Commercial Baking: eCommerce, click-and-collect vs. brick-and-mortar

Omnichannel, accelerated

How eCommerce, click-and-collect, and brick-and-mortar are rapidly changing baked goods purchases.

+Think about how the grocery shopping experience has evolved over the past 12 years: Instacart was founded in 2012, and Amazon acquired Whole Foods in 2017. Now compare that with how the grocery shopping experience has evolved over the past 12 months.

In early 2020 — prior to the pandemic — online spending accounted for 14.5% of grocery sales according to the Food Industry Association’s annual US Grocery Shopper Trends report, a significant increase from the previous year of 3 to 4%. In March and April 2020, however, that number spiked to 27.9%.

As Gary Hawkins, founder and CEO of the Center for Advancing Retail & Technology (CART) stated on a May 2020 episode of the American Bakers Association Bake to the Future podcast, “The pandemic has accelerated nearly everything that’s been happening across retail over the last several years.”

There are considerable advantages to omnichannel grocery shopping. Online and click-and-collect streams allow consumers to do their research by comparing prices and finding the best product to fit their needs — especially for those whose income or spending has been upended by the pandemic. According to Nielsen data, in September 2020, 56% of online shoppers put careful consideration into every purchase at the point of sale, compared with 51% of brick-and-mortar shoppers.

“Constrained consumers are becoming more active and astute online users, tapping into these resources to source products, pricing and promotion to match their reduced spending ability,” said Ailsa Wingfield, executive director, Nielsen Intelligence Unit, Global Connect. “They are searching and shopping more regularly online to obtain the best deals, without having to incur travel costs.”

Constrained consumers are becoming more active and astute online users, tapping into these resources to source products, pricing and promotion to match their reduced spending ability.”

Ailsa Wingfield, Nielsen Intelligence Unit, Global Connect

And for many consumers, shifting to delivery or click-andcollect for center-aisle purchases, in which standardization and brand loyalty are major driving factors, was an easy switch at the outset of Covid-19’s impact. “Online shoppers initially buy products they’re familiar with and use routinely; that applies to both branded and private label,” said Bill Bishop, chief architect and co-founder, Brick Meets Click. “Omnichannel has the biggest initial impact on non-edible groceries and other center-store products. Frozen and refrigerated products also sell well online as long as the retailer can maintain the coal chain over the last mile.”

And although commercial baked goods like bread typically tend to fall in the center-aisle category, Bishop said consumer reports indicate that many stopped buying bread online because items they didn’t want were being substituted for the items they’d ordered.

In a presentation during the American Baking Society’s BakingTECH 2021, Sally Lyons Wyatt, executive VP and practice leader, client insights at IRI cited data that highlighted some of these fulfillment gaps. In an IRI Weekly Survey in April 2020, 62% stated that some of the items they wanted were not available to order online, and 48% said that items ordered were not delivered due to changes in availability.

Although retailers have made progress in adapting to the changing omnichannel shopping environment over the past year, there is still room to innovate and grow consumer loyalty across channels.

“It’s clear from the data that retailers will face a challenge in holding onto a lot of online shoppers as experience is not meeting expectations,” said Sylvain Perrier, president and CEO, Mercatus. “To remain competitive with mass merchandisers, regional grocers need to enhance the digital shopping experience so as not to give consumers a reason to spend their money elsewhere. Grocers have to look at where they can improve operationally, how they can efficiently scale to meet online demand, and which services will be most effective at revenue protection going forward.”

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133%

increase from — 2019 to 2020 — consumers who considered themselves exclusive or heavy online shoppers

For bakery, Hawkins suggested packaging is just one such area that needs to innovate and adapt to omnichannel shopping. “Think about packaging of baked goods such as cookies, breads, other things. Their package was designed to sit on a shelf. That may no longer be the best design if the product now has to go in a tote for pickup at the store parking lot, for delivery to a home or into a box to be shipped somewhere,” Hawkins said.

But even as data suggests that the increase in online and click-and-collect grocery shopping has staying power post-pandemic (according to a Nielsen survey, the number of shoppers who considered themselves exclusive or heavy online shoppers for everyday items increased by 133% from September 2019 to September 2020), Bishop said it is unlikely grocery would ever lean fully into an online-only model. “Consumers don’t want to let someone else pick out their fresh items such as fruits and vegetables, meat, seafood, and deli products for them.”

That is why many retailers are increasingly considering hybrid facilities: part fulfillment center for packing non-perishables like canned goods, and part in-person retail space where consumers can hand-select fresh products including produce and bakery. The fulfillment centers would rely heavily on automation such as robots in a back room, picking product like boxes of Cheerios and a bag of sugar, while the front of the store would be a more sensory experience, touting avocados, donuts, and fresh flowers.

“I see a lot of opportunity for both in-store and commercial bakery as the traditional grocery store model evolves,” Bishop said. He suggested that experiential factors could have a significant impact on driving people to visit in person and make impulse bakery purchases, whether it’s smelling fresh-baked cookies or connecting with the person behind the counter. “A lot of other bakery products, both on the commercial rack and from the in-store bakery, are typically bought on the basis of appearance. But there’s a discovery aspect to shopping in-person that consumers continue to crave, and retailers have an opportunity to educate and help them find something new.”

Technological advancements can also give baking commercial bakery brands new communication and marketing streams to partner with retailers and connect with customers more effectively, according to Watkins. “Let’s say in the in-store bakery they’ve just had a batch of fresh baked bread come out of the oven, or cookies, or whatever,” he said. “The retailer can message every shopper within a mile of that store about a new batch of product. It’s really marketing in real time.”

And technologies like augmented and virtual reality offer new avenues for engagement with consumers as well. Products can now “come alive” via video to tell the story behind the product or offer recipe ideas for a particular ingredient. In a culture that values transparency and authenticity, this could be a valuable avenue for investment.

But the main takeaway is that consumer behaviors are changing faster than ever, and the time to act is now. “Things that people thought were going to be years off may now happen in months,” Watkins said. “I would encourage everyone to really be aggressive in looking at new ways to communicate with shoppers and new ways to work with your retailers around marketing, messaging and all these types of things.” +++

I see a lot of opportunity for both in-store and commercial bakery as the traditional grocery store model evolves.”

Bill Bishop, Brick Meets Click