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The market is challenging but the opportunity is getting bigger!

6 June 2024
Author: Gordon Neil and Ellie Smith

Guest blog by our experts Gordon Neil, Thumbprint Managing Director and Ellie Smith, Thumbprint Customer Insights Manager

It’s no secret that the Grocery sector is evolving, however, at what stage does evolution over time equal revolution. We’d argue that this has already happened, driven by changes in the ownership structure of the big retailers, cost pressure, profit pressure, and supply chain challenges.

Let’s start with what’s most important – What’s happened to the customer experience?

Gordon commented: “When we look at the data, we’re seeing declining execution trends across brands and categories in three key areas - availability, promotional compliance, and planogram compliance. The result of this is brands are losing more sales than ever before.

To make the challenge more complex, inconsistency is the only consistent trend. What I mean by that is that the biggest opportunities to positively intervene are in different stores at different times.

Gone are the days where you’d see a consistent set of stores that you need to impact, now is the era or constantly changing opportunities.

In our view. this execution revolution is being driven primarily by retailers being under cost and P&L pressure. Some of this is being driven by different ownership structure, with more private ownership within the top 4.The pressure is showing up in four ways in-store:

• Significant reduction in staffing levels means less time to focus on retail execution
  with time being pointed at getting the basics of running a store right and shelf picking for online shopping.
• A change in shift patterns leading to less nightfill and less consistent issue correction from the retailers themselves.
• Higher staff turnover, leading to lower skills, in turn leading to poorer execution standards
• A reduction in stock holding to tie up less cash, meaning less stock to keep shelves, and promotional displays filled.

Our Thumbprint Customer Insight Manager Ellie Smith, has shared her view on the market…

“Inflation has been hampering the everyday purchasing power of consumers as price increases on products and pack size reductions have become commonplace, with ONS data showing a growing divergence between retail sales value and volume – as value continues to increase whereas volumes trended downward since May 2021 as consumers spend more to receive less.

Whilst food inflation rates are now moving in the right direction according to the BRC (British Retail Consortium), which reported that food inflation had dropped from 5% in March 2024 to 3.7% in the latest month, this does not mean that consumers will be less impacted as prices continue to increase but just at a slower rate.

Attempting to combat this, grocers have been cutting jobs within stores and logistics as part of cost-saving measures – Sainsbury’s and Morrisons having announced 1,500 and 300 losses during 2024, respectively. Tesco had taken the same route the previous year after announcing a new efficiency plan which saw it axe food counters and significantly reduce the number of store management positions, shifting them to lower paid roles in some cases, before delaying pay rises to staff in March 2024.

As a result, this has created a challenge in product availability with staff less readily available to ensure products are reaching the shelf. DART data supports this as it shows a long-term declining availability trend which is leading to growing levels of lost sales value (LSV) across three of the Big Four grocers.”

So what does this mean and what about the future?

Gordon commented: “It’s time to face the facts that constant evolution in retailer operations and environmental pressure over the last few years has led us to a revolution in retail execution that’s here to stay. My view is we need to see todays retail execution as the best it’s going to be if left to its own devices. Why? Because the path the market is on is not going to suddenly reverse, it’s the norm, not a short term blip.”

Lastly and most importantly, what must brands be doing to succeed? We asked Gordon and Ellie for their view:

Ellie commented : “The good news is, there’s a wealth of data available, meaning analytics can be the key to outstanding execution and put brands ahead of the competition. DART, which starts with the performance of a product on a shelf, enables us to predict and evaluate where opportunities and issues occur, and what the root cause is.

Root cause analytics is critical, DART presents a full picture from store through to depot and uses all the available data in retailer systems. This means whether you’re in-store, at head office, or in supply chain, you can see what intervention you need to make to sell more.

Gordon commented: “In addition to empowering their business with the best directive analytics, brands should consider:

How they connect effectively end to end. What I mean by that is the most important factor is what happens at the shelf i.e. can the customer see and buy your products. Starting there, brands need to consider whether they’re effectively connected from that point, all the way to retailer depot, and back to production.

Whether they’re being agile enough in the way they act and go to market. Brands need to be more accountable for how their brand shows up in-store than ever before, and agility is key to that when you consider the way the market is going. I meet many brands who consider their approach to be flexible, however agility removes boundaries, drives pace, and does is efficiently, all things that are critical to success. Our sister agencies have the optimum solutions in the market to support this.

What they’re doing to constantly generate insight and adapt to it. Combining data sources to build the best insight is key. Once you have that, be clear about how you’ll drive continuous evolution. Again, between Thumbprint and our sister agencies, we can help you do that.”

With the right data tools at your disposable you will be well equipped to navigate the changing Grocery market. It’s time to undertand the opportunities that are still available for brands and use your EPOS data to take advantage of them. The right insight will direct your strategy and sales.

Talk to us to find out more: thumbprint.enquiries@weareavidity.com