A global survey of 4000 consumers reveals that shoppers are being left disappointed with the freshness of their grocery purchases.
Set against a backdrop of declining retail profitability and significant changes in consumer lifestyles, grocery retailers are under pressure to deliver the best freshness to their customers, while also turning a profit. McKinsey reports that 40 per cent of grocery revenue is driven by fresh, which puts tremendous pressure on category managers to get it right.
The complexities of fresh replenishment
Yet category managers in fresh know too well the complexities of delivering the best fresh to their customers: Fresh goods are perishable, demand varies from day to day and supply chain lead-times are difficult to predict. Stock too much and you risk providing a less than satisfactory level of fresh if the stock is not sold in time, or you generate food waste. On the flipside, stock too little and you risk missing out on revenue if the product is unavailable.
Shoppers are not receiving the right customer experience in fresh
It is little wonder then that of the 4000 consumers we surveyed in the USA, UK, Germany and France, 68% of shoppers have been left disappointed with the level of fresh during their grocery shop. Perhaps more alarming for grocery retail is that a resounding 54% of shoppers said they have been put off shopping with the grocery retailer in the future. By failing to deliver the best freshness, they are literally throwing their customers, revenues and profits at their competitors.
Unprecedented pressure for fresh is driven by changing lifestyles
As the war on sugar progresses and more knowledge and understanding is shared by the experts on our diets and the provenance of our foodstuff, more of us are living by the rule of ‘you are what you eat’. This is putting unprecedented pressure on grocery retailers to deliver a proposition not just based on price, but also quality. Grocery retailers know that consumer habits are changing and expectations of fresh are on the rise. This point is clearly illustrated by our survey results, which found that the younger generations are the most demanding when it comes to fresh: 70% of 16-35 year olds are put off by lack of freshness versus 42% of over 55s.
There were also interesting regional comparisons: Germany had the highest standards in terms of fresh with 62% stating they are put off shopping with a brand when they do not deliver the right fresh experience, versus just 45% in the USA, 53% in France and 55% in the UK.
How machine learning can assist the best decisions in fresh replenishment
But where does all this leave us? The real battle for grocery success lies in fresh and getting that right profitably, but there are simply too many decisions and factors to take into account to be able to deliver the best experience using traditional supply-chain systems for fresh category replenishment.
Christoph Glatzel, senior partner, McKinsey says: “Most traditional supply-chain planning systems take a fixed, rule-based approach to forecasting and replenishment. Such an approach works well enough for stable and predictable product categories, but fresh food is more complicated.
“Machine learning – based on algorithms that allows computers to “learn” from data even without rules-based programming - allows retailers to automate formerly manual processes and dramatically improve the accuracy of forecasts and orders.”
Only by using machine learning will grocery retail keep pace with the increasing number daily decisions needed in fresh. Machine learning also uses and learns from the large amounts of internal and external data to make the best decisions and balance availability, waste, customer experience, margins and profit.