What does the FMCG future look like?

Posted by Allen Roberts on 2nd May 2018

It is easy to be critical of just about anything, much harder to be constructive, and make suggestions about how to change the things that attracted the criticism.

In my case, I have been critical of the retail gorillas, Coles and Woolworths for some time, specifically their capacity to change what appears to an outsider, to be their strategic priorities.

As a shareholder in both however, (via managed super rather than choice) I have been rewarded by the returns.

So, I am going to stick my neck out and make some observations, in no particular order, and would welcome feedback.

Delivery services

Busy crowded lives seem to require a delivery service, and Coles and Woolies have dabbled in it with the delivery trucks we now see around. I have not used either, but several acquaintances have, several extensively, and generally just shrug with resignation at the inaccuracy, inconsistency and uncertainty involved, and wonder if it is worth it. Perhaps the order/pick-up combination will be the answer to the ‘last mile’ problem, as most of us have cars.

In the US there is a service called ‘Instacart’ that appeared to be doing an ‘Uber’ on grocery shopping and distribution. In Australia, ‘Uber eats’ seems to be bobbing up everywhere, delivering from all manner of food service outlets. Shopping and delivering seems to be a small step to take, or just the delivery part after order assembly in store.

By contrast, Kaufland in Germany appears to have walked away from their on line grocery services, citing the costs of the ‘last mile’ making it unprofitable. This is in the face of Ocado in the UK seeming to go from strength to strength.

In summary, a lot of experimenting to do before the best model evolves, but the common element appears to be basket size.

Encouraging on line shoppers of any sort to increase the order size makes some of the other problems less important. It is a standard retail metric, and even more appropriate for on line.

Digital marketing development

Amazon has mastered the art of cross selling and using feedback to overcome the barrier of not being able to see, touch and feel products as you can in a bricks and mortar store. The current on line gorilla catalogues are just that, catalogues, little more.

No cross selling, no recipes, no personalisation based on browse and purchase history, no seasonal suggestions beyond the digitisation of the generic ‘shop now for Christmas’ stuff. With a few digital tweaks, the current catalogues look like the pages of Co-Op ads in the Wednesday afternoon newspapers that used to be an important part of dealing with the gorillas.

Opportunity waiting?

Store automation

Amazon has ignited retail with Amazon Go, poking into action all sorts of activity from the usual suspects as well as some unexpected places.

Hema supermarkets are quickly opening stores after 18 months of testing and development in a Shanghai pilot. Owned by Alibaba, the tech in these stores and the levels of service they offer will, or should concern the two Australian gorillas. Alibaba also has a pilot unmanned Tao coffee shop.

I wonder at the quality of the coffee, but who would want to bet against that being commercialised?

Another Chinese start-up called ‘Bingo Box’ is planning unmanned convenience stores after a (reported) successful pilot in Shanghai taking Amazon Go type technology a step further.

It also seems obvious that there will be automation applied to the routine and labour intensive job of shelf filling, facing up, and highlighting offers of various kinds.

Wal-Mart is experimenting with that idea in 50 stores, using robots to check inventory stock weight, location and pricing, and the other US retailers are not being left behind.

Kroger is playing with mobile apps, to communicate offers, lists, coupons, and personalised messages, as well as scanning items in store to reduce checkout lines.

Supply chain automation

Somebody, somewhere, will apply Blockchain to the entire supply chain for a product. It will be kicked off by a consumer taking a product from a shelf, being relayed back through the chain, creating production orders, invoices, inventory management, all ending up in an automated Kanban system at the store selling face, creating a genuine demand chain. The technology to do all this exists, in pieces, so putting it together will not be far off.

Allen Roberts is a guest contributor to Australian Food News and writes another of his regular articles hereHe is the Director of Strategy Audit www.strategyaudit.com.au and has worked in the food sector for more than 35 years. To read his full biography click HERE.