The modern trend toward preparing and enjoying tastier, healthier and more sustainable foods continues, and it goes by many names. The fresh food movement. Slow food. Farm to table. These and many others are all delayed reactions to decades of fast and prepared foods and their effects on our culture, obesity, and our overall health. By and large, all these foodie movements have something in common. They reject unhealthy ingredients, additives, excess calories, and dubious nutritional value of prepared foods, not to mention lackluster taste, in favor of a flavorful and often (but not always) healthier dining experience—even if it costs more and takes longer to prepare.
These trends have spawned a plethora of fresh-food restaurants to cater to their followers, but they’ve also inspired ordinary home cooks to try their hands at fresher, healthier foods. That’s put pressure on local grocers to stock more varieties and quantities of fresh meats, exotic cheeses and organic dairy products, not to mention a wider variety of less common produce. To satisfy these new home gourmets, retailers have to stock everything from locally sourced produce, dairy and meats to exotic imported fare like truffles, spices and other once hard-to-get items.
But what do the grocers get out of all this? Is the move toward fresh food and healthier meals a challenge for today’s retailers—or an opportunity?
Squeezing an already slim margin
In an industry of already narrow margins, satisfying the demands of fresh-foodies can be difficult. The margins on fresh foods vary from item to item and between departments, but when we cater to real foodies, we get into specialty items.
Whether they are organic, locally grown items or exotic imports, specialty items cost retailers more than their run-of-the-mill counterparts. Remember that we’re not just talking about milk and eggs, iceberg lettuce or ground round. We’re talking about less common imported meats or exotic fruits and vegetables many shoppers and home cooks have never heard of. Is it profitable to stock these pricey items to satisfy the foodies?
While fresh food fans are content to pay extra at the grocery store to create their culinary masterpieces, there’s a fine line which many won’t cross. The problem isn’t only whether the profit margin for these items is more or less than for traditional fresh foods, frozen or canned items. Whether you overprice or overorder these items, the problem is that margins on all fresh foods get slimmer if you end up throwing a good chunk of it in the dumpster.
Margin management: Balancing happy foodies with a healthy bottom line
The trick with specialty items, then, is not any different than for other grocery items with short shelf lives. To keep your foodie customers satisfied, you have to stock these items. But to be profitable, you have to order and stock just enough to cover the demand, so that little or none gets tossed out the back door.
Doing that effectively and consistently requires more than supermarket veterans making educated guesses when it comes to ordering. Even long-time employees can’t be aware of every new product, every weekly special, or every new foodie trend. And it also takes more granularity than national or even regional forecasts can provide, because after all, every store has different customer purchasing patterns.
Maximizing profit and minimizing waste for fresh items takes a margin management solution with real business intelligence. A smart margin management solution can collect and analyze data about customer buying patterns from the point of sale, then recommend order quantities of each specialty item week-to-week, right down to the individual store. It can even factor in planned promotions, time of year, holidays, and even local community events that affect local shoppers and what they buy.
What’s more, as more data is collected over time, the effectiveness of analytics-driven margin management continuously improves, as does the accuracy of your fresh item orders. And that means just like the appetites of the foodies, your margin on these fresh items will keep on rising.
Ready to find out how a margin management solution with built-in analytics can satisfy the requirements of both your foodie customers and your bottom line? We’ve compiled Four Mindsets for Maximizing Grocery Store Profit Margins: