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The Exceedra


Localizing assortments in an era of lumpy supply chains

Pre-pandemic, grocery retailers had already begun to move toward ranging in a given category beyond just the two biggest brands and a niche or premium brand. Localization requires going a step further. 

The COVID19 pandemic saw a consumer shift toward localization; shopping locally for local brands and products in order to demonstrate support for the ‘little guy’.

This has continued to an extent even into 2022, as people continue to work from home and center their lives around their local area, rather than where their workplace headquarters or office may be located. And even then, many people – particularly younger generations – now only go to ‘the office’ between two and four days a week, and often for social and cultural rather than operational reasons.

At the same time as this cultural ‘SIMBY’ (‘stay in my own backyard’ – we at TELUS Consumer Goods coined this term, you heard it here first) mentality still dominates, shipping obstacles and bottlenecks create ongoing supply issues in many categories, many of which are ongoing, even if some are easing.

But how to reconcile the need for localization with supply, when for many retailers currently maintaining even a core assortment of top performing SKUs nationally is challenge enough?

Pre-pandemic, grocery retailers had already begun to move toward ranging in a given category beyond just the two biggest brands and a niche or premium brand. Localization requires going a step further. Could hyperlocal domestic ranging, requiring very little shipping, be the key? And how feasible is it? Would localizing ranging at a cluster, or regional, level suffice? Obviously small local brands do not carry economies of scale with regard to shipping, and by nature you can only range certain brands in certain geographies. On the other hand, their shipping costs are likely to be vastly reduced as they are not carrying overseas shipping tariffs and costs.

To arrive at a direction, you need to both ask the consumers, and get a read on historical data. Getting a read on the potential profitability of localized assortment means testing a variety of assortment options with consumers upfront in order to reduce the ‘say-do’ gap. That is, reduce the difference between what consumers say they will do, such as support local producers, versus what they actually do. What they actually do may be to buy global brands based on trust, price promotion or lowest price, or other elements, particularly in an environment of rising cost of living and inflation.

Reducing the say-do gap can be achieved by testing a number of assortment scenarios for a given category, in order to determine:​

  • Which assortments grow brands and the category versus merely cannibalize products and brands within the category
  • Which assortments favor your brands versus those which positively or negatively impact competitors
  • Which gain the most favorable consumer perceptions of shopability, and
  • Which assortments most positively impact on your brand equity.

After understanding the appeal and feasibility of a number of localized assortment options, assortment planning is then required. This involves matching up the desired range at a store or cluster level with demand planning and forecasting; reviewing what has and hasn’t worked in the past; and making the right product picks in the right quantities to match market demand. And this means looking at both manufacturer and retailer historical data, overlaying consumption demand and shopper testing scenarios, and ultimately moving into predictive planning. Taking into account various supply chain scenarios from best case through to worst case.

Supply chain traceability

Once you’ve done that, you also need to factor in, particularly for local and hyperlocal suppliers, how traceable and transparent their supply chain is. The supplier may be local, but what quality controls and supply guarantees do they have in place? What is their ability to supply consistently, in what quantities, down to SKU level? Particularly if you’re planning on a SKU level differentiated planogram by store or geography.

Getting localized assortments right therefore requires a combination of an upfront understanding of consumer demand and preferences, allied with both historical and predictive brand and retailer data, integrated with local supplier data.

It sounds like a lot of work, and it is, but tailoring is the name of the game as consumers now expect their local stores to stock local brands. The challenge is how to fulfil the need, to what extent, in a way that is profitable.

The good news is that Exceedra’s software solutions can take some of the pain out of the process and analysis.

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