The three obstacles that are blocking grocers on their path to merchandising success

This article is brought to you by Retail Technology Review: The three obstacles that are blocking grocers on their path to merchandising success.

By Mark Croxton, VP Customer Support, Symphony RetailAI.

Most of us are a little tired of the phrase ‘new normal’ but it’s a concept that isn’t going away any time soon. Whether or not life will ever feel or look as it did before the pandemic, it’s clear that adjustment remains the order of the day for businesses.

Compared to other areas of retail, the grocery sector fared relatively well in 2020 from a revenue standpoint. Consumers never stopped needing food and essential personal care items sold in grocery stores. Grocers also found themselves in the headlines over frustrating out-of-stocks and other inventory issues as customers stockpiled items. The speed with which organisations needed to innovate 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 behaviour in response to the pandemic has made category managers’ roles even more complex. A survey of retail executives highlighted three obstacles that retailers must pass in order to adjust  to the new normal. Specifically, these relate to the reliability of data, the integration of the insight needed for profitable decision making, and the agility of the supply chain. 

1. Unreliable data is hindering decision-making for category planning

Inventory optimisation was a top priority for retailers during COVID-19, as indicated by 95% of FMCG retailers surveyed. Maintaining stocks of desired products was key, but moving forward, customer-centric assortment optimisation will be even more critical.

In the early days of lockdown, the uncertainty of the situation prompted shoppers to stock up in a panic. Consumers shifted into overdrive in their grocery purchasing, filling their baskets with products that could provide a sense of safety and preparedness. At the same time, products that mattered to a consumer in years past suddenly lost their importance, as people tried new brands out of necessity, or changed the frequency of their purchases. But how could retailers have known? The only way would have been through use of real-time data. 

Optimising product assortments in response to the way in which consumer behaviour and product preferences evolve will only be possible with access to data that tells an accurate story. 81% of 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. Next comes access to the valuable insights gained from that data. Analytics are best used when they take into account all associated systems and processes, but this is another area where retailers find a roadblock. 58% of retailers say they have no integration, or only partial integration, of consumer insights across merchandising processes and systems. That causes a problem when revenue opportunities are missed that could have been spotted with shared access to relevant data. Assortments that reflect current shopper behaviour are dependent on the availability of the most relevant insights, and those can only be applied when systems and processes talk to each other. 

Even with a return towards more “normal” shopping habits, 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 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 obstacle: the agility of the supply chain. 

3. Supply chains are incapable of supporting the new frequency of category resets 

As indicated by retail executives in 2020, grocers intend to take on twice as many annual category resets than pre-pandemic in order to improve performance of individual items. Unfortunately, this strategy becomes problematic when you consider that 89% of retail executives say their supply chains cannot adapt quickly enough to support more frequent resets.

What is the reason for these sluggish supply chains? One major hindrance to supply chain agility is the 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 optimised and connected retail value chain 

As the disruption of March 2020 recedes further into the past, we have many reasons to be hopeful for the future. For retailers coming to terms with their existing category planning capabilities, however, 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.