Beware the Swinging Food Pendulum
The phrase “foreseeable future” gets used a lot in the retail world when executives share views of market conditions and strategies to capitalize on them. It’s always been a throwaway sort of statement in the vein of “to tell you the truth.”
The “truth,” especially lately, is subject to interpretation. We’ve now got fact checkers checking fact checkers, and then all concerned looking to distort information for political gain or various causes. It’s not a great situation for the country to be in as we try to extricate ourselves from the COVID-19 pandemic.
That process hasn’t gone well. We are seemingly no closer to a resolution of COVID-19 than we were six months ago, when a national emergency was declared. This point was driven home last month, when retailer after retailer announced that they would require all customers entering stores to wear some type of face covering. This is definitely not the future most of us foresaw back in March, April or May. We’re Americans, dammit! We were going to get through this together, flatten the curve and get on with life. The curve went where it wanted, and the future that people wanted to foresee never materialized.
Foreseeing the future is incredibly challenging right now, and so uncertain that efforts to describe it have resulted in unprecedented use of the word “unprecedented.” We’ve seen this uncertainty show up in the sales and profit guidance that retailers of food and consumables share with investors. They’ve stopped doing so, even though many reported record sales and profits, despite the U.S. economy recording a 34.3% decline in second-quarter GDP — the largest drop ever recorded.
This steep and self-imposed decline has clouded our view of the path forward, but there are some fairly widely held truths about consumers and the retail industry that make the future a little more foreseeable. Amazon founder and CEO Jeff Bezos offered his version of the truth on July 29 in prepared remarks provided to a congressional subcommittee exploring the business practices of Amazon, Google, Facebook and Apple.
“The range of retail competitors and related services is constantly changing, and the only real constant in retail is customers’ desire for lower prices, better selection and convenience,” Bezos said.
There are a few exceptions to Bezos’ constants. Low prices matter, but not always, as some customers are willing to pay more for certain attributes. Better selection is subjective, because better doesn’t always mean more. Amazon provides a vast assortment, but some of the most popular and fastest-growing retailers — Aldi, Costco, Trader Joe’s — have business models rooted in the operational efficiencies that come with a limited assortment.
Convenience is the most constant of Bezos’ constants, because there’s universal appeal to simpler and faster, as opposed to slower and aggravating. If ever it were appropriate to invoke the “foreseeable future” card, convenience would be it. It’s hard to imagine any future scenario where convenience will matter less to people.
We’ve already seen what a huge impact a desire for convenience and the avoidance of physical stores has had on food retailers during the pandemic. Many struggled to keep pace with shoppers’ massive shift to digital fulfillment methods, as they were the beneficiaries of the displaced demand that COVID-19 caused the foodservice industry. But beware of the swinging pendulum when the nation’s restaurants fully reopen and convenience-minded consumers rush back to those who prepare food for them. Food retailers are going to feel this impact in a big but hard-to-quantify way. Those on top of their foodservice game, with convenient meal solutions, will be best equipped to cope with the inevitable rush of consumers back to restaurants. How far the pendulum swings in the other direction will be determined by retailers’ foodservice innovation efforts.