As grocers struggle with supply chain shortages, finding it increasingly difficult to keep shelves stocked and meet demand for popular products, retailers are seeking out new approaches to inventory.
Arizona-based grocer Sprouts Farmers Market, for one, which has about 380 stores across 23 states, is working with Pod Foods, a company that offers a wholesale marketplace to connect grocers and emerging consumer-packaged goods (CPG) brands, per a Pod Foods announcement last month.
Larissa Russell, co-founder and CEO of Pod Foods, said in an interview with PYMNTS that this partnership enables the grocer not only to keep their shelves full but also to follow industry-wide trends toward challenger brands.
“With Sprouts, we’re going to provide about 130 stores with immediate access to what we call our virtual warehouse of emerging CPG brands,” she said. “So, a virtual warehouse that can support an infinite array of trending products, so that Sprouts and other retailers that are using our technology can quickly reset and extend their inventory so that they can quickly meet the changing customer needs.”
She added that the platform also enables the grocer to tap into an “up and coming” market segment: emerging brands that do not have the name recognition of incumbents but that appeal to consumers’ demands.
By the Numbers
In fact, product availability is important to the majority of grocery shoppers, according to research from PYMNTS’ January study “Decoding Customer Affinity: The Customer Loyalty to Merchants Survey 2022,” created in collaboration with Toshiba Global Commerce Solutions.
Get the report: The Customer Loyalty to Merchants Survey 2022
The report, which drew from the results of a survey of more than 2,000 United States consumers, noted that 51% of shoppers said ensuring that the grocery products they want are in stock and available for purchase is key to their continued patronage of a given merchant. Moreover, 6% of shoppers listed this factor as the single most influential driver of merchant selection for them.
Despite the importance of being well stocked, many grocers are struggling to keep popular items on the shelves. Even major retailers with more resources at their disposal have been having difficulty meeting these needs. Take, for instance, Target, which announced last month that it is lowering prices to offload excess items and canceling orders.
“A lot of manufacturing supply chain constraints are felt by retailers because specific manufactured products can’t reach the shelves, and what that creates is out of stocks,” said Russell.
Some grocers, to take on these challenges, are automating their inventory management processes to gain greater insight into stock levels and product performance. Brand’s ranging from Walmart-owned, membership-based warehouse club chain Sam’s Club to grocery giant Albertsons Companies to smaller, regional grocery chains have been announcing artificial intelligence (AI) inventory management solutions throughout 2022.
Retailers’ supply chain challenges are expected to continue into the future. In fact, White House economists predict that the supply chain issues born out of the COVID-19 outbreak will long outlast the pandemic, according to an April report in The New York Times. Noting these concerns, last month, the U.S. Department of Agriculture (USDA) announced a $4 billion investment in strengthening the food supply chain and other impacted areas.
Taking on Ultrafast
Russell argued that keeping shelves stocked not only enables grocers to meet consumers’ expectations but also to compete with the rise of ultra-fast delivery.
“I think we’ve all seen that the hype is fading with the quick delivery,” she said, adding that she expects to see “a new equilibrium” between the channel and more traditional methods of physical and digital grocery shopping.
Certainly, ultrafast grocers have been struggling throughout 2022. One such company, Buyk, shut down in March, and another player in the space, Jokr, ceased its U.S. operations last month.
Still, Russell predicted that some demand for ultrafast delivery will remain, asserting that the channel “will still have a place,” but that traditional retailers will also maintain a central place in the grocery industry “as long as they can bring in a relevant assortment of products.”
The Inventory Advantage
Russell contended that the emerging brands marketplace will “become more and more relevant” moving forward, gaining ground in the next year.
Certainly, a range of factors impact consumers’ choice of grocery merchant, with top considerations, according to the Decoding Consumer Affinity study, including price, proximity and payment or fulfillment features. However, Russell expects that shelf-stocking will become more of a key differentiator for grocers as their supply chain challenges persist.
“It all becomes who has the most relevant assortment in their store,” she said, “because if the consumer can’t get a product in grocery store, they’re going to look for it somewhere else.”