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This week, we conducted a roundtable discussion with our Advantage team on how the COVID-19 crisis is impacting Canada. Panel members included:

Dwight Konings, Vice President of Global Client Development, North America

Dan Doulos, Director of Client Services, Canada

Jamie Hoare, Director of Client Services, Canada

Atul Kapile, Senior Analyst, Customer Insights

Q1 - Throughout the pandemic, the e-commerce channel has skyrocketed. What do you think caused this, and what could we expect to see in Canadian e-commerce long term?

Jamie: In Canada, it has become very much about e-commerce. This is one of the highest growth channels right now nationwide, with almost every supplier and retailer making unprecedented advancements and investments in e-commerce innovation and technology.

There is a saying in the supplier and retailer community now that goes “Canadian e-commerce is like building a plane while you’re flying it”. More honest words have never been spoken! We are hearing suppliers and retailers comment on the trajectory of e-commerce, saying that they expect that growth will begin to subside, but, I am not so sure about that. If you think about this from a psychological perspective, there is a principle called the 21/90 rule. It takes 21 days to start forming a habit, and 90 days to integrate that habit into your lifestyle. In Canada, the pandemic started roughly in mid-March, so everyone from suppliers to retailers and consumers alike have had 90 days to build e-commerce engagement into their lifestyles. In those 90 days, e-commerce has continued to develop and provide competitive and alternative solutions to support continued growth.

Dwight: The CEO of one of the largest retailers in Canada recently stated the pandemic is accelerating the e-commerce plans everybody had. Another CEO said that since the crisis started, they probably jumped forward three years ahead of where they would have been with e-commerce. When we went into lock down, I tried to order groceries online for pick-up and the earliest available timeslot in my area was two weeks out. Now I can find places to order and pick-up same day. Companies increased their pace of investment, and they now have improved infrastructure to deliver online compared to at the start of the pandemic. Many consumers got exposed to e-commerce that had not used it previously due to the ‘new normal’ of shopping, but there were also negative customer experiences that retailers needed to overcome to keep them coming back and hold them as we move to the new normal.

Jamie: It is also interesting to talk about the customer acquisition costs for e-commerce shoppers both now and pre-COVID. On average, e-commerce customer acquisition costs were higher pre-COVID. Retailers were pushing innovative bundle options, and referral programs to customers for higher penetration into the channel pre-pandemic. Compared to today, I would anticipate with all the alternative solutions in place and optimization of use, acquisition costs have declined. Customers are willing to pay for the convenience and safety of an e-commerce purchase and delivery versus shopping in-store, so long as the experience has been favourable.

Atul: I think this also touches back on the increased investments that suppliers and retailers are making in e-commerce. As suppliers and retailers experience a growing volume of e-commerce shoppers, it implies that these cost improvements need to be more scalable for channel growth. This is where innovation in product assortment, supply chain, and process improvement will become very important for the next phase of e-commerce development in the new normal. Jamie: In Canada, we have recently launched a ‘Voice of e-Commerce’ program. It will be very interesting to see what kind of feedback suppliers and retailers give to each other. E-commerce right now is a very competitive race, and retailers and suppliers will need to leverage each others’ feedback to fuel their growth.

Q2 - In the pandemic, we have seen strong actions taken from Canadian suppliers and retailers in adapting their corporate cultures to support the needs of local communities. What effect does this have on consumers?

Dan: These are initiatives that consumers are really latching onto right now. The topics of brand reputation, community support, sustainability and customer loyalty have become more intertwined than ever, so retailers and suppliers must continue to treat this with high diligence. In one of my recent meetings with Smuckers Canada, they told me that they have frequent meetings on how they will continue these initiatives and shape their brand to avoid any negative connotations with consumers. In one example, they received a lot of press for their flour products because they ran out of their previous packaging for them. They elected to use local materials and repurposed their packaging on recycled paper with black and white ink. This was something that really resonated with consumers, as they felt Smuckers was making a positive contribution to the environment and society.

Jamie: Brands that have transparent, ongoing communication are viewed as more relevant and can ‘pull at the heartstrings’ to engage with communities. This becomes even more powerful when their efforts are connected to our national heritage and identity. A uniquely Canadian example of this is a local supplier of hockey equipment that repurposed their products to build protective visors for healthcare workers. From a grocery perspective, many Canadian suppliers have shifted their marketing budgets to support local businesses. One Supplier even supported an internal initiative, providing gift cards to all employees to treat their families to dinner on a Friday evening.

Overall, corporate cultures are really accommodating to meet the needs of communities. As Canadians, we thrive on diversity and community, and I think that really speaks to some of the strengths that both our suppliers and retailers have leveraged during this period.

Dan: It’s really about taking a holistic approach to goodwill efforts at this time. These are powerful efforts that can triple your brand coverage, and they can even be used to win back consumers who have left your brand for other competitors. The key thinking from a consumer perspective is: are these efforts just ‘lip service’ while we are navigating through this crisis so that the brand can increase sales? Or does the brand honestly believe in these efforts and have an imperative for societal goodwill?

Q3 - What influence has the pandemic had on the Canadian grocery industry overall? Do you believe that these effects are here to stay?

Atul: Looking through the initial feedback gathered in our Advantage Engagement Program so far, we have found two key behaviours that are beginning to become much more prominent due to the crisis:

• Collaboration: We believe that the pandemic exposed the senior leadership of suppliers and retailers to how much more could be accomplished when they work collaboratively and adapt together to change. When it comes to activities such as pivoting strategy, changing promotional plans, and making decisions on inventory, these are examples of where effective collaboration and adaptability become paramount. It has become about understanding new and unique challenges and solving them collaboratively. Suppliers and retailers have come up with creative, fast, and innovative approaches to problem-solving in this period. An example of this is the centralized crisis management teams that suppliers and retailers have created internally so that they can make urgent decisions quicker and implement them immediately.

• Communication: We are seeing more honest, and open communication at a higher frequency resulting from the pandemic. Previously, suppliers and retailers may have only communicated on a weekly basis, or as required. Delays in communication were also very common. But now, both parties are responding quickly and taking immediate action. At the beginning of the crisis, suppliers and retailers would be in a scramble to find products to refill shelves, but they worked to build ways to continuously review inventory information. This alleviated much of the pressure that they had on managing production schedules and product availability.

I think that with enhanced collaboration and communication, one of the overall effects we are seeing is much deeper levels of trust. Suppliers and retailers are saying to each other, “we will get through this crisis sooner or later, together”, acting with a very positive, ‘can-do’ attitude that is fueled by a mutual commitment to one another.

Dwight: We had been asked to speak at some online sessions for various groups in Canada, such as the Food & Consumer Products of Canada, and the Ontario Chamber of Commerce, to share our insights on grocery industry collaboration and communication in the crisis. The larger question now becomes: now that senior executives have had more exposure to the benefits and agility of collaboration, will these behaviours continue to hold amongst suppliers and retailers? Or is there a risk of shifting back to the older behaviours? On the topic of communication for example, we know that there will be challenges on both sides. There will be a need to have proper expectation management around effective communication. Thus, one of the initiatives that we will be taking on is to encourage suppliers and retailers to develop a joint charter. This will help them codify the learnings that they have taken from this crisis period and continue to act on them well after the crisis is over.