How Did The Pandemic Affect The Confrontation Of Food Retail Formats - And Who Is The Leader?

Photo: Shutterstock

Last year, analysts noticed that neighborhood stores successfully compete with big hypermarkets. Large retail networks are losing ground. The year 2020 has only made it more difficult for them. In our article you will learn what happened to the confrontation of formats, who is leading and how the market influences the promo activity of food retail.

The pandemic of 2020 has forced us to take restrictive measures. While most catering and retail outlets were closed and at best worked for delivery, food retail has remained a profitable business. This business has helped many shopping malls maintain the flow of customers and keep other outlets that are on the list of essential goods open. For example, pharmacy pavilions, household chemicals stores, pet products stores. Retail seems to be in an advantageous position, and hypermarkets, especially - they replace the range of shops for the average citizen.

In 2019, the format of the hypermarket has already yielded to small shops. There has been a drop in traffic for eight quarters of the last 12. Plus the overall decline in average checks. Traffic in April fell by 16%, although regular customers increased their checks by 30%. However, small shops were less affected by the crisis - they are close to the residents' homes.

Supporting promo

Perhaps the victory of the shops at home is not far off. But it's still in the future. So far, both hypermarkets and district shopping malls are trying to attract visitors. One of the most popular tools that use both hypermarkets and neighborhood stores: promotional catalogues.

Some regional and retail networks from time to time launch incentive campaigns to support delivery and help maintain a self-isolation regime. For example, they integrate with the delivery of services, including Uber. Some stores are opening their own delivery. This can be useful for those who are constantly busy and have no free time. Like students who use the paper writing service. Another measure is a free taxi for customers. Retail is now launching the delivery and self-service of pre-assembled products.

Another option to attract the flow of buyers in a difficult time - a round-the-clock format. Shopping at night excludes a large flow of buyers, but allows you to buy the necessary products and goods, thus satisfying an urgent request. According to subjective observations, the traffic after midnight in hypermarkets increased by at least 10-15%. 

Hypermarkets are more active, district centers a little less, expanding the range of goods and constantly experimenting with it. For example, they are increasing the share of healthy eating and sporting goods. They also keep betting on the traditional strategy: loyalty programs, trading and marketing activities - accumulation of tokens and purchase of promotional goods with them, discounts on certain positions.

How attractive are the neighborhood stores 

Investors note a spike in the growth of district formats and explain why they are so attractive:

● pedestrian accessibility;

● closure of basic needs of the district residents;

● saving time for travel;

● unobtrusive daily routine - stop by the shop after work instead of spending the day off for a full week's purchase;

● the trend towards eco-friendliness and avoidance of unnecessary trips by car and public transport.

Small district centers are also convenient for builders: they are ergonomic and quickly erected, and investors get passive income from the profitable site. Everything is on the plus side.

Last year, small trade centers increased their commissioning rates. But they will also have to adjust if they want to adapt. Such sites have an essential feature in front of hypermarkets - the area. In a small area, it's easier to violate sanitary and epidemiological standards. And this risk is also a reputational one - people have become more attentive to their health.

The confrontation between hypermarkets and shops near home continues, but small shops win. Surely they will be the ones who will win in the next couple of years. But it's possible that hypermarkets will adapt. The pandemic and crisis are, as always, an interesting time that can fundamentally change the situation. The question is whether hypermarkets will be able to take the opportunity or confirm that their time has passed.