Interview: Brittain Ladd sizes up the global grocery industry
RTIH discusses various hot grocery retail topics with Brittain Ladd, a supply chain consultant who has also worked at Amazon, Deloitte and Capgemini.
RTIH: You’ve been critical of grocery retailers during the coronavirus outbreak. What do you feel they could have done and could be doing differently during these tough times?
BL: I appreciate the fact that many people who work for grocery retailers are working very hard to meet the needs of consumers.
However, executives became aware of the coronavirus in December 2019 with increased information being provided to them in January. Reports received by the retailers contained confirmed cases of panic buying and hoarding.
My argument is that the leading players should have at a minimum utilised Monte Carlo simulation to identify potential disruptions within their retail ecosystems due to panic buying and hoarding.
Had Monte Carlo simulation (and other analysis) been conducted, retailers would have forecasted extensive shortages and empty shelves. To better prepare and minimise disruptions, they should have contacted their consumables (meat, milk, eggs, fruits, vegetables), CPG suppliers (toilet paper, cleaning supplies, hand sanitiser), and over the counter medicine suppliers and instructed them to massively ramp up their production.
In turn, the retailers should have contacted their third-party logistics companies and transportation providers with instructions to purchase every available dry van and refrigerated trailers. The trailers could have been loaded with groceries and then pre-positioned in the parking lots of stores to rapidly replenish shelves. Additional warehouses could have been leased for more storage, and the retailers could have expanded the number of suppliers to purchase additional essential items.
They could have also informed President Trump about their concerns along with a recommendation for additional production to be ramped up and the National Guard be activated to help with deliveries to homes.
RTIH: What other trends are shaping the future of grocery retail?
BL: Micro-fulfilment is a major trend. The coronavirus has given retailers a look into their future when online grocery ordering increases from just 3% of their sales to 20% or more. They are already experiencing crowed aisles as customers and online grocery order pickers fight for space in the aisles.
The smartest investment is installing an MFC inside their stores. Unlike the trend of placing an MFC in the back room of a store, I recommend evaluating placing the MFC in the middle of the store.
As grocery retailers embrace MFCs, they will have to rethink their supply chains as MFCs require frequent replenishment. This will lead to the next big trend, automation across the supply chain. This does not mean signing an agreement with Ocado. Instead, I recommend that grocery retailers evaluate automation solutions from providers that have reimagined the distribution through technology and robotics.
Retailers will also turn to robotics for moving inventory from back rooms to their shelves where an associate will pick products off a tray and place them on the shelf. By 2030, stores will have robots in use capable of shuttling inventory to shelves and using robotic arms to place the product on the shelf.
“Grocery retailers can no longer maintain the status quo or ignore the tsunami of technology and changing consumer trends coming at them”
RTIH: How about industry consolidation?
BL: Yes, that will also be a trend throughout the 2020s. Steps taken to weaken the impact of the coronavirus has also made failing and struggling grocery retailers even weaker. My advice to regulators in the UK and other countries is do not try and rescue grocery retailers. Instead, simplify the process for strong retailers to make acquisitions and merge.
For example, the Competition and Markets Authority in the UK should contact Sainsbury’s and inform them that they can proceed with acquiring Asda. The deal I want to see most of all is Tesco acquiring or merging with Moscow-based X5 Retail Group.
Mergers and acquisitions will also take place in the US. Cashierless stores will be a major focus of many retailers as they simply can’t ignore the cost savings removing cashiers will provide.
Retailers will continue to invest in AI and machine learning to improve their operational and analytical capabilities to improve the customer experience.
RTIH: You’ve said the changes that will take place in the grocery industry over the next five years, will exceed all of the changes that have occurred since the first supermarket (Piggly Wiggly) was opened in the US in 1916. Could you expand upon that?
BL: Grocery retailers can no longer maintain the status quo or ignore the tsunami of technology and changing consumer trends coming at them. Most of them continue to focus on reducing their costs. Over the next five years, they instead will have to answer these questions:
What is our MFC strategy? Which MFC provider is best? How many MFCs do we need? How do we adapt our supply chain?
How do we reduce our labour needs through robotics?
Do we need as many stores since online grocery sales are increasing?
What do customers want? Are we providing customers with the optimal in-store experience? What do we need to change?
How do we eliminate the use of cashiers?
Grocery retailers will quickly learn that the current model for online grocery isn’t sustainable. Yes, MFCs will help but retailers will also need to leverage the concept of ‘mobile retail’ that will become commonplace thanks to companies like Robomart.
As easily as hailing an Uber, consumers will be able to hail a mobile store that offer fruits, vegetables, meat, milk, eggs, dairy, baked goods and over the counter medicines on individual mobile marts. Retailers will have to identify how to integrate this option into their ecosystems.
The trend over the next five years will be that consumers want increased online grocery delivery fast. As consumers abandon stores, retailers will have to identify how to reduce their square footage dedicated to groceries and replace groceries with something that can generate revenue.
A major driver of change over the next five years will also be Amazon. Retailers will have no choice but to adapt to the changes it introduces.
Be sure to check back later this week for the second part of our interview with Brittain Ladd, including his thoughts on Walmart.