Prepared Food Trends at Grocery Stores

Prepared foods help retailers capture sales

Retail Meets Restaurant: Wegman's "Next Door" one of the first grocerant venues.

December 29, 2017

Jim Hertel

KEYWORDS grocerants / National Restaurant Association

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Consumers are embracing prepared foods and retailers couldn’t be happier. Supermarkets embracing prepared foods are experiencing significant growth. Grocerants, which are in-store restaurants offering dine-in and take-out meals, generated more than $10 billion in sales last year, according to the NPD Group. Grocerants, combined with other foodservice offerings such as pre-ordered, heat-and-eat, and meal kits, will push retail foodservice over the $35 billion mark in 2017. 

In 2018, prepared foods is likely to grow an additional 10%, which is more than five times the growth-rate expected from traditional restaurants.1 Astute supermarket operators may achieve even higher growth rates considering prepared foods address two key challenges: 

Convenience

Prepared foods offer today’s time-pressured shoppers a new level of convenience. Many of today’s shoppers do not have the same cooking skills as previous generations—providing another reason to purchase prepared goods. Whether grab-and-go, made-to-order, or in-store dining, consumers now have convenient and healthy alternatives. Multi-ethnic families—those with diverse taste profiles—also benefit from having more choices at the same location.

Differentiation

Retailers will use prepared foods as a key differentiator. Some may opt to hire recognized chefs and focus on healthy dishes prepared with locally-sourced ingredients. Others may introduce neighborhood-relevant specialty items, such as an Irish Cream Crème Brulee for the Boston market. 
Prepared foods, particularly the grocerant, can provide many related services that further connect the diner’s experience to other in-store goods and services. This may include sharing the recipes for Friday’s special via social media or email; inviting diners to a cooking class; featuring a patron’s family recipe; or serving as a meal-planning coach – anything that facilitates diner/shopper engagement and convenience, promotes healthy living, and/or strengthens their kitchen confidence. 

Year of Convergence

Next year, 2018, likely will be the year of convergence, the year when shopper behaviors, technology, and retailers align. Below is a case in point: 
I place my grocery order while seated in the grocerant. After enjoying my braised beef short ribs with locally-grown asparagus, I receive a text notifying me that my grocery order is ready. Scrolling down I see additional details pertaining to my meal items—such as where the grass-fed beef was sourced and how my organic asparagus was grown. Based on my previous orders the app informs me that Wednesday the store will be offering buttered chicken for lunch. I also receive an “eat-one-take-one” offer for Monday. 

In addition to creating banner loyalty, the shopper now has multiple reasons to visit the store. Using machine learning, the operator can offer the shopper a more personalized experience. They also can adjust promotional offers according to day parts or traffic patterns. While the shopper receives great food, convenience, and a better in-store experience, the operator benefits from more trips, improved loyalty, and higher margins due to the price elasticity of prepared foods—all from a consumer that was going to eat at a stand-alone restaurant.  

1: According to the National Restaurant Association, the growth rate for restaurants has been consistent over the past few years. The projected growth rate for 2017 is 4.3% or 1.7% after adjusting for inflation. Similar growth is expected for 2018.

Kroger Will Be 1st to Bring Cashierless Tech to Mass Market

12/27/2017

The Kroger Co.’s plans to expand its Scan, Bag. Go technology to 400 stores in 2018 will make it the first to provide cashier-less technology to a mass market, beating both Amazon and Walmart to the punch, according to a published report.

Customers can scan products with a handheld scanner provider by the Cincinnati-based grocer, or by using Kroger’s Scan, Bag, Go smartphone app. When finished shopping, they can go a self-checkout register to pay for their order, but eventually, they’ll be able to pay via the app, Business Insider reported, citing the company.

The publication noted Seattle-based Amazon’s plans to roll out a similar solution at its physical grocery store concept, Amazon Go, which has been held up due to various technological issues, while Bentonville, Ark.-based Walmart is fine-tuning its own checkout-free concept as well as testing a cashierless system at more than a dozen stores in Texas, Florida, South Dakota, Arkansas, Georgia, and Kentucky.

In October, Kroger noted its intention to expand its 20-store Scan, Bag, Go pilot to 400 stores in the coming year as part of its Restock Kroger strategy.

Clear Demand Presents Fundamentals of Retail Science: Episode I

Posted on December 21, 2017 by Ryan Jensen

The world in which retailers reside seems to evolve and get more complicated with every passing week. Members of merchandising and pricing teams are constantly flooded with complex problems as well as varied approaches and technologies designed to help them achieve their goals. 

With that in mind we at Clear Demand will be launching a series of educational blog posts that will leverage the vast experience of our Chief Scientist, Adam Rosenberg.  These posts will be made monthly and can be considered useful guides for retail practitioners. This entry will cover the basics and subsequent posts from this series will build upon this foundation.

INTRODUCTION TO RETAIL SCIENCE

Retail science is the analytical support for retail decisions, sometimes called retail decision support. The business of retail is an old one but recent advances in computer technology allow scientific decisions to be made where only “seat-of-the-pants” decision were available before.

We’re going to explore five of these in this post-, merchandise assortment planning, regular price optimization, promotion optimization, markdown optimization, and merchandise replenishment. At the end will be a brief section about modeling and forecasting capabilities.  

 MERCHANDISE ASSORTMENT PLANNING

Things in retail can quickly get complicated, hence the need to start with the basics.

The first decision a retailer makes is what to sell. The decision to be a grocer or a hardware store owner or in the fashion area is usually a personal preference decision, but the next level of product selection is less personal and more scientific.

A large grocery store in a chain may have shelf space for 75 thousand products and nearly half a million products to choose from. Selecting only the most popular products isn’t going to work well. There are key value items products that must be on the shelf or shoppers will take their business elsewhere. For more details on key value items, or KVIs visit this linkfrom McKinsey. Also, shoppers who prefer one brand or size will switch to another if it is close enough to their chosen product.

Once we decide to put a product on the shelf, we must decide how much shelf exposure it gets and where it gets that exposure. We measure the amount of product exposure in shelf facings so a normal product gets a single facing while a particularly popular product gets multiple facings. Adding facings increases sales but not in proportion, so going from one to two facings might increase sales ten or fifteen percent, not a factor of two. Usually, the products with multiple facings are very popular products like Coca Cola. Impulse-buy products should be placed at eye level so shoppers are more likely to see them while basic, staple products, that shoppers are going to buy no matter what, can go on the top or bottom since shoppers will look for them, find them, and buy them anyway.

REGULAR PRICE OPTIMIZATION

We say a product is selling for regular price when it is not on any kind of sale price. Setting the regular prices for tens of thousands of products in thousands of stores is a daunting computation. Once we understand shopper buying behavior for each product-store combination, we can deduce the optimal prices for them.

Optimizing each product-store combination individually is not a good way to optimize prices for a store as a whole. A shopper who pays “a little extra” for one product may be reluctant to return if most of the products in a store cost “a little extra.” We have to figure in the overall shopper perception which we call price image in deciding which prices to change.

Also, product-store prices are connected by a web of constraints which we call business rules. The fifteen-ounce box must be between 1.0 and 1.5 times the price of the ten-ounce box of the same product. The name-brand product has to be more expensive than the similar store-brand product. Shoppers become uncomfortable if we change too many prices, so we may impose an activity cost for any price change.

PROMOTION OPTIMIZATION

A promotion is something a retailer does other than price reduction to increase sales of a product in a store. It could be a sign, a radio advertisement, a coupon, or putting the product on the end of the aisle which we call an endcap. Promotions are an essential part of a retail business and managing them is an essential part of retail science. A promotion event is a collection of product-store promotions combined in some way such as a common promotional flier.

Promotions are done for many reasons and they typically fit into three strategic areas, profit, revenue, and traffic. The profit strategy is the simplest, promotions are chosen to increase volume more than they cut margins. The revenue strategy is to increase sales volume with less regard for margin. Finally, in a traffic strategy promotions are chosen to maximize the number of shoppers buying the goods on sale.

Promotion optimization involves selecting what products to promote, how to promote them, and which price point to choose for each product being promoted. Typically, a promotion event has the same promotion and price points at several stores during the promotion time period.

MARKDOWN OPTIMIZATION

When a product reaches the end of its life cycle, the remaining stock is often sold at a discount price called a markdown. (In fashion, the term “markdown” is often used where other areas of retail use the term “promotion.” We specifically mean the end-of-product-lifecycle phase when we refer to a markdown. Also the term “markdown” has a meaning in retail accounting that we are not using here.)

The markdown pattern is price decreasing, or at least not increasing, according to prescribed business rules over a prescribed time interval. For example, this $10 product can be discounted to $8, $7, $6, $5, or $4 over the next eight weeks. Once it goes down to 7 it can’t go back up to 8 even if it’s selling so much at 7 that it sells out early. Business rules prescribe a set of discounts, either percentage discounts or specific prices, and rules for the price reductions. There may be minimum and maximum changes and there may be minimum and maximum time intervals the product can sell at a particular price.

In addition to the rules about decreasing price, there may also be rules connecting products and stores. For example, it is typical to require all the sizes of a particular garment to have the same markdown price even if all the Medium and Large sizes sell out really fast. It may be a requirement to keep several stores at the same price. On the other hand, it is typical to allow different colors to have different prices in a markdown event.

When the markdown time interval ends, whatever inventory is left gets some salvage value, typically less than the markdown price, maybe zero. The markdown problem is particularly complex because it involves managing inventory and forecasting demand at the lowest level, individual products and stores, and revising the markdown plan over time as the markdown progresses through its time interval.

Markdown inventory typically is not shared from store to store, but may start at a central warehouse and be distributed to stores to satisfy shopper demand during the markdown.

REPLENISHMENT

The decision of how much of each product to buy is called the replenishment problem, not only how much to order each product for each store, but when to order it and how much to store at intermediate points known as distribution centers (DCs).

The basic economic issue is trading off the cost of ordering against the cost of holding inventory. The retail-science part of the problem is deciding how much to keep in stock so one does not go out of stock between replenishment orders. This requires management of both inventory and forecasts. Add to this the complexity of seasonal demand and promotion planning where variation of demand is anticipated and we have an intricate calculation for replenishment optimization.

The network of DCs makes the replenishment problem not only more complex to solve but more complex to describe because there are business rules pertaining to shipment quantity and stock levels as well as costs associated with each truck shipment of multiple products.

UNDER THE COVERS

Driving all these retail-science solutions is a network of modeling and forecasting systems. Modeling is the science of reducing complex real-life behavior to a relatively small number of formulae and parameters. We use the models to forecast behavior under actual conditions and hypothetical conditions for optimization.

Behind the models and forecasts is a world of data input from point of sale activity through product and store hierarchies and data cleansing to a clear data picture of retail activity. It is only at the turn of the twenty-first century that computers have become powerful and cheap enough that it is practical to collect the data required and to do the sophisticated processing necessary to support retail decisions in the volume required.

CONCLUSION

While the business of retail is as old as the hills, retail science is a new and growing area for decision support. The art of retail remains human art, but the science of product assortment, regular retail pricing, forecasting sales, promoting products, and marking them down can be aided by sophisticated data handling and mathematical analysis.

HOTSPOTS: 2017’S TOP TREND OBSERVATIONS

by Mintel News on December 20th, 2017

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With Awards season almost upon us, Mintel’s global Trends team has selected the wittiest, most creative and groundbreaking product and service launches from 2017. From the most unexpected collaboration to the campaign that generated the most media buzz, here are some memorable innovations worth checking out.

Ladies and gentlemen, please give a big round of applause for 2017’s top trend observations!

RISING STAR – THE MOST FUTURE POTENTIAL

Automatic restock, US: Walmart is testing a service called “in-fridge delivery” where customers can have their groceries sent to their home and placed directly in refrigerators. The service uses smart home technology to enable customers to remotely open their door for delivery workers while they’re away from home. Through the technology, they can also watch a livestream of the delivery by linking their phones to home security cameras.

TOP NEWCOMER – THE MOST NOVEL IDEA

Livestreamed Cheese Shop, Netherlands: Kaan’s cheese shop in Alkmaar has laid claim to being the world’s first ‘stream store’. Shoppers at home can ask staff questions about products through a webcam and microphone during regular hours. Should a customer enter the physical store, however, those online will be politely asked to wait to make any queries.

INNOVATIVE DOUBLE ACT – THE MOST UNEXPECTED COLLABORATION

McDonald’s x MacDonald, UK: McDonald’s partnered with designer Julien MacDonald to create a crystal-embellished luxury burger box for its Signature Collection. Although the burger giant’s Signature Collection will be available to order from more than 900 McDonald’s across the UK by the end of 2017, only 1,000 of these high-end boxes are available.

CLASS CLOWN – THE MOST HUMOROUS

GPS Cassette Tape, US: Kentucky Fried Chicken combined GPS and the cassette tape to delight customers with a unique experience where Colonel Sanders directs them from KFC’s hometown, Louisville, Kentucky, to the brand’s iconic Big Chicken restaurant in Marietta, Georgia. During the road trip, Colonel Sanders narrates the scenic drive while going on random tangents and singing his favorite songs.

WACKY & WONDERFUL – THE MOST ‘OUT THERE’

Cliff-side Pop-up, US: 37.5 by Cocona Natural Technologies opened a pop-up shop approximately 300 feet high on the facade of the Bastille Wall in Eldorado Canyon, Colorado. The outerwear textile specialist invited only climbers to drop by the cliff-side pop-up and snag apparel from brands such as adidas, Point6 and Rab that utilize 37.5 technology – an insulation built into fabrics to help climbers maintain their ideal core temperature in any climate.

SNAPPIEST DRESSER – THE MOST DESIGN-FORWARD

Solar Egg, Sweden: A 16-foot pop-up sauna in the shape of a golden egg was installed in the Swedish town of Kiruna in an attempt to attract visitors to the Arctic Circle. The Solar Egg came about as part of an urban development project by developer Riksbyggen, aimed at getting people to visit Kiruna – a town that’s in the process of moving in order to save it from collapsing into a now-abandoned mine.

BUZZ-WORTHY – THE MOST MEDIA ATTENTION

Under a Shared Umbrella, China: In Shanghai, a new umbrella rental scheme was introduced to the public. The umbrellas are available in the city’s infamous business district, Lujiazui. Pedestrians can rent the umbrellas by downloading an app, paying a RMB20 deposit, and scanning a QR code on the rack to receive a code on their smartphones that will unlock their umbrella. Umbrellas cost RMB1 for one day’s rental.

MOTIVATIONAL SPEAKER – THE MOST INSPIRING

Empty Shelves, Germany: Hamburg’s supermarket Edeka emptied its shelves of products from abroad in order to show how bare the store would be without them. Customers were left to do without food they consume regularly including tomatoes from Spain, olives from Greece or cheese from France. Signs were placed around the store with slogans saying ‘This is how empty a shelf is without foreigners’ and ‘Without diversity, this shelf is rather boring’, with the stunt designed to highlight the importance of diversity in society.

SCI-FI BECOMES REALITY – THE MOST FUTURISTIC

Handy Payments, UK: The Costcutter store at Brunel University in London introduced a biometric technology that literally puts payment at the fingertips of customers. The biometric Fingopay technology from Sthaler uses infrared to scan the unique vein pattern in the shoppers’ fingertips to identify customers and make a payment from their bank cards in just three seconds.

Study: More than half of warehousing organizations to upgrade mobile devices

By Supply Chain Quarterly Staff | December 20, 2017

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Many firms choosing Android-based handhelds as Microsoft ends support, VDC finds.

More than half of warehousing and logistics organizations plan to upgrade their mobile device collections in an effort to apply the latest handheld technologies to balance soaring customer service requirements with rising labor costs, according to an industry study released Thursday.

Fifty-six percent of organizations plan to upgrade their existing fleets of mobile devices, as their current devices near end-of-life, according to a study conducted by VDC Research Group Inc., a supply chain analyst firm in Natick, Mass. Commissioned by supply chain mobile device management provider Ivanti Software Inc., the study, "Taking Advantage of Apps and App Modernization in Warehousing," contacted 143 qualified survey respondents from North America and Europe during August 2017.

Organizations are motivated to upgrade their mobile devices because by their own admission, 53 percent of information technology (IT) decision makers supporting warehouse operations view their mobility deployments as immature, the study found.

Another factor pushing the surge of upgrades is the decision by Redmond, Wash.-based Microsoft Corp., the dominant provider of mobile operating systems (OS), to end support for its three products in that area; Microsoft Windows Mobile, Windows CE, and Windows Embedded Handheld, VDC found. The change has left many current customers with no clear migration path to new technologies, at the same time that the warehousing industry has come to rely on ruggedized handheld computers for data collection and processing, as well as inventory management, package delivery verification, digital exchange, and other applications, VDC said in the report.

In response, many mobile platform providers are turning to Google Inc.'s Android OS as a replacement, with vendors such as Honeywell International Inc. and Zebra Technologies Corp. both launching Android-based product families over the past year.

The Android OS offers more sophisticated and functional mobile solutions than the legacy products it may replace, allowing warehouse and DC operations executives to improve efficiency, reduce errors, and fulfill orders faster, David Krebs, executive vice president of VDC Research, wrote in the report.

"The warehouse is much more complex than it was 10 years ago. Now, so many factors can impact the success of supply chain operations," Steve Bemis, global vice president of sales at Ivanti's Supply Chain Business unit, said in a statement. "Everything from asset utilization to working capital to transportation expenses, and even regulatory pressures, employee turnover, and the need for faster response times, are driving companies to look for new ways for improving productivity. Along the way, they are also finding that stepping up to 'modern mobility' with Android gives them an edge."

Commentary: Let's rein in the blockchain exuberance

By Mark Solomon | December 1, 2017

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It's the hottest IT topic to come down the pike in years. Now if people only knew what to do with it.

Corporate CIOs aren't shrinking violets when competing for budget dollars. If it walks, talks, or quacks technology, they'll push ROI projections and lobby hard for the stuff. But mention the word "blockchain" and the CIOs' attitudes suddenly get adjusted. They become Star Trek's stone-cold Mr. Spock to the emotional Captain Kirk, forced to tamp down the demands of their besotted CEOs to "get me some blockchain!"

Part of the caution stems from the notion that the CIOs' bosses have no idea what a blockchain is or what it does. A blockchain is not a product, service, or database. It is a process, one with enormous promise but whose broad uptake is far from assured. It was first utilized to support the Bitcoin crypto-currency, which buyers and sellers use to execute transactions outside of the normal banking ecosystem. But leveraging a blockchain across multiple industries, while certainly feasible, will require much work, robust collaboration between many parties, and a challenging transition to what could end up being different sets of laws and regulations.

"Managing expectations will be critical over the next two years as CIOs try to rein in CEOs who don't understand blockchain, but are sold on its potential," Ken Craig, senior vice president, special projects for Birmingham, Ala.-based McLeod Software, a trucking software provider, told a meeting of the executive council of the Blockchain in Trucking Alliance (BiTA), an industry standards group, in mid-November in Atlanta. Craig co-founded BiTA with Craig Fuller, founder of TransRisk, the first futures market for truckload spot-market pricing, which had its coming-out party in late October.

Given the blockchain's superheated hype, expectation management could be a tall order. According to Fuller, 561 companies have applied to join BiTA, a number he reckons makes the group the largest vertical involved in blockchain. About one-third of the applicants have interests that extend beyond trucking, Fuller said. There is little doubt that many are IT firms exploring profitable ways to refresh trucking's reputation as a technological backwater and bring it into the 21st century. There is also keen interest in how a blockchain process could transform an industry where time and the chain of custody mean everything, and where the bill of lading—the standard contract of carriage—still rules the roost. About 30 attendees were expected at the BiTA council meeting, but about 160 showed up, Fuller said.

What blockchain is
A blockchain is a distributed ledger that creates a transparent and indelible trail of each transaction, free of hackers and of so-called trusted third parties such as lawyers, bankers, and other intermediaries who've historically filled overseer's roles. In its simplest form, parties within an extended supply chain add "blocks" of information to the broader chain. The blocks could identify as much information as the stakeholders deem necessary for the transaction to progress and be consummated. Cheating would be virtually impossible, proponents claim, because each step in a transaction, whether open to the public or restricted to specific stakeholders (the latter being what is envisioned in trucking) would be witnessed by everyone in the chain.

At the heart of a blockchain's appeal is the development of so-called smart contracts, or self-executing contracts that would not require a third party to validate them. As envisioned, contracts could be converted to computer code, stored, then replicated on the system and supervised by a network of computers that run the blockchain. Smart contracts enable the exchange of money, property, shares, or anything of value in a transparent and conflict-free way, while avoiding the services of an intermediary, according to supporters of the blockchain process. Like a traditional contract, these new compacts would define applicable rules and automatically enforce those obligations, proponents say. Smart contracts are the "holy grail" of the blockchain concept, said Craig of McLeod.

It is no secret that global supply chains running on legacy systems often get bogged down in the back-and-forth of obtaining multiple approvals for transactions, and are vulnerable to loss and fraud. A blockchain prevents this by providing a secure and quickly accessible digital version to all parties in the chain, advocates say.

"We all collectively work to integrate one level upstream or downstream through point-to-point integration. But then we lose the ability to view the extended supply chain beyond those direct relationships," Shanton Wilcox, a partner at Infosys Consulting, a Palo Alto-based firm that works with logistics providers, among other fields, said in a recent webcast sponsored by the investment firm Stifel.

By charting each step of a transaction in the form of blocks that are validated before they are added, a blockchain process cuts the time lag incurred in achieving extended visibility and reduces the risk of information being corrupted as it moves through the chain, Wilcox said.Companies that have explored a blockchain for transportation have done so gingerly, to say the least. Danish ocean carrier Maersk Line is probably the furthest along, having completed a test of managing Maersk's cargoes using blockchain in collaboration with IT giant IBM Corp. Retail behemoth Wal-Mart Stores, Inc. is testing blockchain technology, mostly to track food shipments with its suppliers, according to Gartner Inc., a consultancy that presented at the Atlanta event. Japanese automaker Toyota Motor Corp. is considering a blockchain technology to track auto parts from the point of manufacturing to assembly plants in other countries, Gartner said.

What blockchain isn't
One wag at the BiTA event referred to a blockchain as "the thing that enables the thing." Scrambled syntax notwithstanding, the description is fairly accurate. Because it isn't a product or service, a blockchain doesn't replace technologies currently in use. Rather, it augments existing business-to-business integration systems with what Craig called a "shared visibility overlay." The challenge for developers and users will be to determine where a blockchain fits within the framework of the current IT mosaic, Bart de Muynck, research director at Gartner, said at the Atlanta event.

As with other very nascent processes, the jury is out on how a blockchain would actually perform. A present-day blockchain cannot handle a lot of data and is not scalable, experts said at the conference. Attaining the ultimate objective of executing smart contracts will depend on Congress, states, or the courts writing and interpreting laws granting them legal authority, a process that could take years.

There will also be new scrutiny placed on the software developers who are writing code to enable a blockchain. One of the pre-meeting conversations centered on whether a blockchain would dis-intermediate lawyers, who have long filled the role of a trusted third party. One attendee replied that lawyers would still be needed to help ascertain liability in the event of a problem, and that they will be riding herd on the developers. Not surprisingly, blockchain advocates said it is critical to establish a transitional mechanism between paper and smart contracts, and to produce a totally bug-free system for smart contracts. Speakers at the BiTA event emphasized that blockchain processes will not advance without a well-thought-out strategy, rock-solid collaboration among vested interests, and a strong set of industry standards governing folks with different agendas operating in what could become a radically changed world. As one attendee said, "What we are talking about is doing away with traditional trusted parties that have existed for centuries, and replacing them with technology, and with each other."