How AI can help retailers strike balance between availability and waste

The consumer of today expects a wide range of products and instant availability when shopping in physical stores, however they are also becoming more aware of sustainability and conscious of waste all the way from the farm to the fork.

The challenge of being able to offer outstanding availability, whilst keeping waste down, is becoming more and more important for retailers in the grocery space as they compete in an increasingly competitive market. As a result, many are racing to discover innovations and new business models that can help them manage stock levels more effectively.

Increased exposure of environmental campaigns and the impact of social media will undoubtedly heighten the pressure on retailers to adapt over the coming years, so what emerging technologies can these companies turn to in order to drive down waste?

Predictive analytics and forecast precision

The ability to shape accurate sales forecasts is fundamental when it comes to aligning stock with customer needs. To achieve this, retailers need to develop the most detailed picture of consumer behaviour, analysing how they respond to external variables such as the weather and significant calendar events, and understand how that influences product demand.

For example, if the weather has taken a bad turn, retailers need to be able to predict how sales of certain products like ice cream or barbeque food are likely to be impacted, so that they can avoid surplus stock. Similarly, if positive conversations are happening around a certain item amongst social media users, retailers want to be able to raise stock-levels to ensure the right availability for its customers.

This can be achieved with the use of advanced predictive analytics engines, which integrate demand-influencing factors (DIFs) into the system to produce the most accurate sales forecasts. These solutions can observe the impact of previous consumer or environmental trends to automatically update forecasts, helping retailers adjust stock accordingly. The result is that retailers can continue to ensure first-class availability without the same risks of wastage.  

Product tagging

Of course, in order to build reliable forecasts that inform replenishment orders, a retailer needs to have an accurate view of their current stock. Availability is influenced by stock file accuracy, and every retailer will know that ‘the system’ is invariably a liar. Products that appear on record but cannot be located may have never existed in the first place, been damaged or expired and never written off, or either stolen or misplaced.

In order to restore faith in the system, retailers can adopt radio-frequency identification device (RFID) tagging to gain a true, real-time view of their inventory. By using microchips to wirelessly transmit serial numbers to a reading device, RFI allows goods to be tracked electronically along the supply chain from warehouse to point of sale without the need for human intervention.

This technology can alert staff to misplaced groceries, and allow them to be retrieved before they are damaged. If a shop has ‘smart tagged’ their store, they are assured full stock visibility, meaning the data they’ve supplied to the sales forecast system is up to date and minimising the over-stocking that leads to wastage.  

Customer heat mapping and dwell time analysis

Another key factor in improving the replenishment process is understanding how consumers behave in a physical store, including responses to different store layouts, product placement and store availability. For example, if customers are known to take a certain route through a store and dwell in specific areas, products that typically go to waste can be moved to these locations in order to grab the interest of customers.

A number of retailers are starting to leverage smart cameras, enabled with AI technology, to generate a heat map of store traffic, and have that data translated into a dashboard for store managers. This video intelligence can help retailers determine issues with certain products, and adapt their stores to better suit shoppers needs.

Meanwhile foot traffic software is also being leveraged to track visitor patterns, helping retailers understand when stores are busiest so they can optimise staffing for quick replenishment of products, or move products around throughout the day to improve sales.

By tracking their customers’ behavior electronically via heat mapping and examining this data through dwell time analysis, retailers are able to enhance their replenishment capabilities and modify unpopular product offerings to reduce waste. 

Consumer waste data

The reduction of food waste in physical stores is a major challenge for retailers, however research indicates that approximately 30% of all goods purchased each year around the globe, are never used by consumers. To help reduce wastage over the coming years, food grocers need to consider how they can help consumers in their purchasing decisions.

Mobile apps provide fantastic opportunities for modern retailers to make consumers responsible for their personal waste. The most simple use case is in notifying consumers of the products they do and do not need – by using Internet of Things (IoT) to tap into smart sensors inside fridges, retailers could provide their customers with a digital shopping list that prevents unnecessary purchases.

Retailers could also leverage mobile apps to gather data on consumer waste, and combine it with predictive analytics to provide counsel to customers over their purchasing.  They could be incentivised to make these decisions through IoT initiatives, such as ‘loyalty to waste reduction schemes’ on shop apps or social media leaderboards that compare each customer with their peers.

According to IGD, the UK food and grocery market is set to grow by 14.8% between now and 2023. New store openings and format development are said to be key drivers, challenging the idea of a supposed decline in brick and mortar retailing.  Such a growth would further intensify the challenges facing retailers in reducing waste.

However, technologies like predictive analytics, RFID tagging and customer heat mapping can provide retailers with more information on consumer behaviour than ever before, generating the insights that help them be more reactive to the factors and trends that might reduce availability or increase waste. By using these technologies to also build a relationship with customers increasingly concerned about food wastage, there is an opportunity for grocers to become leaders in the zero-waste movement.  

Gabby Thomlinson, retail supply chain consultant and Murray Wilson, senior retail supply chain consultant at Capgemini.

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