stores.
Speaking at the annual The Times CEO Summit, John Lewis Partnerships chairwoman Dame Sharon White said the move is part of the company’s wider strategy to balance the increase in online demand (due to Covid) and offline need, with Waitrose’s click and collect service allowing for greater flexibility and convenience for shoppers. She also suggested that this is why – despite the shift away from stores – there’s no need to sound the death knell of the high street just yet.
Waitrose is not the only supermarket to work with John Lewis on click and collect. In the summer, the Co-Op extended its own partnership with John Lewis to more than 500 Co-op food stores, building on the existing 105 locations. Alongside convenience for customers, both Waitrose and Co-op are surely hoping that the extra footfall will benefit wider grocery sales, too, particularly in the run-up to Christmas when demand is high.
Click and collect services for supermarkets’ own groceries can help to facilitate online business, which is why Aldi has also recently launched a click and collect trial (with plans to roll it out nationwide in the coming months if successful). This is another example of a supermarket adapting to changes in consumer behaviour due to Covid.
Luring back shoppers with loyalty schemes
Value for money is a big driver for shoppers at Christmas time, particularly this year, so it’s no surprise that many supermarkets are promoting new or refreshed loyalty schemes. Retailers are also using loyalty-based offers to lure back shoppers who might have started buying elsewhere during the pandemic.
Lidl has recently introduced Lidl Plus – a new loyalty app that offers rewards at the checkout, as well as a digital scratch card on each purchase. Lidl Plus is also Lidl’s first real venture into digital territory, as the budget supermarket has yet to launch an ecommerce channel. The app could help to extend the brand’s connection with customers when they are not in store. And with its gamification elements, it also has something to offer customers beyond basic value.
Sainsbury’s also added a touch of gamification to its Nectar app recently with the ‘The Great Big Fruit and Veg Challenge’, which ran from 7th September to 4th October, incentivising customers to buy more fruit and vegetables by offering bonus Nectar points as reward. The challenge incorporated personalised targets based on shoppers’ typical purchasing habits.
Elsewhere, Tesco has brought back its Clubcard Prices promotion, which gives Clubcard holders up to 50% off on selected items. It also has its Clubcard Subscription, which gives perks like 10% off big food shops for £7.99 a month. Tesco’s subscription offer is a clear-cut attempt by the supermarket to lock in 100% of customers’ grocery spend. This is in contrast to free loyalty schemes, which allow shoppers to pick and choose the best discounts from multiple retailers.
In a time when supermarket loyalty is more fragile than ever, these schemes are about more than just offering discounts, enabling retailers to enhance personalisation efforts and meet evolving demand.
Product innovation aligns with pandemic consumer trends
As well as spending more on food and drink, consumers have tended to splash out on more premium or seasonal products at Christmas time. However, as Easter 2020 showed us, that is no longer guaranteed. According to Kantar, sales of seasonal categories were down 16.7% year on year in the three weeks to Easter Sunday.
As David Sables, CEO of Sentinel Management Consultancy, explained to The Grocer: “That led to a glut of unsold Easter eggs and other items that could only be shifted through massive price reductions. So, when it comes to Christmas, they (retailers) don’t want to do products requiring special seasonal packs.”
Another reason retailers might be reluctant to focus on seasonal products this year is the absence of in-store browsing that will happen compared to last year (with consumers unable to discover new products on supermarket shelves). Online shopping tends to be more linear and focused, with consumers more inclined to stick to a stricter and more limited list.
Indeed, it appears as if some supermarkets are more focused on adapting to changing consumer circumstances this Christmas (and ensuring availability of standard stock) than drawing them in with innovative seasonal products. For example, Waitrose’s ‘Queen of Trifle’ show-stopping dessert has been deliberately made into a smaller version to serve six people.
M&S is also focusing on food that suits more intimate celebrations. In its Christmas Trends report for 2020, M&S stated: “Brits will be entertaining in smaller groups in the weeks and weekends in the run up to Christmas and will be looking for easy meals, alternative turkey inspiration and plenty of shows toppers and tasty table wows to make these moments extra special.”
Despite more people baking and experimenting with food during lockdown, supermarkets seem to be focused on offering convenience and helping customers to avoid stress over the festive period. Morrisons is taking this to a whole new level with its Christmas dinner food box, which contains everything you need to feed a family of four on Christmas Day. Priced at £50, Morrisons is likely hoping that this affordable price point will lure shoppers away from low-cost competitors like Lidl and Aldi.
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Food manufacturers and retailers are stockpiling due to Brexit fears
As if the pandemic wasn’t enough, there are also growing fears that a no-deal Brexit will affect UK food supply. According to reports from The Grocer, British warehouses are running out of space as manufactures and retailers stockpile in the run up to the deadline in January. The Grocer cites a recent survey by the FDF, which reportedly found that over two thirds of food manufacturers intend to stockpile ingredients and raw materials ahead of the January deadline. Meanwhile, about a third of respondents say they are in a worse position to do so than previous deadlines.
Lack of warehouse space could present issues for grocery retailers, particularly with supplies (and warehouse space) crucial in meeting existing Christmas and Covid-related demand. Supermarkets are clearly concerned that the combination of these demands could lead to supplies running out (like they did in March), which has resulted in some reintroducing purchasing limits. As stricter guidelines were put in place around the country in September, Tesco imposed a three-item limit on certain household items like toilet roll and dried pasta, while Morrisons has done the same for cleaning products and other items like kitchen roll. Overall, fears around fulfilment look to be stronger than ever as we head into the Christmas period.
An opportunity for local retailers and subscription boxes to steal supermarket share?
Support for small, independent, and local retailers has grown throughout the pandemic. According to YouGov, 64% of people want to support local businesses and buy local products as a result of coronavirus. This is largely due to the desire to help struggling businesses stay afloat, but it’s also because many consumers’ have rediscovered the convenience of local shops or other benefits such as personal customer service and community spirit.
At the same time, subscription box retailers have experienced significant growth, particularly in the food category. Cardlytics found that in April, spend on grocery boxes and ‘do it yourself’ meal kits grew by 114% compared to the previous year. One of the most popular brands, Gousto, delivered five million meals in June, up from 2.5 million in January 2020. Delivery service Milk & More also signed up more online customers in the first eight months of 2020 than it did during the whole of 2019, with the company signing up 85,000 new customers from January to the end of August.
Unsurprisingly, most grocery subscription services are now offering Christmas meal kits and festive food boxes, including Abel & Cole, which this year is selling a range of organic meal kits for six to eight people. Some supermarkets are taking a leaf out of their book in order to compete: Morrisons’ food box subscription service, launched in September, is clearly an attempt to mirror the convenience offered by these services (as well as to aid customers who cannot secure a delivery slot), and of course, to potentially win back any customers who might have switched to subscription-based retailers since the pandemic began.
With stock levels and delivery capacity likely to be the main focus for all types of grocery retailers, success across the board will depend on supply chain resilience (and applying key learnings from March). Demand has certainly shifted – something of which turkey farmers are only too aware.