Despite the pandemic putting limitations on most human activity around the world, Spring 2020 gave nearly everyone an opportunity to try new things. Whether it was home-schooling for the first time, virtual yoga or sewing facemasks, we all learned a new skill or two.
For many, ordering groceries online for pick-up or delivery was another new skill. In fact, so many people tried online grocery ordering in 2020 that sales hit a milestone that wasn’t projected to come until 2025.
But, the experience wasn’t a success for everyone. A flood of new users, combined with increased use by current users, overloaded ordering, pick-up and delivery systems.
Consumers found themselves having to manage a variety of issues: virtual lines, difficulty navigating websites, out-of-stocks (often not until check-out), the lack of acceptable substitutes, days-long lead times for fulfillment slots, delays at curbside pick-up and received orders thatoften included less-than-fresh selections, short expiration dates, poor substitutions and missing or wrong items.
Retailers are moving rapidly to shore-up their online order and fulfillment infrastructure: increasing bandwidth, realigning and repurposing stores to facilitate fulfillment, hiring additional employees, reconfiguring parking lots and curbside processes and partnering to expand home delivery capacity.
Equally important are initiatives to eliminate out-of-stocks by better matching demand to supply. This is where food companies can play a critical role in helping their retail partners build a positive online experience and drive profitable growth. Five key areas of support stand out.
1. Leverage data, insights, and advanced predictive analytics to forecast true demand scenarios at a granular level
The size, scope, and dynamic nature of the factors needed to create a robust prediction of demand are more than can be captured in spreadsheets or manual manipulation. Now is the time for food brands to leverage big data analytic platforms, machine learning, artificial intelligence and agile forecasting models.
These technologies quickly and efficiently incorporate a wide array of disparate demand signals, continuously self-improve, and generate significantly higher-quality, more reliable forecasts in minutes.
Importantly, AI engines recognize unprecedented events like COVID-19 as an anomaly, but perpetually and rapidly absorb new data sets from internal and external sources, consider complex events that impact buyer psychology and consumer sentiment, enhance and validate modelling techniques to reflect COVID impacts, perform fine-grained analysis at scale, and quickly calculate alternative true demand scenarios, unconstrained by the impact of lost sales due to out-of-stocks, retailer-imposed purchase limits and other artificial sales suppressors.
It’s true that COVID-19 blew up the predictions of even the most sophisticated forecasting algorithms. They were built to minimize inventory and improve supply chain efficiency in a world of relatively consistent sell-through. They could not foresee the unprecedented consumer demand surges and channel shifts that occurred during the first several weeks of the pandemic. That said, the real-time learning and self-improving algorithms being created throughout the pandemic period are permanently retained; by documenting disruptions within the forecasting platform, you begin to build a disruption database to draw on the next time a disruption occurs.
Foundational to building a more robust forecast for both in-store and online demand is capturing more granular sales and purchase behavior data through each channel and delivery format, at the store level (in-store vs. online, curbside vs. delivery). Despite availability of this information, many food brands aren’t taking full advantage of the data ecommerce sites can give them, such as digital shelf information, clickstream patterns, order/pick-up routines, panel data, shopper preferences and buying patterns, according to reports.
Combined with transaction and loyalty card data to understand basket composition and size, day of week, time of day, type of packaging, fresh/center store interaction, average number of categories shopped, demographics, etc., food companies can create competitive advantage for themselves and their retailers.
2. Proactively optimize your product portfolio
Now is the time to identify and focus operations on delivering the core items within your product portfolio that are in greatest demand and will maximize shopper satisfaction. This optimized assortment may be different for online and in-store shoppers; be sure to look at each demand stream independently. And for both it will most likely be different than it was pre-pandemic due to changes in shopping habits and practices, the profile of new online shopping users, and consumer sentiment regarding the outlook for post-COVID-19 recovery and the economy.
Be proactive. Bring recommendations to your retailers and don’t wait for them to delist items. Research shows that up to 17% of items within a category are duplicative. Identifying “which 17%” is critical, and the answer will be different pre, during, and post COVID-19.
One consequence of the massive out-of-stocks driven by pandemic purchases has been a massive “forced” trial of (previously) second and third tier brands and private labels. Many brand-exclusive buyers have now tried other brands and found them just as acceptable. Historical sales and switching analysis alone won’t fully account for this; trial and repeat metrics from loyalty data, comparing pre-COVID to current, is critical to predicting which brands will “stick” going forward. The goal is to rationalize your SKUs within the context of both your product line and the total category, without negatively impacting the shopper’s perception of choice or your ability to keep product in-stock. Understand the consumer value each SKU brings to the category, how it complements or substitutes for other items shoppers purchase, how it contributes to your retailers’ competitive positioning in the marketplace, as well as how it contributes to your bottom line.
Optimization can also identify need gaps that are not being met, particularly for online shoppers. For example, consumers are now buying two-weeks of groceries per shop; larger size packs may be a better consumer solution as well as more efficient to produce and replenish.• What adjustments can be made to the packaging structure or materials to better facilitate the pick-pack-delivery process of online orders, reassure safety (i.e., zero-touch), or deliver precise portion sizes?• Is there an omnichannel packaging solution that works both online and in-store?• How can you satisfy the increasing demand for foods that boost immunity, address underlying health conditions, and are locally grown/produced?
Assortment optimization is another area where AI and machine learning can add significant value, by considering all the relevant internal and external variables, speeding up the analysis, and making specific recommendations at the store level for both online and in-store assortments.
3. Visibly connect the dots from sell-through to forecast to inventory
Out-of-stocks, even pre-COVID, cost retailers trillions in annual revenue. To solve this, omnichannel inventory visibility and replenishment capabilities must be seamlessly integrated. In December 2019, RSR reported that 36% of retailers named inventory visibility a current challenge; 76% said it was a key area for improvement. The pandemic moved it front-and-center. To help in the midst of the storm, both Instacart and IRI recently made inventory data and analytics available to food brands and retailers.
Building forecasts by channel and store allows food brands to produce and place finished goods inventory as close to the point of fulfillment as possible, within the combined footprint of the food supplier and the retailer.
Linking actual sales plus forecast to available inventory in real time flags when new inventory needs to be ready to meet anticipated demand and triggers rebalancing of existing inventory between locations and/or downstream operations to ensure timely production for an always-in-stock position. It may also spur innovative logistics solutions and partnerships, such as by-passing retailer distribution centers and delivering direct to store or, for wholesalers or multi-brand category manufacturers, direct to consumers on behalf of the retailer.
Physical stores are increasingly becoming localized distribution facilities that allow consumers to choose how they get their groceries (shop in-store, curbside, delivery); some stores (and distribution centers) are being converted to “dark stores” or “sorting centers” dedicated to online order fulfilment. Food brands can collaborate with retailers to understand the evolution of their total store network in the short, mid- and long-term, and consider how that will impact production and distribution plans.
Supplier-retailer collaboration to make real-time inventory status by location visible across the supply chain, including to shoppers as they buy online, will increase satisfaction and loyalty, and help ensure consistent delivery of the freshest, best quality product from source to consumer.
4. Educate shoppers, fulfillment personnel, and algorithms on product selection and substitutions
A key advantage of ecommerce is the ability to provide product information at the point of decision in a way you can’t within a physical store. As the supplier, you know your products better than anyone: taste profiles, nutritional benefits, how to select, store, gauge serving size, and prepare, suggested recipes and pairings, etc. Take full advantage of this.• Position products in the context of meal solutions and suggest complementary items (“pairs well with”)• Provide retailers with as much information as possible, along with high-quality visuals in all forms – packaged, raw, finished dishes, serving applications – to inspire creativity and educate• Make sure descriptions and images are shopper-friendly and searchable• Provide specific substitution recommendations in the event an item is out-of-stock. Not only does this help shoppers complete orders, it makes substitution algorithms smarter• Ensure retailers with AI-powered virtual assistants and live chat have answers to FAQs
Educating order fulfillment personnel is equally important. Develop product-specific training that can be delivered within the retailer’s training infrastructure and accessed digitally in real-time. This is particularly important for produce and other fresh foods, which are lagging in online shopper adoption and have the greatest potential to create online shopping dissatisfaction.
Among those who have used online grocery pickup services, only half include produce in their orders, primarily due to concerns over quality. Selecting as well as or better than they would have done themselves can make or break online shopping satisfaction.
5. Optimize promotions for online shopping
During the early weeks of the pandemic, price and promotion were a distant second to finding and stocking up on essentials. However, as consumers have settled into stay-at-home routines, are feeling the impact of furloughs and unemployment, and are becoming more concerned about the economy, these value triggers will play a more important role in purchase decisions. This is true for both in-store and online shoppers. However, optimizing promotion performance online requires different strategies and tactics.
Using online shopper profiles and purchase behaviors, identify shoppers who are price-sensitive and those who are quality-driven. Focus reduced price promotions on price-sensitive customers and, of course, on products for which inventory and supply is not an issue. In-store promotions, such as secondary displays, signage, and sampling, trigger impulse purchases. How can you inspire similar impulse purchases in the absence of the in-store experience?• Provide retailers with suggestions for complementary items when your product is added to a shopper’s cart;• Help shoppers “find you” in the online shopping portals with the high-impact visuals and helpful content outlined above;• Feature new varieties, seasonal/limited-time only SKUs, value packs, or other new packaging configurations. The ability to test and learn quickly from data lets food brands react and refine with greater agility than traditional in-store promotions.
Anticipating Behavior Change
Whether online grocery shopping maintains its current levels remains to be seen. Some statistics and surveys show a decrease in grocery ecommerce behavior as shelter-in-place restrictions ease, while others note that more than half of consumers will stick with it.
Other factors, such as the pace of economic recovery, will also impact online loyalty. At the start of the pandemic retailers eliminated fees for curbside pick-up, the most popular online fulfillment option. If fees are reinstated, how many will return to in-store? Omnichannel pricing consistency may also drive value perception, especially among families impacted financially. Ultimately, though, it depends on how satisfied shoppers are with their overall online experience.
Food companies that take the lead in these five key areas and work more closely with retail partners will create a more attractive environment for food brands, retailers and the online channel by helping ensure satisfaction, maintain shopper engagement and create profitable growth during 2020 and beyond.
Are Traasdahl is the founder and CEO of Crisp
