AlixPartners: Grocers need to take immediate action to remain viable

AlixPartners’ senior consultants have released a new report on how grocery retailers can mitigate financial risk from increasing online grocery shopping.

Among other things, the report suggests pandemic-driven online grocery trends will cost retailers up to 2.75 points in lost operating-profit margins if not offset—such as by adopting click-and-collect options.

“Grocers need to take immediate action to stay viable and avoid a deep margin impact as the market evolves into its new normal,” the report’s authors stated. “While most grocery stores remain open during the current crisis, many customers are preferring to stay home and take advantage of home delivery and curbside pickup in unprecedented numbers.”

Grocers have seen digital sales more than double across click-and-collect and delivery channels, and growth in digital channels makes a deep dent in operating income. Based on history, the authors expect a significant portion of this digital growth to become permanent once restrictions are lifted.

The report also calls upon grocery retailers to:
● Make bold capability decisions, including relating to ecommerce scaling and outsourcing.
● Track and codify “learnings” from the current crush, to determine what is truly incremental online business
● Choose customers incentives carefully, including not to incentivize customers into long-term actions unprofitable for the business.