As coronavirus restrictions have lifted, retailers have looked to in-store dining to bolster footfall and drive both store and online sales. But what are the challenges and opportunities presented by in-store dining in a post-pandemic world?

  • Food, home and fashion brands are all experimenting with food options to boost footfall and dwell time
  • While Sainsbury’s and Asda are hosting third parties, Morrisons and Ikea are sticking with own-brand offerings
  • Greggs chief says food-to-go brand would ‘love to open in more Primarks, in more Tescos, in more Asdas’

Tasty by Greggs in-store cafe in Primark Birmingham

Tasty by Greggs opened in Primark’s Birmingham flagship this February 

Earlier this month, Sainsbury’s became the latest in a list of retailers to announce a shift in its in-store dining offering.

The UK’s second-largest grocer said it would close 200 of its in-store cafes by the spring, replacing them with a host of third-party offerings.

The grocer will launch 30 new in-store Starbucks coffee shops and 30 new food halls run in conjunction with Boparan Restaurant Group offering customers eat-in, takeaway and home-delivered hot food and drink from a range of brands, including Caffè Carluccio’s, Gourmet Burger Kitchen, Ed’s Easy Diner and Slim Chickens.

Over the next three years, Sainsbury’s said it planned to roll these offerings out to 250 of its supermarkets. 

The announcement follows a trend for big grocers looking to adapt and change the use of store space.

Tesco, Sainsbury’s and Asda have been closing own-brand food-service counters in their supermarkets, citing a lack of interest from customers. Of the big four grocers, only Morrisons is persisting with service counters. 

On the flipside, non-food retailers have looked to in-store dining as a means of increasing footfall and dwell time for customers. Swedish homewares giant Ikea has fashioned an in-store food business that would be the envy of many restaurant groups around the world.

Primark also has form in this space. The value clothing giant’s Birmingham flagship has a range of food offers, including a Disney Cafe and its first Tasty by Greggs cafe, rolled out in early February

While hospitality has reopened as Covid restrictions unwind, customer behaviours and expectations have been fundamentally altered by the pandemic.

With the rise of the likes of Deliveroo and rapid grocery players such as Getir and Gorillas, how can retailers strike a balance between making their in-store offers compelling for customers while also convenient? 

A problem of perception

It is no surprise that retailers are looking to revamp their in-store dining offers post-Covid. While hospitality was one of the hardest-hit sectors during the pandemic, it has also been one of the quickest to rebound as people look to reconnect with one another and eat meals out of the home. 

Food-to-go, another part of the sector that struggled during rolling lockdowns, has also rebounded as people return to offices and socialising. 

Retail Economics chief executive Richard Lim, however, points to the failure of Tesco’s Giraffe restaurant chain in 2016 and wonders whether grocery shoppers will ever want to go for a sit-down meal in a supermarket. 

Morrisons-Market-Kitchen-Canning-Town

Morrisons now has 14 own-brand Market Kitchens across the UK

“Are people going to go to somewhere where they want to do the big shop and then decide they want to sit down for a 40-minute to an hour meal?” he asks.

“Where are they going to stick their shopping trolleys? Do they want to have a meal and then wander around doing their shopping after? I’m a little bit sceptical as to whether or not the in-store dining concept can work at scale and be profitable.”

It’s a problem Asda has been grappling with. In December, the grocer unveiled a £7m investment in its Milton Keynes superstore, the largest in its estate, which features everything from a standalone George clothing department through to a food court with EG Group brands such as Leon, a wood-fired pizza oven, a nail bar and a personalised shopping service. 

“It’s a very different proposition for one of our stores,” said an Asda spokeswoman. “You can order your shopping, go to the food court and get a meal and then drive out of the store and collect your shopping at the click and collect. 

“If you’re already making that trip [to the store], at the same time you can do other things instead of just doing the big shop.”

On paper at least, the Asda Milton Keynes store addresses Lim’s concerns. However, the spokeswoman admits that some customers are hesitant about changing the grocery shopping habits of a lifetime. 

“People are still getting used to some of it,” she says. “It appeals to different customer types. Some are really loving it, but it depends on what life stage they are at.”

Own-brand versus third-party

While some retailers are grappling with changing customer mission perceptions, Ikea has mastered it. The Swedish homewares giant sells circa 1 billion meatballs a year and a visit to its in-store restaurant has become synonymous with shopping at one of its big out-of-town stores for hundreds of millions of customers a year. 

The food offering is so crucial to Ikea that even as it begins opening smaller-format stores within shopping centres with other hospitality offerings, space for a dine-in restaurant is one of the first things its property arm, Ingka, looks for when evaluating new potential sites

“We love food because we know that it is one of the components that customers love most and it complements, indeed is core, to the idea of a meeting place”

Cindy Andersen, Ingka

Ikea meatballs pictured with drink

Source: Karl Baron, flickr

Ikea’s famous meatballs have long been a big draw for the retailer

“The food offering is a huge part of our Livat meeting places concept,” says Ingka chief executive Cindy Andersen.

“We at Ingka Centres love food because we know that it is one of the components that customers love most [about Ikea] and it complements, indeed is core, to the idea of a meeting place.”

Unlike Sainsbury’s and Asda, Morrisons is looking to focus more on its own brand with its Market Kitchen format. The grocer now boasts 14 Market Kitchens around the UK, with a further 31 planned for the remainder of this year and 2023. 

A spokeswoman for Morrisons says that, while it does offer sit-down dining, the concept is also geared towards more food-to-go and takeaway customers.

The Market Street concept sits within a wider offering of own-brand cafes, third-party Brew coffee shops and in-store hot-food counters – an increasingly diminishing proposition in the wider supermarket sector. 

“As a food-making business, we are always listening to our customers to ensure we have the right offer across our store estate,” she says, indicating that customers most value choice when it comes to in-store dining.  

With grocers experimenting with own-brand versus third-party in-store dining options, Retail Economics’ Lim sees more of a future for these retailers in the takeaway space.

“It’s a relatively new income stream for grocers that doesn’t necessarily cannibalise their existing sales base to grow into different parts of the market.”

Using Sainsbury’s as an example, Lim says grocers should look to offer customers multiple different takeaway options from dark kitchens, which would be a niche in the growing takeaway market. 

“You could deliver multiple cuisines to one customer, depending on how the model is set up,” he says.

“If you get the right collection of brands together, then you could offer one family takeaway meal consisting of a chicken chow mein, a curry, multiple cuisines within the same order. I think that’s quite an interesting concept because it doesn’t really exist at the moment.”

Experience points

Much like hospitality, consumer spending in the leisure sector has also come roaring back post-Covid. So-called competitive socialising in particular has seen a strong post-pandemic resurgence, with operators like Flight Club, Puttshack and even paintball venues snapping up disused retail spaces to accommodate surging numbers of customers looking to socialise with friends. 

After nearly two years of hibernation, retailers have also begun to reopen their in-store experiences from Waitrose’s cooking classes to Hotel Chocolat’s “bean-to-bar” chocolate-making experience. 

While Hotel Chocolat had been looking to expand its experience offerings pre-Covid, chief executive Angus Thirlwell says the pandemic has actually accelerated that strategy. 

“With customers wanting to have more in-person experiences, we’re looking at expanding more stores to connect our digital and bricks-and-mortar customers”

Angus Thirlwell, Hotel Chocolat

“Our store expansion programme has actually begun to accelerate in a stronger way than I could have predicted during the pandemic,” he says.

Hotel Chocolat outlet cafe interior

Hotel Chocolat was expanding its offerings before the pandemic to include cafes and at-home products

“With customers wanting to have more in-person experiences, combined with the success of our Velvetiser and in-home cafeteria products, we’re looking at expanding more stores to connect our digital and bricks-and-mortar customers.”

Thirlwell says Hotel Chocolat will open a new format “store of the future” in the coming months. He calls it a “blank canvas, where we can implement all we’ve learned as a digitally led business during the pandemic and figure out how that interplays with the physical space in the best possible way – through categories, teams, technology, leisure, all of the assets that we have”.

For fast-fashion giant Primark, offering customers an experience doesn’t require hands-on cooking classes or all-you-can-eat chocolate. It’s more about offering customers access to “a brand they love” in new ways. 

The retailer’s 130-seat Tasty by Greggs cafe – the largest Greggs location in the world – offers customers a range of the baker’s best-loved products alongside a refillable coffee cart. To celebrate the opening, Primark and Greggs also collaborated on a limited-edition 11-item clothing range. 

The fast-fashion giant has previously opened a Disney Cafe in Birmingham and a Friends-themed Central Perk Cafe concept in its Manchester store. 

Primark director of new business development Tim Kelly says: “Greggs and Primark are both much-loved and iconic UK high street brands, each with a loyal and shared fanbase, so when we were exploring the perfect partner to add to our food-and-beverage offering in our flagship Birmingham store, Greggs seemed like the perfect match.

“We’re continuously on the lookout to put Greggs formats anywhere where there are lots of people away from home”

Roger Whiteside, Greggs

“We want to create spaces and destinations that reflect the social nature of shopping and look to create experiences that complement and enhance this experience, whether that’s getting your nails done in one of our beauty salons, a fresh haircut at Smokey Barbers or a place you can recharge and relax with friends and enjoy a coffee or some lunch.”

Primark Disney cafe

Primark also has a Disney cafe in its Birmingham flagship

The left-field collaboration has also benefited Greggs. “We’re continuously on the lookout to put Greggs shops and cafe formats anywhere where there are lots of people away from home,” says chief executive Roger Whiteside.

“With the Primark cafe, people are going to be walking around this store and want some food on the go but they don’t want to leave Primark, and we wanted to be offering that service. 

“We’d love to open in more Primarks, in more Tescos, in more Asdas and anywhere else that’s busy and needs a food-on-the go offer”.

Whether it’s luring customers back into stores post-Covid, tapping into the re-emerging food-to-go market or continuing to take advantage of the popularity of delivery, retailers across categories are exploring in-store dining.

While the opportunities are almost limitless, the potential rewards are very lucrative. 

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