According to a UK based report by Progressive Grocer, titled the 84th Annual Report of the Grocery Industry, only 12.2% of grocers have a “fully integrated strategy” for omnichannel retail. Whilst the American grocery market is quite different from that in the UK, this is interesting because omnichannel retail is on the rise in the majority of sectors. The American grocery industry being behind the game is perplexing.
It’s fair to say that consumers, over the last few years, have been very quick to adopt new retail channels and it’s an increasing challenge for traditional grocers to develop their capabilities fast enough. However, it does look as though things are getting moving. The Progressive Grocer report showed that 34.1% of grocers do have a strategy which they are implementing, and 36.6% are beginning to formulate these plans. The biggest problem these grocers face is how to manage supply when so many more channels are in the mix.
Demand Forecasting for Grocers
Grocers have some unique problems when it comes to demand planning. The biggest problems, of course, come with fresh food. The margin for error is tiny. Grocers need to be able to assess and amend inventory levels constantly in order to make profits, not losses.
This has always been a problem, but it comes right under the spotlight when grocers try to take an omnichannel approach. Getting it wrong impacts the customer, which us Brits are all too familiar with when our weekly online shop is riddled with substitutions.
What is particularly important is understanding the nature of an omnichannel consumer. Being able to predict them is the primary challenge. Grocers need to understand why consumers will be moving across various different retail channels, and what they are doing at each stage.
Focusing on the Important Things
It makes sense, when attempting to forecast demand in omnichannel groceries, to determine which products make up the lion’s share online. These will differ from in physical stores.
This needs to be combined with real-time visibility of the grocer’s inventory so that logistics can match the demand. This also needs to be paired with a very clear substitution policy and strategy so that customer service is maintained. Again, it involves really understanding the customer.
Lastly, grocery retailers need to decide whether to attempt to fulfil online orders through picking from physical stores, or whether dedicated warehouses are set up for this alone. Whichever is decided upon will impact the store, as online orders typically follow a different pattern to physical store-based purchases. The demand forecasts, therefore, need to be viewed separately. That’s before realising that the volume of data is astronomical.
Data, Inventory, Workforce and Demand
It’s also about the personnel. According to the report, the store workforces alone account for 14% of sales. The customer does their own picking. In online channels, you need pickers. Then you need to forecast when you need the pickers as getting that wrong will hit the profits.
It’s highly complex but that doesn’t mean it can be avoided. If grocery stores are to keep pace with the expectations of consumers, they have to rise to the challenge.