According to the trade group’s recently released annual survey, Food Retail Speaks,Technology investments may be the key to overcoming these challenges – but at what cost?
“Rapid adoption of technology was and is a key component”overcome challenges
This includes expanding e-commerce, adopting frictionless checkout in stores and using new technology to manage inventory planning, pricing and differentiation, a double-edged sword that promises long-term benefits but limited short-term gains, the survey showed.
“Rapid adoption of technology was and is a key component in helping food retailers and their suppliers overcome the many challenges posed by COVID-19,”Chief collaboration officer Mark Baum said nearly three-quarters of food retailers continue to invest in and experiment with technology to improve customer experience and increase business efficiency.
He explained: “LLast year, food retailers invested an average of 1.3% of total sales in technology, or more than $1.5b, and 83% expect their technology growth to increase again this year. Some of the areas where they’re really seeing a major tech overhaul include technology to personalize the shopper experience to enhance foodservice ordering and delivery and allow for dynamic pricing, product traceability, especially around mobile checkout systems to make checkouts faster, smoother. “
He added that food suppliers spent twice as much on technology over the same period as advanced data analytics, artificial intelligence and machine learning for business processes such as price optimization, assortment planning and supply chain logistics.
Does technology pay off?
But while nearly three-quarters of suppliers report that their technology investments in the last year have had a positive impact on profit margins, retailers have “The short-term impact of tech investments is less optimistic, with only about 39% seeing a positive impact on their bottom line so far,”Baum said.
A similar story is playing out in e-commerce investments, he explained.
He noted that the shift to e-commerce and omni-channel by consumers during the pandemic has sparked the most “Prolific and Earthquake” Changes in the food retail and supply industry, with 91% of retailers now offering online sales, and almost half of retailers reporting an increase in those sales by 2021, even as pandemic fears have receded.
He added that retailers don’t expect e-commerce adoption to slow anytime soon.
“About 20% of these retailers expect their online sales to grow again this year, although many have seen a significant increase in e-commerce during the pandemic – so food retailers’ online sales are 10% of total sales. The share continues to grow, now accounting for about 2.5% of pre-pandemic sales in 2019, rising to 5.7% of total sales in 2020, now 6.5% in 2021 and still growing,”He says.
To meet consumer demand, retailers are developing their delivery models and service differentiation strategies, with nearly 90 percent offering curbside pickup for online ordering and 56 percent offering home delivery, the report said Serve.
Only half of retailers report that e-commerce is profitable
Despite these advances, Baum said, “Many grocers are still trying to crack the code for online grocery delivery.”
He explained that most people feel that their capabilities or methods are immature — a feeling that can be influenced by the fact that only 51% say their e-commerce business is profitable and only 13% say they The online order and pickup or delivery model is actually a source of differentiation.
Credit card fees come at a cost
Another major challenge limiting the profitability of omnichannel products is the increased use of credit and debit cards and the accompanying high interchange fees, Baum said.
He explained that 85% of online purchases are made by credit or debit card, and by 2021, credit cards will be used for more than 75% of all sales, up from 68% in 2017.
“Credit card fees average around 1% of a retailer’s total sales, and for smaller retailers with 10 or fewer retailers, it’s even higher — 1.4%…these fees actually directly exceed the retailer’s bottom line and making it really challenging to keep consumption costs low, especially if you factor in rising inflation,”He says.
While these fees are part of the cost of doing business, they have grown exponentially in recent years, said Andrew Harig, vice president for tax, trade, sustainability and policy development.
“In 2021, merchant card processing fees will total $137.8b. This is a 25% increase from the previous year and more than double the level of the previous decade,”He said, according to Nielsen data. “That equates to an average American household paying $900 a year in credit card fees.”
While these challenges are associated with increased technology and omnichannel offerings, retailers and suppliers believe they are on the right track and will help them engage with modern consumers and build long-term businesses.