Viewpoint: Grocery retailers need digital to differentiate
Traditionally perishables in grocery stores comprise up to 50 percent of sales and more than 60 percent of profits. The concept of maintaining a robust fresh foods department may seem like a simple box to check, but the grocery business is complex, and managing products that have an expiration date requires a very specific toolset that many retailers, especially SMBs, do not have.
The biggest challenges that grocery retailers face is excess inventory and profitability. Since grocers want to be able to keep their margins low by spending less, while delivering quality products, they are faced with a dilemma. More labor means higher costs, but without the additional attention to fresh foods, products will not be up to standards and as a result they will sabotage their own efforts. Grocery retailers should leverage digital resources to more easily monitor, plan and execute their efforts.
Transforming with Technology
A few lessons that the grocery industry can immediately put into action, include
• Go Digital: It’s critical that grocery free themselves from the constraints of doing everything manually. By digitizing everything, and using data to drive strategy and automate efforts, grocers will be better equipped to understand the complexities of the market and address them accordingly. Automation of simple tasks can help ensure manpower is used in more critical roles rather than routine monitoring and conditions management. As an example, electronic sensors can go a long way to ensuring the store is running smoothly, without devoting additional staff and therefore spending more money.
• Be Driven by Data: By having a holistic view of the store, understanding what products are most popular and what are consistently undersold, grocers can better manage the fresh foods landscape. They can more easily determine which products are in high demand and ensure that these products are being used beyond just the produce section. For example, fresh-prepared food offerings have mostly been determined based on availability of ingredients, what was leftover from the produce section and what items are likely to perish. It was more of a “take what I can get” strategy instead of one based in data and demand. Instead, today’s retailers devise their fresh-prepared foods assortment based on the most popular products being sold in other aisles of the store. With the availability of data and analytics today, it’s imperative that retailers use strategic reasoning for merchandising decisions.
• Demand Transparency: Reward the truth and be prepared to re-evaluate how the entire business is conducted. Many employees will have to learn how to make data-driven decisions. This will need to be done over time in phases, but by easing the business into a different management environment, the company can offer more appealing fresh food.
Stores must differentiate from online by taking advantage of consumer senses drawing consumers into the store, and using experiences to convert the sale. Whole Foods is a retailer that excels at this by providing in-store events like wine tastings, and providing local product representatives and vendors throughout the store to offer expert opinions, insights into the products and recommendations. By providing offerings that aren’t possible online, brick-and-mortar locations create unique brand loyalty that gives them a competitive advantage over pure play online retailers.