While the challenges faced by grocery retailers and consumers due to the pandemic might be coming to an end, a new set of challenges are now being faced by grocery retailers and consumers alike. One of those macro challenges – inflation – is increasing at its fastest rate in decades, eating up budgets in North American households with double digit growth. The unappetizing issue has ushered in unprecedented challenges in fresh that show no immediate signs of slowing down due to a troubling combination of demand changes, supply chain issues and the continuing crippling labor crunch.
A recent KPMG study revealed that consumers are facing an alarming 22% increase in grocery bills with inflation hitting a 31-year high. According to FMI – The Food Industry Association, 25% of shoppers ranked the price of fresh as the number one factor when making purchasing decisions in 2021, followed by appearance (19%), health benefits (19%), and ripeness (15%).
While grocers have traditionally done well during periods of food inflation, it’s a different battle this time around. Consumers are walking away with empty or smaller baskets per trip – even retailers that have managed to hold on to their competitive pricing will have to reconsider their approach in the second half of this year. Many grocers are prioritizing special promotions, home ready meal offerings to increase variety, and extending the shelf life of fresh items to increase basket size and earn consumer trust. Consumers, in turn, are looking at cheaper alternatives, such as ground beef over steak.
“The inflationary conditions are prompting significant focus on list-making and promotional activity, with 54% of shoppers frequently checking sales prices at the primary store and 27% across stores,” stated Rick Stein, Vice President of Fresh at FMI.
While inflation is likely to be a reality for some time to come, there is good news as there are actionable steps grocery retailers can take immediately to minimize the impact of rising commodity prices to protect operating margins.
- Data-Driven Insights: Increase visibility and control across both in-store and commissary operations to uncover hidden opportunities to optimize store revenue
- Demand-Driven Replenishment Capabilities: Monitor real-time in-store inventory requirements to maintain the freshest stock possible through a centralized production planning solution
- Price Optimization: Combat fluctuating costs of goods by leveraging demand focused Fresh Ordering to reduce shrink and grow assortment
- AI Automation: Reduce added expenses by automating processes to minimize labor expenses, errors, disruptions, and resource consumption
To navigate through the perfect storm of challenges in fresh, grocers are reinventing themselves and investing heavily in technology to grow market share and build customer trust and loyalty. Rising prices can eat away at your company’s bottom line but picking the right fresh-centric technology to forecast accurately, automate and act on cost-savings opportunities, will take a bite out of inflation.
The best recipe for winning over inflation is optimizing and improving the efficiency of your Fresh operations.