Grocery Deep Dive – Winter Update
The offline grocery sector performed exceptionally well throughout the pandemic, and the
grocery space is continuing to benefit considerably from the pandemic’s impact on retail
patterns. Our Grocery Deep Dive whitepapers from October 2020 and June 2021 describe
how the pandemic affected grocery foot traffic and consumer behavior at the height of the
pandemic and as consumers eased into the ‘new’ normal. We’re now diving back in to see
how the grocery sector is performing a year and a half after being radically disrupted by the
first wave of COVID-induced panic.
The following report provides an overview of the grocery industry from the onset of the
pandemic from a location analytics perspective. Following a review of different aspects of
the changing industry trends, we will drill down into the performances of leading grocery
brands and analyze the main contributors positioning them for long-term success.
Scoping Out the Sector
Grocery Visits are (Yet Again) on the Rise
The fourth COVID wave highlighted once again the strong correlation between the rise in
COVID concerns and grocery visit growth. As the number of COVID cases skyrocketed
across the country in August, so did visits to grocery stores. During the first three weeks of
August, the grocery industry saw visits grow by 13.3%, 12.8%, and 11.9% in comparison to
those weeks in 2019. Interestingly, it seems that grocery visits are more closely correlated
with the anticipation of a COVID wave than with the rise in actual cases: while cases peaked
in September, grocery visits peaked in August.
When the fourth COVID wave receded towards the end of September, grocery visit growth
also slowed down, with foot traffic falling from 11% year-over-two-year (Yo2Y) growth in
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August to only 3% Yo2Y growth in September. But the recent supply-chain crisis, which is
causing empty shelves across grocery stores nationwide, seems to be bringing some of
those visits back, as purchase limits and shortages force customers to make more frequent
grocery runs. Not only has visit growth continued deeper into October, the visit surplus
compared to 2019 has actually increased as the month progressed.
Correlation Between Grocery Visits and Other Retail Categories
Many expected that grocery visits would be negatively correlated with restaurant visits,
since customers who dined out less presumably needed to buy more groceries to make up
the difference. But looking into the foot traffic data, we found that the impact of different
retail sectors on each other was not so simple.
Tracking the year-over-two-year change in grocery and dining visits since the beginning of
the year shows that since April – when restaurants reopened – visit trends generally moved
in similar directions. Visits to grocery stores and restaurants increased and decreased
together, with two exceptions. In May, dining visits dropped slightly while grocery visits
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increased compared to 2019; but the drop in dining visits is likely relative to the Memorial
Day 2019 dining peaks, as many restaurants were still not offering indoor seatings and
enforcing mask mandates over Memorial Day 2021. Dining and grocery visit trends were
also decoupled in August, but that month was also unusual due to the high levels of COVID
concern over the fourth wave, which brought a clear decline in dining visits. It seems, then,
that barring exceptional COVID-specific circumstances, dining and grocery visits move in
similar directions.
Less surprisingly, grocery visits seem to be strongly correlated with superstore visits.
Between April and August, the two sectors exhibited a very similar Yo2Y variance, with visits
to the two sectors increasing and decreasing together and often even changing by identical
percentage points. This tight correlation may be due to the many similarities existing
between these two sectors, most notably in terms of product offerings.
Regional Impacts
Looking at nationwide foot traffic data highlights sector-wide trends, but analyzing the
change in visits by state can reveal key distinctions between regions. Although almost all
states saw a year-over-two year increase in visits in each of the first three quarters of 2021,
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some regions saw more grocery growth than others. As the maps below show, the
northwest, southeast, and northeast all saw a significant rise in grocery visits, while the
southwest, midwest, and mid-Atlantic saw a more moderate increase.
In the northwest, grocery visits to Montana, Wyoming, and Idaho rose by 21.9%, 16.2%, and
11.8%, respectively, between Q3 2019 and Q3 2021. Year-over-two-year grocery visits in the
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Southeast also increased, with Arkansas, Louisiana, Mississippi, Alabama, Tennessee, North
Carolina, and South Carolina seeing visit hikes in Q3 of 11.7%, 18.6%, 15.8%, 22.8%, 12.5%,
15.3%, and 13.7%, respectively. Finally, the northeastern states of Maine, New Hampshire,
and Vermont saw their Q3 grocery foot traffic increase by 15.9%, 12.2%, and 18.7% when
compared to Q3 2019.
Meanwhile, in California, Texas, Florida, and New York, grocery visits rose by 5.2%, 5.8%,
7.4%, and 4.8% between Q3 2019 and Q3 2021.
Shifts in Consumer Behavior Patterns
COVID brought many significant changes to consumer behavior. In some areas, these
changes appear to be sticking, while other pandemic-induced habits are fading away.
Return to Pre-Pandemic Visiting Hours
One of the major changes to consumer behavior over the pandemic was the shift in
shopping hours across most retail sectors. As many people’s schedules opened up, mid-day
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visits increased while evening visits decreased. At the height of the pandemic, in Q2 2020,
the share of evening grocery visits had shrunk to 17.2%; the share of mid-day visits –
between the hours of 12PM and 3PM – increased to 29.1%; and the share of late morning
visits – between 9AM and 12PM – rose to 26.8%.
Now, consumers seem to have largely returned to their pre-pandemic grocery shopping
hours, with the share of mid-day visits in Q3 2021 essentially identical to the share of
mid-day visits in Q3 2019. And while the proportion of 9AM to 12PM morning visits is still
slightly above where it was pre-pandemic (17% in Q3 2021 compared to 16.1% in Q3 2019)
and the share of evening visits is still slightly lower (20.0% in Q3 2021 compared to 21.2% in
Q3 2019), these differences are quite small, especially when compared to the shift that took
place from 2019 to 2020.
Weekday Visits are Growing
The increase in weekday visits seen over the pandemic has proved more resilient than the
change in shopping times. Although both weekend and weekday visits increased compared
to 2019, the year-over-two-year grocery visit surplus was greater for weekday visits than for
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weekend visits in each of three first quarters of 2021. In Q2 and Q3, weekday visits grew by
2.9%, and 8.2%, respectively, when compared to 2019, while weekend visits rose by only
0.7% in Q2 and 6.5% in Q3.
This could be due to the rise in staycations this summer, or to the fact that many people
are still working from home and enjoying a more flexible schedule. But the rise in weekday
visits may also reveal a more lasting shift in consumer habits. Whereas at least part of the
weekend used to be reserved for running other errands, it seems that consumers are still
taking advantage of the reopenings and the renewed license to socialize. Perhaps more
shoppers are now dedicating their weekends to leisure and squeezing in food shopping
when they can during the week.
Visits are Shorter
The pandemic introduced us to the concept of mission-driven shopping – consumers
minimizing their exposure by making longer, less frequent shopping trips to stock up on
food and other essentials. Now, mission-driven shopping appears to be a thing of the past.
Median visit duration dropped by 5.4% in Q2 and by 2.4% in Q3 when compared to 2020,
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and year-over-two-year data indicates that visit length has more or less returned to
pre-pandemic norms.
Diving down into the median visit duration at individual brands provides even more insight
into consumer behavior. Grocery chains experienced two major drops in visitors’ median
stay after an initial dramatic peak in visit duration during the outbreak of the pandemic in
March and April 2020. The first drop took place over late spring and summer, as the initial
COVID-driven hysteria and food hoarding subsided. But many chains experienced yet
another drop in median visit duration in the spring of 2021, often resulting in an even lower
median visit duration than pre-pandemic.
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Brand Drilldown
True Trade Area Size – No “One Size Fits All”
Although almost all chains experienced a certain shrinking of their True Trade Area (TTA)
size with the outbreak of the pandemic – when shoppers preferred to shop closer to home
– the year-over-two-year changes to TTA in 2021 varied across chains.
Some chains, such as Kroger, have bounced back, and have now reached a TTA size in Q3
2021 that exceeds their pre-pandemic TTA. But other brands, such as Whole Foods Market
and Albertsons, are still feeling the impact of the COVID-induced TTA contraction, with a Q3
2021 TTA that is still significantly smaller than it was in 2019. It should be noted, of course,
that while the graph shows the average TTA for a brand, there is still significant variance
between individual locations and regions for a given brand.
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Visit Patterns Consistent, Visit Levels Vary Across Brands
A wide range of grocery chains in the last few months exhibited the same pattern – a
gradual increase in year-over-two-year visits throughout the summer, a peak in August, and
a drop in September.
The outliers also experienced this same foot traffic pattern. Of the brands analyzed, ACME
Markets saw the biggest increase in visits, with 32.7% and 26.6% in year-over-two-year
visits in August and September. Its September Yo2Y visit growth was impressive but still
significantly less than its growth in August. On the other end of the spectrum, Whole Foods
Market, which has yet to close the Yo2Y visit gap that opened during the pandemic, was
closest to pre-pandemic visit levels in August, and then saw a major drop in visits in
September.
There are several possible explanations behind this September drop. Perhaps the fall in
new COVID cases led to a drop in pandemic concern-related grocery visits. Or maybe after
the spending sprees of the summer – during which retail visits increased across many
sectors – consumers decided to cut back in September. But whatever the reason for the
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September decline, visits in October bounced back across the board – indicating that the
pandemic has given the grocery category a long-lasting boost, and that the sector’s
strength in 2021 is not linked exclusively to rising COVID cases.
Strength of Regional Leaders
Diving into some local cross-grocery shopping patterns reveals just how powerful some of
the regional chains are.
In Florida, for example, Publix is the strongest regional grocery player – not only because it
holds such a significant percentage of visit shares in the Sunshine State (63% in
September), but also because of its extraordinary grocery cross-shopping patterns. In
September, an average of 10.7% of visitors to Trader Joe’s in Florida on a given day also
visited Publix on that same day – but only 0.3% of Publix customers visited Trader Joe’s.
In Michigan, where Meijer is the dominant grocery brand (51% visit share in September),
13.4% of daily Aldi customers visited Meijer the same day, whereas only 1.3% of Meijer’s
customers visited Aldi. And grocery shoppers in Texas – where H-E-B is the dominant
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grocery brand (43% of visit share in September) – exhibit a similar pattern. While 4.5% of
customers to Whole Foods visited H-E-B the same day, only 0.2% of daily H-E-B shoppers
also visited Whole Foods.
Cross-shopping patterns from these three states seem to indicate that while many local
customers may visit nationally distributed chains for specific grocery needs – to stock up on
specialty items, pick up forgotten items, or snag specific bargains – these customers still do
their main grocery shopping at the local leading brand. This data reflects the challenges
that large, widespread chains face when competing against strong regional players on the
regional player’s home turf.
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Key Takeaways
● The grocery sector’s offline performance suggests an impressive trajectory.
Grocery brands throughout the country have seen significant year-over-two-year
increases in foot traffic. At least part of the growth can be attributed to the ongoing
pandemic, as year-over-two-year (Yo2Y) visits spiked in August along with the spike
in COVID concern that same month. But the grocery sector has also had clear
success in turning the unique opportunity presented by the pandemic into a longer
term strength. The loyalty generated and the renewed appreciation for home
cooking could drive an extended period of strength for leading players in the sector.
Visits didn’t just rise as COVID cases did. Instead, late October has seen a significant
increase in Yo2Y visit metrics for the wider sector. The clear conclusion is that the
short term strength created by the unique factors present in 2020 have generated a
far longer term trend that is continuing to drive visits to brick and mortar grocery
stores.
● Grocery and dining are not necessarily inversely related. The Yo2Y growth in
grocery visits closely tracked the Yo2Y growth in superstore visits, reflecting the
similarity between the sectors. More surprisingly, grocery and dining visits also
showed a loose correlation, suggesting that restaurant and grocery success are not
inversely related. In October, as COVID cases declined, dining visits saw a sharp
uptick when looking at Yo2Y growth numbers. Yet, instead of declining, grocery visits
rose in this period as well. This may not only offer optimism for both sectors, but
also open up opportunities for more interesting interactions and partnerships
between them.
● Grocery visit trends vary significantly between regions. Although Yo2Y grocery
visits increased in almost every state, the increase in some regions was considerably
larger than in others. Many northwestern, southeastern, and northeastern states
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saw substantial, double-digit spikes in foot traffic, while states in the southwest,
mid-Atlantic, and midwest saw more moderate increases.
● The grocery sector’s performance was not uniform across all brands. While
looking at grocery visits on a sector-wide level reveals some general trends about
grocery shopping habits, foot traffic patterns did vary across brands. Some brands,
such as ACME markets, performed particularly well this year, while other brands,
such as Whole Foods Market, are still working on closing the visit gap that opened
during the pandemic.
The continued success of traditional grocers like Publix, Kroger, and Albertsons is
notable here because of the capacity these brands displayed to set a foundation for
long term success. While the unique nature of the pandemic created a distinct
advantage for players like these, the value of their offering is creating an extended
period of success that bodes especially well for their long term potential.
● Consumers are returning to some, but not all, of their pre-pandemic visiting
behavior patterns. Customers have largely returned to their pre-pandemic visiting
hours. Visit length has also dropped back down from the long, mission-driven
grocery shopping visits of 2020, with median visit duration even falling below 2019
levels. At the same time, the share of weekday grocery visits compared to weekend
visits is still significantly higher than it was in 2019.
The rise in weekday visits may reflect a change in how consumers view the weekend
vs. weekday distinction since the pandemic. This is a significant takeaway for
grocers, enabling both new types of offerings and indicating that incentivizing the
continuation of this behavior could drive a significant win/win for grocers and their
customers.
● Cross-Shopping on the Rise. Same day cross-shopping is back on the rise in the
grocery sector, indicating the return of an important behavior. If customers are back
in the mode of utilizing multiple players as part of their grocery mix, the shift creates
a powerful opportunity for grocers and product companies alike.
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Differentiation is critical, and as chains understand the unique pull of their brand
they can better double down on the core elements that attract visits. The shift
should also push product companies to prioritize a better understanding of where
certain products are succeeding and why. Understanding that dynamic could help
drive a far more efficient and successful operation.
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Intelligence Insights
Placer.ai is the world’s most advanced foot traffic analytics platform allowing anyone with a
stake in the physical world to generate instant insights into any property to understand the
factors that drive success.