Omnichannel Grocery Requires Rethinking Demand Forecasting
Consumers desire to shop more ways than ever. As a result, omnichannel is on the rise.
More than half of U.S. grocers now offer omnichannel services, according to Progressive Grocer’s 84th Annual Report of the Grocery Industry, published this past April. But only 12.2 percent of grocers have a “fully integrated strategy” for omnichannel retail, which is necessary for today’s shoppers.
“Consumers are migrating to new selling channels as fast as digital players can make them, and it’s a challenge for traditional grocers to keep up and build out their capabilities quickly enough,” says Brian Baker, managing director in the products practice at Accenture, a global professional services company incorporated in Dublin.
Times are changing, though. Some 34.1 percent of grocers said that they have a strategy they’re executing, and slightly more (36.6 percent) said that they’re just getting started.
One of the most daunting parts of starting and executing an omnichannel strategy, however, is maintaining proper supply, no matter what the channel. Grocers previously had only their brick-and-mortar stores to take into account, but now many more channels must be considered.
Where Demand Lies
Johanna Småros, co-founder and CMO of RELEX Solutions, a Helsinki, Finland-based retail-planning company with U.S. headquarters in Atlanta, notes how demand forecasting in grocery, especially fresh food, is tricky due to the need to examine at a granular level — store-SKU-day — sometimes even within the day.
“This level of detail is needed to accurately match available stock with demand that fluctuates daily throughout the week to ensure good product availability and minimize costly waste,” she says, noting that shelf life needs to be added to the equation for the freshest products, such as meat and fish, and the impact of promotions and price changes must also be factored in.
She continues: “Omnichannel accentuates these challenges, as the consequences of poor product availability are more immediately visible to the online consumer in the form of the ordered products having to be replaced with substitutions. Online consumers are also highly sensitive to ‘best-before’ dates and freshness of products delivered.”
Before grocers can start understanding demand forecasting in an omnichannel environment, they first must tackle the greatest challenge: understanding the new, omnichannel consumer.
“In order to build the seamless omnichannel experiences that today’s consumers demand, retailers and FMCG marketers must first understand how and why shoppers engage across all channels and platforms,” says Sneha Uppal, VP of advanced analytics with Schaumburg, Ill.-based Nielsen. “Without this core understanding, a retailer will never gain a clear view into who their true competitive set may be. In a world where a one-size-fits-all approach will not work, this is a must-solve issue.”