Eggs may be getting the most attention in the news lately, but food, in general, is a narrowly profitable business. Modern grocers face a host of challenges beyond just weather-related disruptions (like climate change) and health crises (such as epidemics like bird flu). They are also grappling with rising energy and labor costs, inflation, and heightened consumer demand for premium options, such as organic, free-range, gluten-free, or exotic products, which often come with higher price tags. Adding to the pressure is fierce competition from mass retailers like Costco, Walmart, and Target, as well as international discount chains such as Aldi and Lidl. On top of all this, the growing preference for lower-cost private-label products is further squeezing profit margins dollars, leaving grocery retailers with an uphill battle to stay afloat.
With profit margin rates at less than 2%, grocers are challenged by how to stay relevant with new technology needs and consumer expected services (mobile apps, third party delivery, buy online, pick up in store). The truth is that there is a threshold to how much shoppers are willing to pay for products. The cost of eggs, meat and specialty items are fast outpacing tolerance levels and shopper’s willingness to shop multiple stores to find the lowest prices are becoming the norm. So, if retailers can’t protect their thin margins by elevating retail prices, and their actual costs continue to escalate, where do they turn to stay profitable?
Price and Promotion optimization and operational efficiencies.
Being better is easier said than done. Many grocers are operating on legacy systems (e.g. ERP and POS) and/or have not maintained updates, and are challenged by the costs and business interruptions from technology investments. Not only do they most likely not have the in-house skill-sets and expertise to escalate their business models, but they face tremendous risk if they make the wrong selections, choose the wrong vendors and lack the project, process and change management to ensure success. Remember, technology is only the enabler.
Columbus Consulting knows the challenges that retailers are facing—both in and out of the grocery industry. We have worked with hundreds of leading brands to help them transform their business to not only survive, but to thrive in the modern marketplace. Grocers, in particular, are looking for proven, experienced, resources for strategy validation, their people, processes, and technologies to help them build a roadmap and prioritize their efforts. At the core are usually system enhancements or replacements. Only through technology and new AI integration can grocers find hidden profits across the thousands and thousands of SKUs.
Optimizing price points/promotions by market, season, assortment and competition is one way that grocers are finding success. Doing this with dynamic rules or optimization, real-time pricing models is the solution. In addition, leveraging staffing efficiencies to best place resources where and when they are needed can be another source of success. Understanding shopper needs, for example which markets are better served by catering services or pre-prepared foods and leveraging technologies like loyalty, eCommerce and self-check out can also offer incremental sales and profits.
So, while eggs are still getting the headlines, the real story is about how grocers are nourishing their profits to compete and scale long-term.
ABOUT COLUMBUS CONSULTING
Columbus Consulting delivers solutions that drive true value and have been transforming the retail, grocery and CPG industries for over two decades. We are a retail consulting company of industry experts. Our approach is simple, if you do it, we do it. We are more than consultants; we are experienced practitioners who actually sat in our clients’ seats. We understand the challenges, know what questions to ask and deliver the right solutions. Columbus offers a unique, consumer-centric approach with an end-to-end perspective that bridges functional & organization silos from strategy to execution. Our specialties include: unified commerce, merchandising & category management, planning & inventory management, sourcing & supply chain, data & analytics, accounting, finance & operations, people & organization and information technology. Let us know how we can help you. To learn more, visit COLUMBUSCONSULTING.COM.
