Six solutions to measure on-shelf availability in grocery retail

We live in an age of immediacy. Customer expectations are difficult to meet, and customer loyalty is highly fragile. If you do not have the right product on the right shelf at the right time, you give your customer the right to try elsewhere.

To combat this, retailers should ensure that their product availability is maintained to the highest standard, not only to satisfy the challenge of the physical store customer, but to ensure maximum satisfaction for their online customer too. 

This is no small challenge, especially when you layer other operational considerations into an increasingly complex ecosystem. Supply chains, store processes, labor, technology, and domestic economies all affect your store operations.

It is essential to understand that how to deliver on-shelf availability (OSA) is a question with several answers. Retailers will most likely use a mixture of internal and external solutions to measure and improve  OSA, for their business.

In this blog, we will evaluate the potential choices that a retailer can make when evaluating an OSA solution, looking to provide you with all the information you need to make an informed decision for your business. Each solution assessment will address the strengths, weaknesses, capital investment, costs, and return on investment (ROI).

As a disclaimer, we make some assumptions that you already understand which metrics you are looking to track, but if not, there is a great blog here that will help you to define these.

TLDR: this blog goes into a lot of detail, but we also have a useful summary that you can download and share internally. 

Download here

Internal Solutions for Measuring OSA

We will start by reviewing the traditional, internal measures that retailers have adopted to address the OSA challenge.

Gap scans

This approach uses in-store teams to provide a simple yet manual solution. Retailers will often deploy their associates to manually check and count store out of stocks, providing you with information on what is and is not available.

Pros:

• Very quick to deploy if you can leverage existing teams.
• Provides you with a quick metric to start making improvements.

Cons:

• Labor costs are only rising, and this method is resource-heavy.
• OSA is only ever measured at a point in time (i.e., once per week). So, the data becomes obsolete quickly.
• The approach is prone to human error as people often miss critical out-of-stock occurrences (e.g., faced over / plugged gaps). 
• Difficulty measuring every store, every week.

Data accuracy: Moderate
Capital investment required: Yes
Costs: $$$$
ROI: 2X

Inventory Based OSA

First and foremost, store colleagues are responsible for accurately maintaining inventory based values. They take on-hand data, adjusted by deliveries and sales through the checkout, to assess what is in and out of stock.

Pros:

• Good inventory accuracy means a high quality of order calculations and accurate delivery levels.
• Frictionless method, it is calculated through existing in-store processes.

Cons:

• Inventory inaccuracy makes this solution ineffective; our research showed that c.50% of grocery store inventory records are inaccurate within two weeks of the stock take/count.
• Assumes all inventory is available to be sold on the modular/shelf.
• In the absence of real-time inventory data, it cannot identify intraday out-of-stocks.
• Inventory based OSA does not prioritize out-of-stocks by dollar value.

Data accuracy: Low
Capital investment required: Yes
Costs: $$$
ROI: 3X

Nil Picks

A nil pick is the outcome of an online customer not receiving an item they ordered. Retailers leverage this data to determine their OSA, with the assumption that if an item is nil picked, then it must not be available to purchase.

Pros:

• Can be leveraged alongside your existing online offering.
• Labor costs aren’t as relevant as they already carry out picks.

Cons:

• Online offerings are not in every store.
• Picks do not look across every hour of the day.
• Prone to manual errors.
• It is not universally available for all SKUs, in all stores.
• Gameable process through store/associate intervention.

Data accuracy: Moderate
Capital investment required: None
Costs: $ - $$$ (the increased cost comes from the investment in an inventory management system)
ROI: Unknown, as it is not a standard methodology

External Solutions for Measuring OSA

Internal solutions, while functional, typically require high capital expenditure and carry data quality risks. Therefore, retailers have begun to explore specialized, external solutions to tackle the OSA challenge.

Camera technology

Cameras are ceiling or shelf-edge mounted to provide a real-time view of product availability. They are typically accompanied by computer vision software that interprets the images, providing actionable insights to in-store associates.

Pros:

• Provide real-time data without the need for human intervention
• Certain systems can scrub personally identifiable information from their feeds
• They can scan backroom, top stock, and primary and secondary locations to provide real-time ordering.
• Provides actionable data for store staff to execute.

Cons:

• Camera technology fails to address true item availability outside of pure gaps on the shelf.
• Incredibly high initial and ongoing capital investment
• Challenge getting the cameras deployed across Fresh and loose items in the store.
• They are intrusive, and as such, there is customer concern that cameras infringe on privacy.
• The shelf edge cameras are prone to theft and high damage.
• Speed of processing and resulting output is highly reliant on store network and infrastructure.
• Coverage can be poor, with fresh being a weakness at the moment.

Data accuracy: Very High
Capital investment required: Yes
Costs: $$$$
ROI: 5X

Robotics

These solutions provide a robot that patrols the shop floor scanning the shelves as they go. Typically, they are combined with a software solution that provides data and insights to a store team and allows actions to be taken manually and automatically. 

Pros:

• Able to identify a variety of out of stocks and provide a root cause.
• Robotic systems know when you have inventory in the back to prioritize restocking.
• They know which shelves are most effective and keep them stocked with high-margin SKUs.

Cons:

• Only able to safely perform 1-2 scans per day as robots cannot travel down busy supermarket aisles.
• Prevents getting accurate out-of-stock data during peak store hours - which is most valuable to retailers.
• Very high capital investment.

Data accuracy: Moderate
Capital investment required: Yes 
Costs: $$$$$
ROI: 2.5X

AI and ML-based SaaS Solutions

SaaS solutions will utilize readily available retailer data, processed through proprietary algorithms, to detect and alert on real-time out-of-stocks. They are typically agile and can be tailored to the client’s needs, delivered as standalone apps, or integrated into a retailer’s existing system.

Pros:

• Economical solutions, as there are no hardware or capital costs.
• They are scalable and can work across 100 or 5,000 stores.
• Able to identify broad saleability issues, such as damaged products or faced over gaps.
• There is a high speed to deployment and ROI realization.
• Easy to integrate.
• Reduces manual labor costs and frees store staff up to serve and sell customers.
• Cannot be gamed -  measures what goes through the checkouts.
• Seamlessly integrate with omnichannel processes, e.g. item catalogue maximization. 

Cons:

• Retailers need to be able to provide the necessary input data, e.g., delivery data or sales data.
• Slow-selling items take time for probability to build.

Data accuracy: Very high
Capital investment required: None
Costs: $$
ROI: >30X

Selecting the right OSA solution for your business

The options available are varied, both in capability and investment. They are also not binary, meaning that retailers will typically leverage several of these solutions simultaneously within their estate.

Ultimately, it comes down to your business position and budget. Still, with rising inflation, online and omnichannel fulfillment, and new customer expectations, existing razor-thin margins will come under increasing pressure.

As a result, CapEx budgets will be scrutinized, so we predict that retailers will need to look to technology and insights to adapt and evolve, with internal solutions becoming support mechanisms instead of standalone solutions.

Wherever your business lands, we recommend you consider the following:

• Do you have your problems and metrics clearly defined?
  Doing so makes it easier to procure a new solution, even when talking to multiple suppliers.
• Is your buying committee aligned?
  These solutions have far-reaching impacts and must be understood across the supply chain, retail operations, and commercial teams.
• Are you ready to push compliance across your estate?
  The answer should be yes, as benefits will be fully realized if compliance is high.
• Can your provider of choice deliver an end-to-end offering?
  By that, we mean can it tackle more than just availability and support you with your waste challenges, inventory record accuracy or provide online solutions?
• Does your prospective partner have a track record in transforming on-shelf availability?
  The retail technology space is awash with inflated claims or savings that are based on individual stores across an estate. It is important that you do your due diligence, and we would recommend speaking to existing clients as part of your purchase process.
• Have you already invested in camera or robotics technology but still have gaps?
  There are suppliers that can ingest this data and leverage it to plug these gaps and ensure your existing investment is not wasted.

As a business, we process 10% of the world’s grocery sales data every day. We support some of the world’s largest retailers and CPG brands to access the insights they need from their existing data at an unparalleled scale. We provide an end-to-end solution that can be rolled out across your entire estate, tackling waste, availability, online, and more. It integrates with multiple data sources and can ingest camera and robotics data with ease. Most importantly, at a time when budgets are under scrutiny, our track record of transformation means we can deliver >30X ROI with a modest investment. 

We would be happy to speak with you and explain how our solution works; equally, if you are facing some of the challenges that have been mentioned above, we would be happy to discuss these further.