Supermarkets turn to technology to manage grocery costs
Published September 28, 2020
Profit margins at grocery stores have always been razor thin. Among all businesses, food retailers have one of the lowest returns, typically 1 to 3 percent – often the equivalent of just pennies per item sold. And if you add continual minimum wage increases, rising wholesale food expenses and heightened competition for employees? Those margins get even thinner.
And that’s not all: Now, grocery retailers are also facing the added pressure of COVID-19-related cost concerns. There are new requirements and costly challenges, from pandemic cleanliness and adding new experiences like curbside shopping, to contending with supply chain interruptions.
It’s all happening at a time when the competition has never been hungrier. Along with traditional grocery stores, membership clubs like Costco and Sam’s Club, convenience stores, online grocery retailers, farmer’s markets and specialty food stores are vying for customer food dollars.
That’s why grocery and supermarket brands are increasingly turning to technology.
Improving the in-store customer experience—without spiking labor costs
Leading grocery retailers know there’s more to the shopping experience than selling food. They have to provide a positive customer experience every single time. Maybe that’s having smiling employees who offer the friendliest service in town. Maybe it’s having the cleanest, safest stores. Or adding hand-held mobile scanners or mobile shopping that feels fast and futuristic.
Finding ways to differentiate on customer experience every single time is vital to maintaining your brand’s competitive edge. That’s because today’s busy shoppers are seeking a less transactional, more value-added in-store experience. People want convenience. They want ease. And they want safe, fast experiences from a brand they trust to have what they need.
Delivering this kind of customer satisfaction is directly tied to your labor costs and customer satisfaction. This is where technology and automation can help; they're powerful tools that can help you reallocate labor to more high-return, customer-facing departments while improving productivity and efficiency, which also saves money.
Responding to rising labor costs
According to the U.S. Department of Labor, payroll costs are the biggest—or one of the biggest—operating expenses of any company. That’s especially true in the retail and food sectors. And labor costs continue to rise.
Employee labor percentage, also called the cost of labor percentage, is expressed as the overall payroll expenditure for a business as a proportion of gross sales. For large chain grocery stores, the median employee labor percentage is 9.4 percent, but the extreme end is nearly 14 percent for smaller grocery retailers.
Tracking employee labor percentage is especially important; it’s a key metric that retailers can use to identify labor productivity and any opportunities to save on costs.
That’s where technology comes in.
How technology helps grocery retailers control labor costs
Grocery retailers today have to be nimble; they have to be able to dynamically respond and adapt to shifting market realties to compete and get ahead. So it’s more critical than ever for grocery store owners to better manage labor costs and maximize productivity.
Leading grocery store operators know this, so they’re increasingly turning to technology to help them responsibly stem rising labor costs, boost associate productivity and safeguard their profits. With the right technology, grocery store operators can eliminate repetitive employee tasks. That helps grocery personnel focus on delivering value-added customer service and responding to changing shopper expectations.
Whether you’re a global grocery operator like Walmart, a regional food retailer like Kroger or Publix or a local small grocer, there are technologies that can help you increase customer satisfaction, optimize labor costs and improve your bottom line.
Leading grocery store retailers are increasingly turning to technology to help them stem rising labor costs, boost associate productivity and safeguard their profits.
Benefits of employee scheduling software
Picture this: your sales floor is humming, but two cashiers have called out. Your store manager didn’t find out in time to cover their shifts. Your lead cashier can get customers through your lines pretty fast—but is already in the weeds. Meanwhile, one of your stock employees keeps running into overtime. And your deli workers keep swapping shifts—and it’s hard to keep up.
Now imagine that you have innovative, intuitive employee scheduling software to help you more efficiently manage your labor. Shifts run like clockworks, employees can handle a lot through self-service and everyone can better can focus on important priorities.
That's because employee scheduling software offers a big-picture view of your operation that you can check in on any time, while automating multiple, repetitive tasks. Improved, labor-saving impacts include:
- Building better schedules
- Keeping shifts running smoothly
- Eliminating overtime
- Responding to demand-driven workforce changes
- Facilitating messaging between managers and employees
Consider installing or increasing self-checkouts
In the 1990s, barcode scanning registers revolutionized the grocery store checkout process, a traditional pain point of shopping. Just like that technology, the introduction of self-checkouts (SCO) has become of staple in grocery stores and big box retailers.
Time-crunched customers not only appreciate having the SCO option as a way to skirt lengthy checkout lines—they expect it. And amid the pandemic, many shoppers prefer them. In fact, 49 percent of respondents in a recent NCR survey said they’ll “definitely” or “probably” use SCO more often. Another study found 75 percent of shoppers are likely to use grocery store or convenience store SCO.
The benefits of this technology don’t just include speedier checkout and improved customer experience. The benefits extend to the business, too.
49% of shoppers say they’ll “probably” or “definitely” use self-checkouts.
When grocery retailers install self-checkouts, associates can usually supervise four self-checkouts simultaneously, rather than the 1:1 of a traditional manned lane. For many employees, it’s a more rewarding role.
And self-checkout doesn’t mean cutting your labor force. With SCO, you can keep your staff employed and simply reallocate them to other customer-facing areas of the store, such as the deli, meat and seafood counters, or bakery and floral department. Or those employees can focus on restocking shelves or meeting rigorous COVID-19 cleaning requirements.
Just like your employees, your self-service options don’t have to end with, well, the front end. Some grocery retailers are boosting efficiency, productivity and the bottom line with self-service ordering kiosks in areas like the deli or their quick-serve restaurant.
Ramp up sales forecasting software
No shopper likes to confront an empty shelf—which is why many retailers rely on demand intelligence software. This software stores past purchasing patterns, helps predict future purchasing behavior and customer reaction to different price points.
Armed with this item-specific data, grocery store operators can optimize promotions and merchandising, and better plan product fulfillment.
No matter your goal as a grocery or supermarket retailer, there’s a technology that can help you manage your operations better while saving costs. The key is to work with a technology partner who offers an open, API architecture that can easily integrate with third-party partners and related technologies that help you adapt and respond the needs of you, your employees and your customers, no matter how they change.
