Brave new retail world impacts firms

Consumers’ changing purchasing habits – which include responding to widespread promotional offers, making more use of convenience purchases and hard discounters such as Aldi and Lidl, and doing more grocery shopping online – will require significant adjustments to the way supply chains operate.

“We are very clearly seeing a fragmentation of shopping trips … we are spreading our purchasing in up to three or four channels where we were probably one or two,”​ said Jim Moseley, md for General Mills UK & Ireland, speaking at the forum hosted by legal firm Stephenson Harwood and sponsored by Agrantec, Intertek, Tata Consultancy Services (TCS), insurance firm Aon, Colombus IT and NSF International.

“There is no growth in that, that is just a switching strategy from the traditional retailer to convenience, discounter or online. What it will bring to the manufacturer, certainly in the short-term, is cost and complexity,”​ said Moseley.

Cost and complexity ​

In the future he predicted: “It would not be so easy to forecast; higher inventories would be held; there would be more bespoke packaging for different channels and for me that is probably going to add some cost and complexity – at least in the short term.”​

The growth of the ‘omnichannel’ where shoppers expect a seamless service whether they buy products online for home delivery or click and collect, or whether they make traditional store purchases, will put increasing pressure on supply chain forecasting and fulfilment, said TCS’s Susan Reid. “Accurate forecasting really takes a lot of cost out of your business,​” said Reid, who for many years worked for Sainsbury in supply chain management.

Own-label suppliers said hard discounters – and foodservice outlets – were cheaper to service. While contracted prices with them tended to be lower, they took up less management time, often requiring one sales call a year, rather than the allocation of large teams of people, as with other retailers.

Generational change ​

Geoff Eaton, former boss of convenience company Uniq and, briefly, chief operations officer for Premier Foods, said the big four multiple retailers were not very well structured to service what he called “a generational change”.​

These changes were putting additional pressures on the supply base, said Eaton, with manufacturers looking at ways of tackling the problem.

He said: “Everyone is trying to compete on the same pricing ticket and all the big brands are trying to push their way into any part of the market that is growing.”​

“When your customers are in good shape life is tough but manageable, but when your customers are on the back foot and trying to work out how to make a margin when there's some really strong tides against them, then it's going to be difficult.”​

Find out why our business leaders thought mergers & acquisitions would grow in 2014​ here.