Do indie grocers need a big tech upgrade to compete with chains for customers?
Larger supermarket operators are taking the incremental cash they made from much higher sales volumes during the pandemic and investing it in a myriad of technologies, including micro fulfillment centers, personalization systems, analytics and more. Community-based retailers, working with their wholesaler partners, need to make similar investments in order to stay competitive in the coming years.
That’s the message that attendees from last week’s National Grocers Association meeting in Las Vegas heard loud and clear from speakers.
In a session titled “Start with the Customer and Work Backwards,” Dave Wendland, vice president – strategic relations at Hamacher Resource Group and RetailWire BrainTrust member, said independent grocers need to deploy new technology to understand customers as individuals. They must engage with shoppers wherever and whenever they want and on their own terms because the buying journey has become splintered with consumers using a combination of digital, physical and hybrid channels to learn about, shop for and buy products.
To take advantage of trends accelerated during the pandemic, grocers need to redefine their core values and invest in digital and analytics. Mr. Wendland suggested personalization and other systems that strengthen relationships, solutions that focus on the marketing of fresh categories and automation tools.
An example of a technology that is widely used by larger chains and has yet to penetrate smaller retailers is demand forecasting. A session titled “Demystifying Demand Forecasting in Grocery: Strategies to Address the Unique Challenges,” highlighted three critical demand forecasting issues facing independents that are leading to unprecedented top and bottom line erosion. The first is a dramatic increase in out-of-stocks, which were between five and 10 percent of items pre-COVID and are now hovering about 15 percent. Next is waste, which now accounts for about 30 percent of all food. Last is the cost of excess inventory, which is estimated to be about 30 percent of margin.
Traditional demand forecasting is simply not effective in addressing changing consumer behavior, which has led to unpredictable and volatile demand, new convenience requirements and price sensitivity, said Amit Bhardwaj, vice president of CX & product consulting at Algonomy. Grocery retailers need a framework for agile and intelligent demand planning that includes capturing a wider variety of data points, tailoring forecasts based on a more granular level of information by category and store and adopting the forecast to react to market circumstances with minimal manual intervention.
DISCUSSION QUESTIONS: What technology solutions are most critical for independent supermarket operators to deploy in 2022? What role do wholesalers have to play in helping independent grocers narrow the technology gap with large self-distributing chains?