The Future of Grocery Retail: How to Become Omni-Channel Grocery Champions

How do you see the role of dark stores or micro-fulfillment centers in grocers’ fulfillment strategies?

I think it depends on the grocery store’s footprint as well as supply chain efficiency. It depends on how many stores a grocer has, what their supply chain and fulfillment are like. So, for example, if a grocer has a huge saturation of stores, it is easier to pick the items from those stores than setting up a dark store.

On the other hand, I am sure we all had the experience with the carts in the stores where store employees are picking multiple orders, and it looks like a fulfillment center. Many times, customers in the store get frustrated with that. So, from that customer perspective, I like the idea of the dark store. It may not just be as financially possible for everybody, especially if they already have a large footprint of stores. In that case, it makes more sense for them to fulfill from the stores instead of duplicating the inventory in a dark store.

If the store density isn’t very strong, I think a dark store can be a good mechanism to fulfill specific geography. Today, grocery retailers doing delivery know where their deliveries are. If 60% of their deliveries are within 3 zip codes and if their closest store is 20 miles away, setting up a dark store can make a lot of sense in there.

How important do you think it is to make granular, data-driven forecasts in the omni-channel grocery era?

Data-driven forecasts give retailers a competitive advantage. However, grocers need to expand the time of their forecasts to make more accurate forecasts and meet customer expectations. Today grocers need to take into account the competitive activity, promotions, local events, all of those different things. And I think local events are an amazing thing if the forecasting tools can account for differences regionally. The more inputs grocers have, the better and robust the forecasts will be.

What do you think is the most effective way for grocery retailers to improve availability? 

I think grocers need to manage assortment differently for in-store vs. online. High turn, perishable items maybe things that are important for people to touch and feel, and these should be in store, for example. There can be a broader assortment on online channels. Also a good demand planning and forecasting, powerful inventory management systems can be very helpful in improving the availability. This should be the starting point.

But as a stopgap, we talked about substitution logic.  As a consumer, if a grocery store is out of the item I wanted, I’d prefer them not just telling me they’re out of it. I’d rather expect them to make some effort, take a step toward me and say, “I’m sorry, we are out of it, but we’ll give you this one at the same price.”. I’m good with that, because it shows that they care, and they don’t make me go to some other store. Substitution logic is hard, and it builds over time, but it can be very powerful.  

What do you see as the best way for grocers to reduce lost sales and increase customer lifetime value in such a competitive environment?

I’d say excellent substitution logic and excellent customer communication skills. Building a good customer relationship is critical in this new omni-channel retail era. I also think the method of communication is very important, and it does help with reducing lost sales and increasing lifetime value.

What do you think will be key trends shaping the grocery industry in the coming years?

How we grocery shop and what we grocery shop for has changed, and I think the pace of change will continue. We’ll see modern, healthier food. We’ll witness growth in fresh food and in pick up. Consumers are getting more thoughtful about healthier eating, especially younger consumers. There was a phase where consumers went through: ‘All I want is convenience in my food’ which led to a lot of highly processed food. Now I think they want convenience in how they shop, not in what they are eating.

What do you think should be the top 3 inventory planning strategies for grocery retailers who want to become the omni-channel grocery champions of tomorrow?

1. Align metrics with company strategy and goals.

Grocery retailers need to align their metrics with their strategy and goals. For so many retailers, inventory goals are based on historical processes. They measure in stock, inventory turn, inventory dollars -just very traditional retail inventory measurements. I think they should start over and ask the question of ‘What are our company’s financial goals?’. And then, they need to align their, inventory, in-stock, profits, sales and customer satisfaction to their business strategy.

In the past, there was a warehouse and a store. Now there is a warehouse and a store that is a warehouse, if you’re doing fulfillment from there. There are also online orders carrying incredible consumer data. In the past, no such data was available. A grocer might have thought they lost a sale, but it was more of a guessing game.

Today when a customer places an online order, they get a recap of the items they’ll get or the substitution items. And retailers have access to this very valuable information too. They can see what their consumers are looking for, what they are purchasing, the out-of-stocks etc. This is a whole stream of data and analytics, and retailers can use it for better inventory planning and more valuable experiences for their shoppers.

2. Leverage technology.

Traditional metrics like in-stock, inventory turn, inventory dollars can no longer produce the desired financial or customer retention results. Today, grocers need to leverage the technology and tools to do robust demand forecasting, better inventory positioning, and better fulfillment.

3. Simplify and remove tension in the supply chain.

Lastly, to meet these goals, I would say retailers need to simplify and remove tension. And I think it is a very different way of thinking about inventory, replenishment and forecasting.

Finally, how do you think Invent Analytics can help grocery-retailers to win in the new omni-channel world?

Consumers have power; they have choice…in both the WHAT they shop for and the HOW they shop for it. Add to that they WHERE they buy and it gets complex quickly. While consumers have habits, they don’t conform to a predictable behavior all the time. Given that, the use of AI to build as much pattern-based learning to assist in driving the business is necessary. Invent Analytics has been modernizing allocation, inventory and forecasting through AI for years and now has tools to help in the omni-world…because we’re not going back! Consumers are in charge and have the power.

Thank you Michelle.