Business The current business environment requires grocers and retailers to...

The current business environment requires grocers and retailers to become fast users

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Francois Chaubard is the CEO of Focal Systemsa deep learning computer vision company focused on automating brick and mortar retail.

Recent years have been marked by unprecedented uncertainty for all types of retailers: the rapid evolution of the global pandemic and the resulting policy mandates; supply chain shrinkage; labor demand and shortage; working from home leads to a desire for work-life balance; and 40-year record inflation.

2021 was a good one or at least better year for most grocers and retailers, but current headwinds will require new strategic thinking and resources to navigate the fourth quarter of 2022 and into the year ahead.

Looking ahead, grocers and retailers must keep customer sentiment as a top priority. Customers face tough decisions when it comes to discretionary spending, which presents opportunities for retailers to drive greater loyalty and increase market share if they can quickly adapt their physical and online storefronts.

Let’s diagnose what’s going on with retailers and what they can do to make sure they’re on the right track to face the tough road ahead.

The symptoms

Two major problems have haunted big-box retailers in recent months, to the point where their inventories have been hammered (by May, Target and Walmart had fallen. 42% and 25% of their all-time highrespectively).

The first is gross margin compression. Retailers struggled to update their prices quickly enough to keep up with inflation hitting their cost of goods sold (COGS), pinching margins almost across the board as nearly everything has steadily increased. The difficult labor market also played a role in this. Without enough in-store employees, companies couldn’t update price tags as often or as quickly as they’d like, so by the time they could implement the new, overpriced prices, they’d already taken a hit.

The other problem has been massive stock spikes, leaving some retailers with staggering amounts of items that have either missed their normal demand window or just aren’t moving at the right pace. The same Motley Fool article linked above also reported that Target and Walmart had closed the past quarters with $15.1 billion and $61.2 billion worth of inventory, respectively.

Cause

What caused this loss of margin and over-buying? For the latter, part was out of the hands of the business community. The backup supply chain has made it difficult to time products correctly, as shipping containers can take an extra month or more to arrive, resulting in fewer goods purchased and more in a warehouse. Or, in the case of seasonal items, shipping is so far behind that the items can’t even hit the shelves.

But other factors could have controlled retailers. Many use the perpetual inventory method, which uses inbound inventory and sales to estimate how many units are available for sale at any given time. But this method is flawed, relying on the data integrity of multiple systems and assuming there are no interruptions or delays, and can easily lead to incorrect inventory counts even during “normal” times. Thus, during disruptions, these retailers did not have an accurate picture of what was actually in their stores. As a result, they were unable to run a proper demand-pull supply chain. And with a limited amount of labor, good inventory management sometimes fell out of the blue, and stockpiling products didn’t happen as quickly as they should to sell on time.

Meanwhile, margin compression is a symptom of a systemic problem at many retailers, who are notoriously slow to update technology systems and processes. Even big names in the industry are still using legacy software that is non-reactive and unable to adapt – something that became especially necessary during the disruptions that started in 2020. visibility in the retailer’s system.

The inability of retailers to streamline and optimize their ordering and inventory management processes is how you end up in the situation many find themselves in today.

Recommended treatment

Sure, there are short-term solutions that retailers can take in some situations. goal is sale much of its overstock at a big discount, which will hurt short-term profits (compress margins even further), but make room in their stores and warehouses for the next wave of seasonal products. Supply chains seem to be more of a known quantity right now and a little less volatile (even if they’re still slower than ideal).

But without addressing the root causes listed above, retailers and grocers tend to find themselves in a similarly difficult situation the next time we get a curveball in our way. Technology investments and upgrades are most effective when deployed proactively, rather than putting out an already raging fire. Retailers need to monitor their technology systems to see where their inventory management processes fall short. Supermarket systems in particular (but not exclusively) have already had success in implementation AI camera systems who monitor exhausted, missing or misplaced products on the shelves. These systems are some of the latest solutions to speed up the real-time ordering, stocking and organization of products to ensure potential sales aren’t missed by a product sitting in the back when its shelf space is empty. (Full disclosure: My company, like many others, offers automated solutions for retailers.)

Speed ​​has proven to be a critical factor – shipping time, time to shelves, time to update prices on the floor and in systems – so automating and integrating the various processes introduced into the inventory management system is the most effective way for retailers and grocers to remain agile and flexible. The most critical systems and processes to innovate are employee task prioritization, hourly sales data, and adaptive merchandising. The goal is to have a system and set of tools that can meet the demands of today’s FMCG retail world – simply put, investing in platforms that produce accurate data in real time.

When the next disruption comes, companies that have transformed their technology can more easily adapt, protect their margins, and perhaps take significant market share from their competitors.


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Shreya Christinahttps://ukbusinessupdates.com
Shreya has been with ukbusinessupdates.com for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider ukbusinessupdates.com team, Shreya seeks to understand an audience before creating memorable, persuasive copy.

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