Amidst inflation and supply chain shortages, retailers have opportunities to manage customer expectations and provide reassurance that they are doing all they can to keep items in stock and provide affordable options.
Recent reports from the U.S. Bureau of Labor Statistics showed that the Consumer Price Index (CPI) has continued to rise in 2022, including significant increases on grocery products. In March the CPI for food at home was up 10% year over year.
Data from the U.S. Department of Agriculture shows inflation across categories throughout the store, from fresh meats and produce to frozen foods and shelf-stable packaged goods. The USDA recently forecasted food inflation of 4.5% to 5.5% for the full year, increasing its previous estimate.
With elevated fuel prices expected to persist for some time, the added costs of transporting goods from plants to warehouses and from warehouses to stores will continue to add incremental price increases to groceries, at least in the near term.
Meanwhile, out-of-stocks in various categories have also plagued retailers since early 2020. Supply chain shortages first emerged at the start of the pandemic when consumers stocked their pantries and freezers to full capacity, and the shortages have persisted off and on throughout the store for various reasons, including ongoing stockpiling by consumers, capacity limitations among producers, and labor shortfalls that limit production.
Below are some of the ways food retailers can minimize the disruptions that have been caused by inflation and product outages.
Offer options for customers
One way food retailers can minimize the disruptions caused by out-of-stocks and steep price increases is by steering consumers to alternative products that have a more dependable supply or are available at lower price points. This can be done with physical and online merchandising, such as placing items on prominent displays or featuring them on ad specials or in recipes.
Many retailers have already reported that their customers are switching from higher-end cuts of meat to ground beef to save money on their grocery bill. Retailers can encourage this behavior and drive sales by promoting ground beef as an alternative and suggesting recipes that help their customers economize. Consider promoting innovative recipes or suggesting creative family meal solutions, complete with displays offering all of the ingredients together.
Creating more awareness around private labels can also help steer customers toward more affordable solutions. Consider promoting store brands overall, as well as specific store-brand products, to remind customers that they can help cut their grocery bill throughout the store.
Communicate with suppliers
Retailers need to maintain communication with their suppliers about which products are expected to be in short supply and which ones will be available in abundance. This will help ensure that you aren’t creating demand for items that you won’t be able to keep in stock.
Consumers won’t appreciate making the effort to visit your store if they can’t find an item that your own marketing content promised would be there.
Establish new vendor relationships
Although it can be time-consuming and labor-intensive to onboard new vendors and introduce new products onto your shelves, retailers have learned during the last two years that this can be a viable solution for keeping products in stock.
Many grocery retailers switched to new or alternative suppliers for essential items such as hand sanitizers, masks, paper towels, and toilet paper during the peak of the demand for those items in 2020, and there may be opportunities for retailers to employ similar strategies for high-demand grocery items as well.
Retailers can try going through their existing distributors to find alternative suppliers, or they can look for other sources of product, such as local farmers and producers. Local producers may have the added advantage of shorter supply chains from their facilities to your stores. Keep in mind, however, that many smaller suppliers will be dealing with the same labor shortfalls and manufacturing capacity constraints as the larger firms, so you may still face potential out-of-stocks.
In addition to bringing on new vendors for some products, there may also be opportunities to expand your relationships with existing vendors to bring in suitable alternative products to replace items that are in short supply.
Be transparent with customers
Most consumers should understand that price increases and product out-of-stocks are generally not the fault of the retailer, but it doesn’t hurt to communicate clearly about product out-of-stocks in particular.
If products are out of stock, make sure you have a clear, sympathetic message that your employees can relate to customers about why there are challenges in the supply chain. Include anything that is known about when products will be arriving to the store, and be ready to suggest alternatives, including store brands, if available.
Customers might turn to other stores to look for products that are in short supply, but if you continue to focus on serving their needs in other ways to the best of your ability, you stand a better chance of retaining those customers for the long term.