Originally published by Quantzig: Demand Forecasting Analytics Drives Profit Margins for an Online Grocery Store
The retail landscape has undergone a significant transformation with the rise of demand forecasting analytics. This revolution is particularly evident in the online grocery segment, where the ever-increasing digital lifestyle has reshaped consumer shopping habits. As consumers embrace the convenience of online shopping for everything from clothing to groceries, the retail industry, including the grocery sector, is adapting to the ongoing digital revolution.
Online Grocery Shopping Trends
Recent industry reports highlight the rapid growth of online grocery shopping. Approximately one-fourth of online shoppers currently purchase groceries online, with an additional 55% expected to join the trend soon. Global online grocers are experiencing a threefold year-over-year growth rate, indicating a substantial market shift towards digital grocery shopping.
However, despite promising statistics, online grocery stores face unique challenges, primarily due to the perishable nature of food products. This challenge sets them apart from other segments within the retail industry, such as electronics or apparel. To overcome these hurdles, online grocery stores must leverage the right technology and analytics solutions, such as those provided by Quantzig's retail experts.
Challenges in the Online Grocery Segment
Inventory Management and Delivery Costs: Managing perishable items with a limited shelf-life poses significant challenges. Specialized delivery infrastructure, including containers, warehouses, and vans, requires substantial initial investment.
Low-Profit Margins: Despite the growing preference for online shopping, customers often resist paying extra for faster delivery and quality assurance. Overcoming this resistance is a major challenge for online grocers.
Client Overview:
Quantzig collaborated with a major online grocery retailer facing challenges in demand forecasting, resulting in food wastage, markdowns, and margin loss.
Client Challenge:
The client aimed to devise effective strategies to mitigate the risk of food wastage caused by incorrect demand forecasting. Seeking to enhance profit margins, the online grocery store partnered with Quantzig to leverage retail analytics expertise.
Business Impact:
Quantzig's demand forecasting solution enabled the client to develop a hybrid model, precisely predicting online demand and reducing markdowns. The model enhanced transparency in sales and marketing spend, leading to increased conversion rates and improved customer knowledge.
Insights from the Demand Forecasting Solution:
As omnichannel retail gains momentum, targeted online demand becomes crucial. Online retailers must supplement in-store forecasts with online demand forecasts, considering potential variations in demand and fulfillment locations. While demand forecasting is essential for online grocery success, merchandising analytics remains the core aspect for profitable business management.
Connect with our analytics experts to explore demand forecasting solutions tailored for your business.
