Contributed by James Cooke, ReposiTrak Marketing Manager
The recent news that three regional supermarkets — Earth Fare, Lucky’s Market, and Fairway — closed their doors should hardly come as a surprise. If anything, the news confirms that many traditional supermarkets are struggling in the omnichannel era as more shoppers turn to online buying. Just last year the number of U.S. supermarkets declined by 1.3 percent to under 25,000, according to the firm Inmar Analytics. And Inmar Analytics predicts that the trend of supermarket closures will continue, with as many as 6 percent of existing food retailers ceasing business in the next five years.
In the omnichannel era traditional supermarkets need to recognize that they have one key advantage over online retailers like Amazon — the ability to satisfy the immediate need of a customer.
In order to fulfill that need, supermarkets must keep products stocked on their shelves. So, even though out-of-stocks has been an issue for years in the grocery industry, solving that problem has taken on a new urgency and importance as Amazon makes an aggressive push to expand into the grocery market with home delivery.
Before the advent of online retail, if the desired product was not on the shelf, the consumer would either opt for a product substitute or go to another store to fill the shopping need. Today, when shoppers encounter a desired product missing on the store shelf, many of them will skip buying a substitute and place an online order for the sought-after item. In fact, a 2018 IHL study found that when Amazon Prime members experience items missing on the store shelf, they are 52 percent more likely than other customers to buy that item online.
What can retailers do to fix out-of-stocks? To keep stores stocked, retailers must give their suppliers visibility into store product sales and on-hand shelf inventory. That way the suppliers can take action to replenish their products and maintain a perpetual inventory at each store in the retailer’s network. In ReposiTrak’s experience, when suppliers have visibility, they can achieve significant out-of-stock reductions. In fact, nearly seven out of 10 suppliers using ReposiTrak’s OOS Management Solution, reduced out-of-stocks on average by more than 50 percent, across more than 12,000 stores involving more than 25,000 stock-keeping-units (SKUs).
Given that today’s shoppers have the option of buying products online, they will no longer tolerate products missing on the shelf of a bricks-and-mortar retailer. To maintain shopper loyalty, supermarkets will have to make product availability in their stores their number-one priority if they want to compete for food dollars against the likes of Amazon.
For more advice on how to protect the traditional grocery business from online competitors, read our white paper: 3 Actions Grocers Must Take To Fend Off Amazon