Compared to other retail verticals, the grocery sector fared relatively well in 2020 from a revenue standpoint.
After all, consumers never stopped needing food and essential personal care items sold in grocery stores. Grocers also found themselves in the court of public opinion over frustrating out-of-stocks and other inventory issues. The amount of warp-speed innovation that organizations have been required to take on in response to these dynamics has exposed significant gaps in merchandising capabilities.
Though the demand for grocery items hasn’t wavered, the evolution of consumer behavior in response to the pandemic has made category managers’ roles even more complex. A survey of fast-moving consumer goods (FMCG) retail executives recently highlighted three key roadblocks that retailers face in adjusting to the new normal, specifically related to the reliability of data, the integration of needed insights for profitable decision making, and the agility of the supply chain.
1. Decisions for category planning are hindered by unreliable data
Inventory optimization was a top priority for retailers through COVID-19, as indicated by 95% of FMCG retailers surveyed. Maintaining stock of desired products was key, but moving forward, customer-centric assortment optimization will be even more critical.
In the early days of initial lockdown, consumers shifted into overdrive in their grocery purchasing, filling their baskets with products that might have provided a sense of safety and preparedness. The uncertainty of the situation prompted shoppers to stock up in a panic. The products that mattered to a consumer in years past suddenly didn’t as they tried new brands out of necessity, or the frequency at which they were purchased changed. But how could retailers have known? Through real-time data.
Optimizing product assortments in response to how consumer behavior and product preferences evolve will only be possible with access to data that tells an accurate story. Eighty-one percent of FMCG retail executives, however, have indicated that their ability to make merchandising decisions to improve category planning is limited by unreliable data.
To remedy this, retailers must gain access to the reliable data they need, investing as required in AI-powered technology to expedite merchandising recommendations.
2. Where insights do exist, there’s limited system integration – or worse, none at all Harnessing reliable data is the first step to category-planning improvements. Then comes access to the valuable insights gained from that data. Analytics are best utilized when they take into account all associated systems and processes, but this is another area where retailers find a roadblock.
Fifty-eight percent of FMCG retailers say they have no integration, or only partial integration, of consumer insights across merchandising processes and systems. That’s problematic when you consider missed revenue opportunities that would have been more obvious with shared access to relevant data. Assortments that reflect current shopper behavior hinge on having the most relevant insights available, and those are only leveraged when the systems and processes talk to each other.
Even with a return to normal, consumer demands will continue to shift. To protect from future disruption, integration is needed. Many retailers already have this initiative in motion, with 55% of surveyed FMCG retailers saying they plan to connect category and merchandising plans with the supply chain within two years’ time. This lends itself well to the exploration of our final roadblock: the agility of the supply chain.
3. Supply chains are incapable of supporting the desired frequency of category resets
Grocers see the benefit of category resets for improving the performance of those items, and wish to take on twice as many annual category resets for this reason. Unfortunately, the hope of this ideal scenario is diminished when you consider that 89% of FMCG retail executives say their supply chains cannot adapt quickly enough to support more frequent resets.
What is the reason for a sluggish supply chain? It should be no surprise that supply chain agility is reduced by presence of silos. Silos cause missteps, miscommunication and missed opportunities, especially in the case of category resets. Breaking down these silos, then, is a huge opportunity to boost supply chain agility, and thus, category planning and performance.
The “new normal” necessitates an optimized and connected retail value chain
Now that we’re past the one-year mark of the disruption that began last March, we have a lot of reasons to be hopeful for the future. But for organizations coming to terms with their existing category planning capabilities, simply hoping for improvement will only get them so far.
Instead, by embracing real-time analytics, integrating systems and breaking down supply chain silos, grocery retailers will be able to improve their category planning and assortment processes for whatever the future may hold.
Gina Hargrave serves as head of category planning at Symphony RetailAI.