Innovative Data Science

3 Retail challenges that are being solved with data science innovation

December 19, 2022

Grocery shopping is at an inflection point. Retailers and their consumer packaged goods (CPG) partners face inflationary pressures and rising consumer expectations. At 84.51° Labs, we identified 3 major pain points that retailers and CPGs alike face and outlined the ways we’re working to solve those challenges with data science, customer insights and technology.

1. Simplifying pricing and optimizing trade funds

Pricing is incredibly complex. Meeting financial goals while maintaining an optimal price gap with competitors requires tuning the balance between everyday pricing strategies and promotion strategies in a rapidly changing pricing environment. We are continuously experimenting with artificial intelligence (AI) sciences to tackle this key challenge.

What’s innovative: 84.51° is fusing historical customer data with AI (predictive and prescriptive forecast models and state of the art optimization algorithms) and aligning with business strategies to enable Kroger to make the best strategic choices when setting prices and developing promotional plans. In fact, we’ve rolled out our regular price optimization solution (RPO) and other advanced promotion optimization science solutions across 3,000+ Kroger stores where they’ve been applied to hundreds of thousands of items and helped make more than 3 million decisions over 52 weeks.

We also continue to push the boundaries of AI for trade-fund optimization. We do this by utilizing predictive forecast models to quantify the value of various trade investments. Subsequently, we are also developing sophisticated optimization tools to help retailers optimize fund allocation at category/brand levels.

2. Optimizing omnichannel fulfillment

At the onset of the COVID-19 pandemic, CPGs and retailers scrambled to align operations that would allow for quick yet financially feasible fulfillment of ecommerce orders. Consumers now expect a seamless omnichannel experience between a brand’s website and stores – even for perishable items from a grocer.

What’s innovative: Retailers and their CPG partners both have an opportunity to win when supply chain and operation processes are optimized. Consider the fulfillment of online orders with in-store inventory. 84.51° Labs is developing AI-powered smart picking strategies that allow retailers to meet customer pick-up needs while maximizing labor efficiency and sales throughput. By combining novel real-time AI with store maps, inventory, and customer orders, we allow retailers to flexibly and efficiently adapt to customer purchasing preferences. Retailers and CPGs win when customers can seamlessly choose how they buy.

3. Household reach and trip optimization

It’s not a secret that companies want to reach as many households as possible and drive as many visits, whether online or in-store. The challenge is understanding what matters to each customer, e.g., service, quality of food, convenience, cleanliness and scaling and activating on those insights.

What’s innovative: We are on a journey to drive households and increase market share for clients using all the price and promotion levers we have at our disposal. To this end, the first steps is to model household reach using a combination of historical data and cutting-edge AI techniques such as deep-AI, causal inference, and traditional machine learning. Our model is demonstrating reasonable accuracy and can forecast household reach as a function of price and promotion tactics. Because of the promising results, household reach will be included in our Price & Promo Optimization products in FY 2023.

Innovate or bust

To be successful, it’s imperative that companies dig into their data to stay ahead of new shopper behavior patterns, activate on those insights and adapt their value propositions to attract customers and drive loyalty. If there’s anything that CPGs and retailers have learned in recent years, it’s that with disruption comes innovation.

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