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Three myths about food retailers during the pandemic

20 Apr 2020 / By: Ray Gaul

Retailing in the Week Ahead, Week 17

Market researchers, in my entirely biased opinion, have done an amazing job of providing data and insight during the global pandemic. We have launched new surveys, asked new types of questions, attempted to accelerate experimental ways of gathering information such as mobile and social media tracking.

Moreover, we have moved from providing monthly data updates to having weekly refresh rates. All of this ‘extra’ has not been easy nor has it been perfect. So, I typically tell everyone to avoid giving too much criticism. My key message: all of this additional information gathering will get stronger, better, faster.

Still, there is one area of market research where we do deserve some criticism: financial relationships. Many commercial teams want this ‘extra’ market research to understand changing financial relationships between brands and retailers. So they ask market researchers three questions: What? So What? and Now What?

In my experience, you need consultants to handle the ‘so what’ question, not market researchers. I realise that might be hard to understand given that some of us are hybrids/cyborgs. The reality is that most market researchers spend so much time gathering data and then organizing it that they have little time left over to consider how a buyer gets KPI’d or how a KAM lands a quarterly sales bonus. Similarly, as the work of conducting market research gets harder - like right now - researchers have even less time to think about these questions.

Therefore, might I suggest that market researchers, through no real fault of their own, have made three ‘incorrect calls’ in analysing short-term trends and projecting them into the short-term future. This is why you need a consultant who understands market research, but does not live and breathe, wake and sleep market research. This is where Kantar’s Consulting division can give you a real advantage.

I would like to be one of the first analysts to try and debunk these myths. Hopefully, more and more of my colleagues will follow. Our consultants all over the world are working hard to debunk these myths. Give them a call. We work very well in unison: Market Research + Consulting = clear ‘so what’ insights…

So, here are three current myths about food retailers:

1. The ‘retailers are enjoying a once in a lifetime bonanza’ myth. Growth rates in some categories have been astronomical. We can joke about dried pasta, tins of beans, hand sanitizers and toilet paper flying off shelves, but the reality is that almost every retailer that has remained open has benefited from stockpiling. 

However, retailers also sell fuel. Supermarkets and convenience stores sell accessories for holiday travellers. Many supermarkets only operate in the ‘summer holiday’ season. Retailers like to sell party supplies such as those needed to throw a summer neighbourhood barbecue. Just as importantly, stockpiling is typically low margin, and eventually results in lower traffic.

Myth: Food retailers are enjoying the best ‘year’ they will ever see. 

Myth busted: Food retailers are having some real challenges selling products that would normally be highly profitable traffic, basket, and loyalty drivers.  

2. The ‘retailers that stay open are highly profitable’ myth. I have conducted multiple webinars every week since the pandemic started. I’ve done my best on these calls to talk about how a retailer’s P&L works. The simple maths is that most retailers have two expense levers which determine how good they are at generating profits. The first is called Cost of Goods or COGS.  The second is Operating Expenses or OPEX. In normal circumstances, if either of these increase the retailer will increase its price mark-up to cover the additional expenses. See example:


% Before

% Additional

% After

Purchase Price








Total Expenses








New Price Markup



4% + 2% = 6% (again)

The ‘so what’ of this is that inflation will rise as consumer prices increase. This results in two types of categories – elastic and inelastic categories.

  • Elastic categories are those where when prices rise, consumers decrease the number of items they purchase.
  • Inelastic categories are the opposite, no matter how high the price rise, consumers continue to purchase the category. 

There are two problems right now with this “formula”.  The first is that increased costs are happening in inelastic categories, resulting in consumers spending more. The second is that all of the additional costs have only flowed into retail during a short period of time, meaning retailers have not yet adjusted their prices to the ‘new normal’. This means their profits have fallen. It also means that inflation is coming, particularly on inelastic categories if governments allow prices to move freely. 

Myth: Food retailers are ‘profiteering’ during this crisis. 

Myth busted: Most retailers are discussing ‘exceptional operating losses’, with Tesco and Walmart just two major operators that have begun publicly explaining this financial problem.

3. The ‘ecommerce will replace bricks and mortar’ myth. Finally, there is a myth that ecommerce food deliveries will now permanently take over from bricks and mortar. Companies like Instacart, a US intermediary that charges fees for ‘drivers’ to pick orders from bricks and mortar locations and then deliver the goods to households, has disclosed a 300% growth in customer orders. Almost all online retailers have announced surges in orders. 

There are three problems to this story in the long run.

  • The first is consumer spending. Consumers pay extra to use services like Instacart or Amazon. If consumers lose their jobs, they will face a stark choice. Pay extra for delivery and eat fewer units of food or use the corner shop and get more for your spend. 
  • The second is that lockdowns have left huge percentages of people with no choice but to order a delivery. Some have been ordered to quarantine with risk of fines for breaking the order.  Others have relatives on lockdown and want to send something nice. This will all disappear, and it will disappear almost as quickly as it appeared. 
  • For the third problem, see myth #2. There is an incorrect assumption that companies like Instacart or Amazon can operate profitably doing these deliveries. 

Myth: Food deliveries will be the new normal. 

Myth busted:  Companies like Amazon have made noises that they may be willing to exit countries like France where the government is forcing them to operate in a particularly unprofitable manner.

These are just thee misconceptions about the changes taking place in food retailing during the early stages of this pandemic.  There may be more.  Please share some others with us using the communication links below and we will do our best to “myth bust” in the weeks and months ahead.

In the meantime, repeat our two mantras: never let a good crisis go to waste and green shoots grow faster after burning fields.

Thought of the week: Have you thought about ways to create cost-effective supply chain solutions?

Upcoming events not to be missed:
The Retail Realities of COVID-19: Now, Next, and Future
Digital Commerce Leadership Virtual Event
COVID-19: The role of sustainability in building resilient organisations (Webinar, 21 April)
COVID-19: Resilience in innovation (Webinar, 24 April)

Retail IQ Publications from Week 16:
Amazon International: Executive summary
Now trending in fashion and beauty: Q1 2020
Will a leaner, fitter Dia emerge from Spain’s crisis?

Good luck in the week ahead.  


Ray Gaul – and @Kantar or @RayGaul on Twitter plus LinkedIn.

Ray Gaul

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