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Will Coronavirus Lead to a New Restaurant and Grocery Business Model?

By Daniel B. Kline - Apr 1, 2020 at 12:39PM

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A pilot idea one grocery chain is testing may actually make sense in a post-pandemic world.

The coronavirus pandemic has forced restaurants and grocery stores to adapt. Many restaurants have had to add or expand delivery while also finding clever ways to safely handle curbside pickup. Grocery chains have faced similar dilemmas even though it's still permitted for customers to enter their stores.

Consumers have embraced digital ordering out of necessity. That has included people who have used it before embracing it more fully now and others who have never used it signing on.

It's safe to say that someday restaurants will reopen and grocery shopping the way people did before will return. That does not mean, however, that long-term change won't happen due to the current crisis, and something Kroger (KR 1.71%) is doing right now may be part of that.

A woman looks through a box of groceries.

Delivery-only grocery stores could become common. Image source: Getty Images.

What changes may stick around?

Kroger has been running one of its locations as pickup-only. That's a response to the coronavirus pandemic and not a pilot project, but that doesn't mean it may not serve as a backdoor pilot.

Grocery stores take up a lot of space and generally have to be located in prime retail areas (or at least ones which people visit regularly). Pickup and delivery-only stores could require less space and be located in less desirable retail areas.

This model would make sense in densely packed cities, allowing grocery chains to put this type of store in cheaper real estate while serving a wide area. The same logic could be applied to restaurants. Some might open kitchens that offer delivery only or pickup and delivery (Starbucks (SBUX 3.76%) has done this in some city locations) with no dining room and no ordering counter.

A restaurant chain that owns multiple brands like Yum! Brands (YUM 2.82%), for example, might house KFC, Taco Bell, Pizza Hut, and Habit Burgers under one roof using a shared kitchen. That would allow customers to place one order picking items from all four menus.

Consumer demand may change

Some people enjoy grocery shopping, and some are very particular. They might want to see produce before putting it in their cart or get the exact right cut of meat or piece of fish.

Many people, however, view shopping as a chore. Some likely got items delivered via Instacart or picked up at Kroger before this, and that group may elect to do that more often. Some customers who had never done that might have been exposed during the current pandemic and might be happy to keep using those services once the crisis subsides.

It's hard to imagine that consumers will care if their grocery or restaurant order is prepared in a store or a dedicated location. And, as long as pickup is easy to find, it's likely they won't care about that either.

Using a delivery-only or delivery and pickup model may let some retailers and restaurants serve new areas and better serve existing ones. It's a model that may have developed anyway, but it's one that seems more likely given how much inadvertent testing has been done during the coronavirus pandemic.

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Stocks Mentioned

The Kroger Co. Stock Quote
The Kroger Co.
$48.14 (1.71%) $0.81
Yum! Brands, Inc. Stock Quote
Yum! Brands, Inc.
$116.71 (2.82%) $3.20
Starbucks Corporation Stock Quote
Starbucks Corporation
$79.26 (3.76%) $2.87

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