Artificial Intelligence in the FMCG Space

Stuart Elmes

 


Ecommerce has a simple and enticing pitch to offer consumers: try me and be amazed at how much easier shopping will be. But in the FMCG space, consumers who give it a go are often disappointed with the results. Consumer satisfaction with brands and retailers continues to plummet, and even the reliably popular Amazon has seen its ratings tumble, dropping out of the top spot in the American Consumer Satisfaction Index for the first time since 2010. Another recent survey found that of the 40% of American consumers who order groceries online every week, more than half were dissatisfied with the services provided, citing high fees, lack of same-day delivery, limited product selection, and inconvenient and late deliveries as the reasons for their unhappiness. For brands and retailers looking to go the last mile and give consumers the convenience they crave, the solutions they’re looking for lie in utilizing AI.


Optimizing Supply Chains

artificial intelligence in the FMCG space

In FMCG, supply chains are complex and multifaceted creatures. They often involve third-party delivery providers, numerous warehouses and suppliers, and a host of other factors that can complicate matters and hurt thin profit margins. For many FMCG players, there is a pronounced lack of overarching control in the supply chain, and the right hand doesn’t know what the left hand is doing. By optimizing technology, retailers can connect all of the moving parts involved to enable employees and contractors to utilize online and offline data to increase efficiency, profitability, and consumer satisfaction. 

Creating a sophisticated feedback loop will allow you to predict things like demand, optimal price-points, and when to replenish stocks, as well as giving a significant leg-up on designing effective promotions. Cloud-based systems will also allow you to manage and track your inventory in real-time, ensuring you keep high-demand items in stock and reducing waste. It can also ensure that your delivery network is capable of handling the orders you receive instead of frustrating consumers by showing up inconveniently late.

Even more ambitious are the automated warehouses designed by Ocado. Their algorithms direct swarms of robots to pick and pack orders, and they’re partnering with brick and mortar retailers around the world to create logistics and fulfillment solutions that start with the software for app-based purchases, and end with a product delivered to a front door with minimal (0.7% according to their website) product waste. Robot-staffed warehouses may seem like a novelty, but perfectly synchronized supply chains will soon be a necessity in the hyper-competitive FMCG industry.   


What Does This Mean For Consumers?

artificial intelligence in the FMCG space

A recent article in Forbes outlines an online FMCG order gone wrong: a customer experimenting with online delivery ordered 9 items, six of which were out of stock, a fact she wasn’t informed of until the order arrived. She had ordered a cut of chicken that was out of stock, but rather than substituting the same cut from a different brand, she received a different cut from the brand she had chosen. Mistakes like these are currently quite common, but AI has the potential to iron out kinks like these, either by ensuring that items are in stock, alerting customers if they’re out of stock, and optimizing substitutions. If you’re ordering chicken breasts for a specific recipe, or wings for a BBQ, the brand isn’t nearly as important as the cut. AI has the potential to figure this out, and create seamless eCommerce experiences by leveraging data to anticipate what customers really want.

The Click-and-Collect model has been a hit with consumers so far, offering a happy medium between the convenience of online shopping and the familiarity of the brick and mortar experience. It is also allowing traditional retail powerhouses like Wal-Mart and Kroger to carve out space as a convenient alternative to Amazon. But click-and-collect has created a few headaches for both retailers and consumers. According to Forrester analyst Sucharita Kodali, “for click-and-collect, the biggest pain points right now are identifying when a car is in the store's vicinity and ready to retrieve. The other is packing the order. It may take sometimes an hour or more to pack an order, sometimes even longer if you don’t have enough pickers in-store.”

It’s easy to see how implementing AI solutions could be a game-changer for this type of shopping, and retailers like Wal-Mart have been quick to invest in technological solutions. A leading executive recently announced that the company is using data to identify “less busy” pick-up times, to avoid long waits, and implementing algorithms to make “smart substitutions.” They’re also employing tracking technology to let employees know the exact parking spot that a customer has pulled into. Radius Networks is a company that has developed customer tracking technology that is specifically designed to reduce wait times for curbside pick-up, and SpartanNash, an American grocer who has adopted the technology, reports that wait times have dropped from an average of 8 minutes to nearly zero. Consumers who are experimenting with online delivery and click-and-collect are putting their money where their mouths are when it comes to maximizing convenience. The eight-minute waits and misguided substitutions that AI can remove could be the difference between retaining them and seeing them flee to a competitor.


The Last Mile

Artificial intelligence in the FMCG space

There is a gap between how easy buying groceries online seems and how convenient is actually is. AI will be crucially important in going the last mile in online FMCG and closing the convenience gap. Once retailers actually begin to deliver the promises they’re offering (quick delivery, orders that match consumer desires, low delivery fees) consumers will flock to them. AI has the promise to radically transform the eCommerce grocery sector. Your choices and investments in leveraging these technologies will be instrumental in determining whether your brand succeeds. If you think you’re behind the 8 ball, get in touch with Adimo today!