3 ways retailers can survive in the age of Amazon

Retail giants like Amazon’s ability to effectively address the ever-changing customer demands has enabled it to make its mark in the market and eventually dominating it.

However, even though it poses a threat to other grocery retail players due to their delivery capabilities and effective customer service, the changes in customer expectations, especially in the last mile of the customer’s shopping journey, present a tremendous opportunity. Grocers willing to adapt their operations to that of the bigger players can see a gradual impact on their profits.

Here are some important methods that grocers can use to capture a larger market share, with greater efficiency and satisfied customers:

Strengthen customer relationships by focusing on customer service

Almost every customer values good customer service, hence it becomes imperative that the grocery stores live up to customer expectations. Small developments in the manner in which grocers deliver and engage with their customers can provide significant results. 

It is important for grocers to provide complete visibility into their orders at all times, meaning that customers can track the delivery from the beginning to the end. Here, customers may be able to make specific results as well as the ability to rate drivers after the products have been dropped off. With fulfillment increasingly becoming an important aspect of customer experience, features such as this become a necessity. 

Leverage brick and mortar setups

Grocers’ physical stores are the biggest advantage over a giant like Amazon, which still does not have a significant brick-and-mortar presence. This can be seen especially for deliveries that require faster turnarounds. 

Even though the larger retail giants have more capital to invest and have a significant amount of experience in the e-commerce field than most grocers, it is still tough to compete with a store that is located near the customer’s home. A physical footprint also aids the grocers to offer their customers options such as in-store pickup or curtsied pick up. 

Scale operations by digitizing the supply chain

Many grocers still use outdated technology for their operations, however, if they want to effectively scale and manage their supply chain, they require a scalable solution that provides a true status on demand. This especially holds true if the grocers are dealing with high delivery volumes. 

Grocers are gradually investing in automation to expedite fulfillments and deliveries. This, in turn, will also enable an increase in profit margins over 5% which is a great margin as the grocery sector has smaller margins and higher volumes. 

As with any disruption, bigger players like Amazon’s entrance into the grocery market brings with it not only a threat but a great opportunity as well. Those that act quickly to implement the latest technologies and strategies both in their stores and throughout their delivery ecosystem will likely find themselves on the path to becoming market leaders and customer favorites.

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The Impact of AI on Grocery Retail

In today’s age, grocery retailers no longer have to make guesses about what customers will buy; they can leverage artificial intelligence (AI) to predict customer shopping patterns and optimize their spending through attractive price and product promotion along with effective inventory management to meet the needs of their customers.

While AI in many forms has been available for several years, the coming few months could mark a tipping point in which the most compelling use cases for the technology will emerge. Grocers need to understand the behavior of the customers browsing through the aisles. If you think about it: while shopping for food, you don’t select random products but instead gather what you need to make whole meals, even if it is only pouring cereal and milk into a bowl for breakfast. Grocery retailers can capitalize on AI by deciding their business goals and then adopting the right technologies to better achieve them.

Here are some of the ways in which technology can impact a mundane chore such as grocery shopping:

Product Discovery

Product displays are often perceived as an art in retail, but AI brings a scientific element that will make grocery displays far more successful. By using the right approach to data analysis, AI can predict what customers would like to see in the product display, based on their purchase history. This ensures that you promote the best mix of products every week, thereby increasing discoverability and sales.

Also, it’s importance lies in being able to avoid overstocks on the wrong items by providing insight around product mixes, revenue, and profit margins, among other possibilities.

Smart Inventory and Intelligent Replenishment

Throwing out leftover food at home is wasteful but if it happens at the warehouse level in a business, that is a direct blow to the bottom line of the business. This is where the use of machine learning algorithms for grocery retailers’ inventory comes into the picture. Machine learning can analyze certain trends in spending behavior to predict future sales. It can also help in standardizing data for better clarity in inventory management.

You could create a workflow empowered with AI-driven automatic notifications about what needs to be restocked and when exactly to do it. This is possible due to advances in demand forecasting that gets constantly updated with real-time information. This results in fewer stock-outs, reduced waste and much greater profitability for grocery retailers.

Futuristic Smart Shelves

The idea of a digital shelf in retail has evolved over the past few years as technology has changed but AI can do more than the simple identification of the product on a shelf and its price.

AI can give customers more information about nutritional values, ingredients, recipe ideas and much more.

Additionally, product recommendations and other vital information can be customized to individual customers based on data they’ve shared with the retailer.

We have seen that AI is enabling grocery retailers to rapidly embrace innovative and compelling capabilities to optimize inventory, product discovery and smart shelves.

For grocery retailers, AI will discover new ways to drive profits higher, increase revenue and have a significant impact on operational efficiencies. In an industry that has traditionally operated with low-profit margins, AI is a breath of fresh wind, promising to enable greater net income growth.

The grocery retailers, however, are merely scratching the surface when it comes to AI. It remains to be seen how aggressively the industry will continue to explore AI to analyze and improve how they operate.

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3 Main Factors That Will Shape Grocery Retail

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Grocery retail has seen four major shifts since the 1950s, starting with a focus on brand in the 1950s, moving to category in the 1970s, then the customer needs in the middle of 1990s, with the focus settling on giving the customer control that emerged in 2010. The shift to giving customer control began with the infamous Amazon Effect that disrupted the world of online retail.

This latest shift in the way customers purchase their grocery has upturned brands and grocery retailers, pitting them against sudden changes powered by the latest in technology and unpredictable socioeconomic conditions. In the new age, only grocers with the most adaptability and agility in the face of change can survive.

Let us explore some of the driving factors of grocery retail and how you can leverage them to improve your business:

Convenience is Top Priority

These days, customers are pressed for time. Amazon understands this well and uses this knowledge to build success in every category. Convenience happens to be a decisive factor in the highly competitive world of grocery retail. Even brick and mortar grocery retailers are turning to new in-store experience solutions such as mini-stores within a store (e.g.: meat and frozen foods, wine and specialty cheeses etc) and modular product displays, keeping in mind customer’s insistence on convenience.

Long check-out lines are a big turn-off for customers. Amazon has innovated and eliminated this inconvenience by introducing Amazon Go stores which are cashierless and run solely on technology. Walmart has introduced an option to pay from their app, easing the check-out process for customers. Your customers are looking for the simplest and fastest way to buy grocery products from you. Since most of the grocery shopping includes repeated products, you can easily provide better service by allowing your customers to repeat their orders, or increase sales by pushing out offers on their regular purchases.

Easy Discoverability

Artificial Intelligence(AI) can be leveraged to analyze customer data and insights, to help grocery retailers and CPG brands make shopping easier and more logical. As an example, product sections are now being organized around the needs of customers rather than solely based on brand merchandising. 

Grocery retailers and CPG brands working together to create singular themes under which they can market and sell affiliated and affinity products. For example, a theme such as “breakfast time” groups together products such as eggs, fruit juices, and loaves of bread, etc. This not only helps customers to discover new products easily but also helps retailers increase gross merchandise value (GMV) whether online or offline.

Omnichannel Experience

Persuasive in-store merchandising can entice store customers to go online or vice versa. For example, an offer on an in-store display of chips sends customers online for a free dip coupon. Likewise, an online offer on select dips sends customers into a brick and mortar store for nachos at a discounted price. These kinds of promotional offers not only bridge the gap between online and offline retail but also serve to deliver an omnichannel experience.  

Research conducted by Dunnhumby research found that 70% of an online shopping cart is populated with the usual products from an in-store spend of a customer. Utilizing customer intelligence such as this, you can drive profits up by making the shift from offline to online shopping smoother for your customers.

We’ve covered some of the current driving factors behind grocery retail. You can apply these concepts to improve your grocery retail. Remember that to become a successful online grocery retailer, you need to implement a structural shift at the very foundation of your retail existence. This applies across all parts of your business, from merchandising to displaying and selling products at your online or brick and mortar store. Using the latest technology such as AI to analyze customer data and gain useful insights could help boost your business like never before.

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While there is a lot of chatter around artificial intelligence and the potential it has to transform retail, it has the capability to impact the most fundamental shopping experiences: the grocery store. Most retailers are moving towards building a better grocery store experience, with the rise of subscription meal kits and competition from pure-play grocery delivery services. With the abundance of customer data and product information available, grocers today are in a special position to apply machine learning and AI in other areas of the business as well.

The grocery industry has a heavy reliance on the movement of perishable goods and with supermarkets struggling to plan, promote and sell goods in a short period of time, it is not efficient. Furthermore, there is a lot of food wastage that happens in this industry - while some of that waste happens in consumers’ homes, a good amount is also lost in the supply chain - anywhere between the farm and the store shelf. And with the various options for when, where and how to buy groceries, grocers compete on prices that are most likely to be profitable.

While grocers are faced with these challenges, they have a fairly good idea of their customer base, who they are and what they want to buy at what price point. With the data available, there is a lot of opportunities utilizing the data in the right manner. This is where AI comes in. Using machine learning capabilities and analytics, more grocers are leaning towards adopting this technology to strengthen the relationship with customers, as well as address some of the biggest challenges they are faced with today.

Leveraging the abundance of customer data

The grocery industry was one of the first industries to collect shopper buying data through programs such as loyalty programs and in-store promotional offers. These methods helped grocers gather information about their key shopper demographic as well as brand preferences. This information is already leveraged to provide discounts and special promotions, the new technology can help enhance the relationship between the grocer and shopper even further.

AI helps grocers to provide a deeper understanding of context and intent by answering the questions behind customers' shopping decisions. It also enables the grocers to parse the customer data and automate the ability to offer targeted promotions to each customer.

Enhanced inventory management

AI can change the entire way of managing inventory. AI can help stock shelves with the right mix of products and ensure that the supply chain is aligned to avoid out of stock products using point-of-sale information and inventory visibility.

Machine learning can build on grocers' rich customer data and combine that with contextual data such as weather, climate, holidays and events - providing a more accurate forecast compared to traditional methods.

Reducing waste

With better inventory management and data analytics, AI can provide better visibility on produce and perishables. Automation can help stores dynamically re-adjust orders based on demand or automate product promotions for the items that are not performing well or selling fast, and helping stores to protect margins, and reducing the amount of food that goes into landfills.

As AI and machine learning advances, grocers should begin to position their systems for a seamless transition towards a highly automated future.

AI must integrate into the commerce platforms and connect across systems to maximize its effectiveness throughout the business. While AI is a valuable tool for customer service, the impact of it will come through its ability to reward loyalty, understand consumer behavior, ensure reduced wastage and increase revenue for the retailers.