Reflecting on Ocado’s new pilot of refillable packaging for everyday products, Pete Hindley, managing principal at Argon & Co explains why changing consumer demand is putting pressure on retailers to adapt their operations – from embedding sustainability to reducing costs. Hindley highlights why retailers must make strategic decisions for long-term resilience to stay ahead of the curve.
Ocado has introduced a pilot programme to offer products such as rice, pasta, and laundry essentials in refillable packaging, in order to deliver more eco-friendly choices directly to the doors of its online customers. The scheme provides containers prefilled with food or laundry products, which are then returned to Ocado drivers, cleaned, and reused. This pilot is part of a wider trend in the retail industry to integrate sustainable practices into their supply chains so they can meet growing consumer demand for environmentally conscious options.
However, as retailers adapt to evolving consumer preferences, they are also coming face-to-face with major supply chain challenges. The pandemic exposed vulnerabilities in raw material availability, impacting the supply of hundreds of items from glass and timber to carbon dioxide. These scarcities drove up costs and created real business risks for firms reliant on these materials.
As a result, businesses are being forced to reevaluate their reliance on certain materials and explore their options for alternatives.
However, many retailers are looking only one step ahead in their planning and operations. Meeting customer expectations, remaining commercially competitive, and embedding sustainable business practices can be a difficult balancing act for organisations. It is crucial for businesses of all sizes to not only respond to immediate challenges, but also take strategic decisions to ensure their long-term resilience.
Staying agile to consumer demand
In the retail world, much change is being driven by personalisation, service, quality, and cost. For instance, there has been a sharp increase in the number of self-service checkouts across various physical stores, from supermarkets to clothing retailers. Driven by demand to reduce wait times, cut costs, and boost convenience, the number of self-checkouts has surged from 53,000 to 80,000 over the past five years.
Knowing your customer and adapting to their needs and preferences is key. The common thread among the leading F&B retailers in staying commercially competitive is nearly always related to being adaptable to consumer demand.
But remaining responsive to consumer demand is easier said than done – particularly when the goalposts are often moving. There has been a burst in activity of consumers pushing retailers to incorporate sustainability into all areas of their operations. In our recent survey, 93% of respondents noted a growing emphasis on sustainability, with a third of those identifying it as mission-critical to their business.
Ocado’s refillable packaging pilot is a prime example of this growing trend. By using reusable materials, retailers can minimise the total amount of packaging required, leading to a reduction in waste sent to landfills or recycling centres. What’s more, this practice often involves less reliance on single-use plastic, contributing to combatting the global challenge of plastic pollution. The world produces over 450 million tonnes of plastic every year, of which only 9% is recycled, according to the OECD.
In addition to the environmental benefits, refillable packaging is closely associated with customer loyalty. By providing convenient refill options delivered directly to customers’ homes, retailers can promote repeat purchases, thereby strengthening brand loyalty and increasing the likelihood of customers returning for future orders.
However, refill schemes have previously faced challenges for being less profitable than pre-packaged goods. Adding to this challenge is the mounting pressure that retailers are under from consumers, regulators, and the government to operate more sustainably, particularly in light of the intensifying climate crisis.
Anticipate rather than react
So, how can retailers strike a balance between addressing immediate concerns, remaining commercially competitive, and planning for the future? A crucial first step is to meticulously examine the risks they face across the short, medium, and long term. Our research highlights the four key areas where businesses are struggling: managing and controlling escalating costs, finding and retaining skilled talent, forecasting and adapting to changes in customer demand, and improving supply chain visibility and raw material availability.
By rooting out the risk areas in the business, firms can then take the necessary steps to alleviate the problems and meet both current and future demands. To see real, lasting change, retailers must de-risk their supply chains.
Is spend returning value?
Given the recent inflationary pressures, it is unsurprising that controlling costs consistently features in most business planning conversations. The retail industry has been hit hard by inflation, with many smaller businesses struggling to maintain profitability amid reduced consumer spending and high operating costs.
As retailers’ operations mature, logistics spending naturally increases to meet rising demand. The focus should therefore be less about ‘spending less’, and more about ensuring spend is returning value and is within control. In fact, 75% of respondents in our survey expressed a stronger commitment to investing in technologies that enhance cost control. This is where taking a long-term perspective and carefully weighing up the benefits of capital investment in technology can pay dividends.
Many logistics professionals in retail are also exploring revised operational distribution solutions, including, automated and mechanised Solutions such as robots and cobots, advanced IT systems, and other complementary solutions that permit either a more flexible or multi-skilled workforce. Behind each of these technologies, the rationale is to improve information visibility and sharing, not only for the purposes of better planning and flow management, but for operational decision making and full supply chain integration.
Supply chain visibility is key
Against the backdrop of ongoing challenges in the retail sector, it is all the more important for retailers to track and gain real-time insight into their supply chains to take timely and effective action.
This need has brought several technologies to the forefront. Digital twin modelling and simulation is becoming increasingly popular as businesses understand the value of investing in insights available from a digital replica of their value chains and run scenarios to identify what levers enable agility and mitigate risks. Additionally, information management systems – such as Warehouse Management Systems (WMS) and Transport Management Systems (TMS) – have become leaner and cloud-based, making them faster to deploy alongside other core technologies and integrate with AI powered tools. These advancements aim to increase decision making confidence and de-risk the supply chain.
Looking through a long-term lens
In the face of rapid change, retailers often resort to quick solutions. However, it’s crucial for these firms to also maintain a broader perspective. By combining responsive actions with long-term planning, retailers can chart a course to navigate the obstacles of today while simultaneously strengthening their resilience to weather future crises. Enhanced visibility and capability to simulate supply chain effects will be what ultimately unlocks value and enables retailers to thrive amidst continuous uncertainty. In an industry marked by constant flux, the ability to anticipate trends and swiftly adapt is essential for long-term success.
Pete Hindley, managing principal at Argon & Co
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You are in: Home » Themes » Sustainability » GUEST COMMENT Why ‘quick fixes’ are not the answer to the retail industry’s long-term challenges
GUEST COMMENT Why ‘quick fixes’ are not the answer to the retail industry’s long-term challenges
Katie Searles
Reflecting on Ocado’s new pilot of refillable packaging for everyday products, Pete Hindley, managing principal at Argon & Co explains why changing consumer demand is putting pressure on retailers to adapt their operations – from embedding sustainability to reducing costs. Hindley highlights why retailers must make strategic decisions for long-term resilience to stay ahead of the curve.
Ocado has introduced a pilot programme to offer products such as rice, pasta, and laundry essentials in refillable packaging, in order to deliver more eco-friendly choices directly to the doors of its online customers. The scheme provides containers prefilled with food or laundry products, which are then returned to Ocado drivers, cleaned, and reused. This pilot is part of a wider trend in the retail industry to integrate sustainable practices into their supply chains so they can meet growing consumer demand for environmentally conscious options.
However, as retailers adapt to evolving consumer preferences, they are also coming face-to-face with major supply chain challenges. The pandemic exposed vulnerabilities in raw material availability, impacting the supply of hundreds of items from glass and timber to carbon dioxide. These scarcities drove up costs and created real business risks for firms reliant on these materials.
As a result, businesses are being forced to reevaluate their reliance on certain materials and explore their options for alternatives.
However, many retailers are looking only one step ahead in their planning and operations. Meeting customer expectations, remaining commercially competitive, and embedding sustainable business practices can be a difficult balancing act for organisations. It is crucial for businesses of all sizes to not only respond to immediate challenges, but also take strategic decisions to ensure their long-term resilience.
Staying agile to consumer demand
In the retail world, much change is being driven by personalisation, service, quality, and cost. For instance, there has been a sharp increase in the number of self-service checkouts across various physical stores, from supermarkets to clothing retailers. Driven by demand to reduce wait times, cut costs, and boost convenience, the number of self-checkouts has surged from 53,000 to 80,000 over the past five years.
Knowing your customer and adapting to their needs and preferences is key. The common thread among the leading F&B retailers in staying commercially competitive is nearly always related to being adaptable to consumer demand.
But remaining responsive to consumer demand is easier said than done – particularly when the goalposts are often moving. There has been a burst in activity of consumers pushing retailers to incorporate sustainability into all areas of their operations. In our recent survey, 93% of respondents noted a growing emphasis on sustainability, with a third of those identifying it as mission-critical to their business.
Ocado’s refillable packaging pilot is a prime example of this growing trend. By using reusable materials, retailers can minimise the total amount of packaging required, leading to a reduction in waste sent to landfills or recycling centres. What’s more, this practice often involves less reliance on single-use plastic, contributing to combatting the global challenge of plastic pollution. The world produces over 450 million tonnes of plastic every year, of which only 9% is recycled, according to the OECD.
In addition to the environmental benefits, refillable packaging is closely associated with customer loyalty. By providing convenient refill options delivered directly to customers’ homes, retailers can promote repeat purchases, thereby strengthening brand loyalty and increasing the likelihood of customers returning for future orders.
However, refill schemes have previously faced challenges for being less profitable than pre-packaged goods. Adding to this challenge is the mounting pressure that retailers are under from consumers, regulators, and the government to operate more sustainably, particularly in light of the intensifying climate crisis.
Anticipate rather than react
So, how can retailers strike a balance between addressing immediate concerns, remaining commercially competitive, and planning for the future? A crucial first step is to meticulously examine the risks they face across the short, medium, and long term. Our research highlights the four key areas where businesses are struggling: managing and controlling escalating costs, finding and retaining skilled talent, forecasting and adapting to changes in customer demand, and improving supply chain visibility and raw material availability.
By rooting out the risk areas in the business, firms can then take the necessary steps to alleviate the problems and meet both current and future demands. To see real, lasting change, retailers must de-risk their supply chains.
Is spend returning value?
Given the recent inflationary pressures, it is unsurprising that controlling costs consistently features in most business planning conversations. The retail industry has been hit hard by inflation, with many smaller businesses struggling to maintain profitability amid reduced consumer spending and high operating costs.
As retailers’ operations mature, logistics spending naturally increases to meet rising demand. The focus should therefore be less about ‘spending less’, and more about ensuring spend is returning value and is within control. In fact, 75% of respondents in our survey expressed a stronger commitment to investing in technologies that enhance cost control. This is where taking a long-term perspective and carefully weighing up the benefits of capital investment in technology can pay dividends.
Many logistics professionals in retail are also exploring revised operational distribution solutions, including, automated and mechanised Solutions such as robots and cobots, advanced IT systems, and other complementary solutions that permit either a more flexible or multi-skilled workforce. Behind each of these technologies, the rationale is to improve information visibility and sharing, not only for the purposes of better planning and flow management, but for operational decision making and full supply chain integration.
Supply chain visibility is key
Against the backdrop of ongoing challenges in the retail sector, it is all the more important for retailers to track and gain real-time insight into their supply chains to take timely and effective action.
This need has brought several technologies to the forefront. Digital twin modelling and simulation is becoming increasingly popular as businesses understand the value of investing in insights available from a digital replica of their value chains and run scenarios to identify what levers enable agility and mitigate risks. Additionally, information management systems – such as Warehouse Management Systems (WMS) and Transport Management Systems (TMS) – have become leaner and cloud-based, making them faster to deploy alongside other core technologies and integrate with AI powered tools. These advancements aim to increase decision making confidence and de-risk the supply chain.
Looking through a long-term lens
In the face of rapid change, retailers often resort to quick solutions. However, it’s crucial for these firms to also maintain a broader perspective. By combining responsive actions with long-term planning, retailers can chart a course to navigate the obstacles of today while simultaneously strengthening their resilience to weather future crises. Enhanced visibility and capability to simulate supply chain effects will be what ultimately unlocks value and enables retailers to thrive amidst continuous uncertainty. In an industry marked by constant flux, the ability to anticipate trends and swiftly adapt is essential for long-term success.
Pete Hindley, managing principal at Argon & Co
We deliver!
Our editor picks some choice pieces from the analysis flow and sends them to your inbox every Wednesday. Dedicated research report previews will also come direct to you. Subscribe for the emails.
Why not join us on Linkedin and you’ll get the best updates on our research and analysis – UK, Europe and Global – in your feed.
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