Grocery retailers have had a wild ride last year as the industry struggles to please shoppers during turbulent times. Pandemics refuse to go away. Inflation is above its highest level in more than 40 years. Supply chain chaos continues. The same goes for labor shortages. All of these factors and more have had an impact on the food industry.
Here are four trends impacting the state of grocery retail, including technology that is helping the industry improve.
Rising costs drive grocers to increase efficiency and innovate
According to the U.S. Department of Labor, inflation in the U.S. is 6.5 percent, though below 8.5 percent. We haven’t experienced inflation this high since 1981, when it averaged 10.3%.
In response to rising prices, consumers are changing their shopping habits. In fact, 82% of shoppers surveyed by Morning Consult said they are trying to save money on groceries.
Retailers are also feeling the pressure of inflation, and they can compress their operating costs a bit so they can have more influence and latitude over pricing. Many retailers are leveraging automation and AI-driven insights to identify ways to optimize supply chains and reduce costs.
Grocery Omnichannel Still in the Fast Lane
At the height of the pandemic in 2020, grocers underwent a major, seemingly overnight shift to online shopping as 20% to 30% of their business moved to this channel.
Most recently, the Brick Meets Click/Mercatus Grocery Shopping Survey found that total U.S. online grocery sales fell 3% year-over-year in September, but online grocery sales rose nearly 4% in the third quarter of 2022 compared to 2021, reaching . $24.1 billion. Despite the adoption of home delivery by grocery stores, many U.S. consumers still prefer to shop in person.
As a result, retailers are doing everything they can to unify their e-commerce and brick-and-mortar operations to reduce costs and avoid out-of-stock situations, as well as provide a better customer experience.
Employees are out of stock—AI can help
One of the biggest reasons retailers run out of stock is lack of workforce support. As of October 31, 2022, the AmCham reported that 3.4 million fewer Americans were in the labor force compared to February 2020.
Retailers continue to struggle to hire enough people to carry out order picking at their distribution centers. And during peak seasons, such as the recent fourth-quarter holidays, when they can’t get what they want from the grocery store, that inevitably impacts the customer experience.
AI-powered workload forecasting can factor in external and internal workforce drivers to forecast potential peaks and fluctuations during the week, day, and year. Plus, it can help retailers plan tasks more accurately—whether it’s delivery forecasts for shelf work, or sales and foot traffic for customer service tasks. Retailers can then plan workforce shifts that match each store’s expected daily workload.
Gaining insight into the flow of goods in stores and distribution centers using AI insights can help minimize the manual labor associated with managing inventory. It can also help improve inventory deployment, which not only reduces sales and inventory losses, but also reduces fluctuations in labor availability in the supply network.
Auto-replenishment should become a staple
The efficiency of a retailer’s replenishment operation primarily affects profitability. The accuracy and effectiveness of store ordering affects sales through shelf availability and impacts handling, storage and waste costs in stores and other parts of the supply chain.
Accurate item-level control is nearly impossible with manual store ordering. Even so, nearly half of retailers manage inventory manually, so they don’t know how much stock each store has.
However, an auto-replenishment system continuously monitors inventory, sales, and demand. Human errors such as forgetting to place an order are eliminated. In addition, a good, reliable replenishment system will take into account forecast changes in demand and adjust replenishment orders accordingly, thereby improving service levels and sales while improving customer satisfaction.
All in all, with inflation and costs rising, labor forces declining and consumers shopping in-store and online, grocers will need to fulfill some high-volume orders. Fortunately, technology can help improve product replenishment efficiency and supply chain efficiency, both of which lead to more revenue.
Mikko Kärkkäinen is CEO and co-founder of RELEX Solutions, a provider of unified supply chain and retail planning solutions.
