Article
Writing
Question / Issues
Fresh food innovation in retail requires links
to the chain to become part of the value-added process. The retailer is an
active participant and key to the fresh food innovation process. It is retailers
who mostly determine the role of the supplier and the rate of innovation in
fresh food chains. Additionally, the retailer plays a role in the product idea,
product development, and launch cycles in fresh food innovation. Write an article about the roles, issues or
challenges of food retailer with regards to the above statement. Students
are requires to write an article of
about 750 words.
Over the past five years,
there has been a significant increase in overall fresh food offerings as
retailers strive to meet rising demand from consumers (Duff and Phelps, 2016). Despite
able to contribute healthy sales in business, keeping fresh food is rather complicated.
Thus, fresh food retailing is experiencing innovation in order to reach
consumers in new ways. The roles of retailers in driving innovation success are
critical by executing strategies such as offering value product, employing
high-impact merchandising strategies and building a supply chain with the right
economics. However, the retailers also confront with issues or challenges in
the process such as implementation of alternatives in limited workforce becomes
less effective, risk of losing relevance (and patronage), perishable products
and strategy development.
2.0
The Roles, Issues or Challenges of Food Retailers in Fresh Food Innovation
As the own brand market
was evolving, the market share of own brands was steadily increasing over the
past years, though varying from country to country (Bourlakis, Hirner, Moiter
and Werkhoven, 2013). Retailers may offer value products within the premium
segment and premium products within the value segment. This strategy would attract
customers who have become more cost-conscious due to decrease in incomes and purchasing
power (Mike Stones, 2013). For example, Tesco Stores (M) Sdn Bhd have their own
brand, “Tesco” with “Tesco Everyday Value” that aimed customers who want to
spend their money wisely and discount competitors such as Giant Supermarket.
Meanwhile, “Tesco Finest” directly aimed at competitors such as Sam’s Groceria.
Moreover, retailers must
employ high-impact merchandising strategies that clearly define freshness and
determine unique ways to demonstrate it. According to ATKearney (2013), the
merchandising tactics include dish customization, attractive packaging and
display, a “made-on-premises” look, aroma, evidence of frequent rotation or
replenishment, appropriate signage, suggestive selling, see-through packaging,
and labeling that indicates the production date rather than the expiry date. These
tactics contribute to the desired impression of freshness and are essential to
optimize the fresh prepared foods opportunity. Ikea Restaurant is the best
example that apply these tactics; variety of food offerings that can be seen
through the open kitchen concept, cozy ambient atmosphere, great dining
experience and much more.
On top of that, numerous
food manufacturers have perceived that the fresh foods supply chain is particularly
delicate to the economics of sales turnover and product waste. Retailers
require different supply chains focused on short shelf life, product turnover,
optimized assortment, and target pricing. Also, retailers must partner with
reputable suppliers that can handle all of the complexities of fresh
distribution when it comes to food safety concerns. Perhaps, they may need to consider
alternatives (Allen, McLaughilin and Pierson, 1990) to remain freshness
such as:
1.
In-store preparation
whereby food is prepared on-site. For instance, Giant Supermarket has its own
food court that serve fresh prepared foods to patrons.
2.
In-store finish whereby frozen
foods are delivered by product supply chain and reheated in the store kitchen.
For instance, Ikea Restaurant.
3.
Commissary model whereby a
network of centralized kitchens is established to prepare and deliver ready-to-serve
meals or partner with local fresh food providers. For instance, there is food
& beverage section (not food court) in Mydin that serve ready-to-serve food
and drinks.
4.
Food processor model
whereby retailers establish a partnership with a large food processor. Tesco
and Giant have their own products that apply this model. The products include
frozen minced beef, nuggets, French fries, mixed vegetables, and etc.
Nevertheless, these
alternatives are less effective to implement when retailer has limited
workforce. Retailers should focus on a core assortment. In order to achieve
proper balance between merchandising fresh products and reducing shrinkage,
managing assortment should be done effectively. There is also risk of losing
relevance (and patronage) for retailers to cope in fresh prepared foods. It
could be impossible for old-fashioned supermarkets to adapt changes in their
business. Even though fresh prepared foods can be profitable, retailers should
carefully evaluate a business model that is affordable and suitable for their
positioning. The approach should be able to match the venue and investments
should be chosen wisely.
Another challenge
pertaining to fresh foods is that perishable products inventory cannot be used
as the shield to manage sub-optimal information management. The use of inventory
would be efficient for other types of manufacturing supply chain but not in fresh
food supply chain where there are many forms of inefficiency including wastage,
repackaging, out-of-stocks, discounted sales and having to purchase from
non-preferred suppliers (Alberta Value Chain Initiative, n.d.). Many of these
inefficiencies – such as out-of-stocks and discounted sales – are hidden costs
that may not be managed and monitored. Inefficiencies can be larger than the
visible costs of wastage suggest.
Lastly, there is issue in
strategy development whereby it requires integrated components. The system is
more than the sum of its parts. For instance, marketing skills need to be
complemented with improved demand and supply forecasting capabilities.
Similarly, developing a collaborative relationship between retailer and supplier
is essential to generate higher rates of product innovation. Diversity of
product or service is resulting from competition in new business designs. Food
industry is often faced with competitive price and unable to maintain diversity
in its product and quality due to the same business model practices. Both retailers
and suppliers should be cooperative to support the new system so that both
parties will benefit from it.
3.0
Conclusion
In conclusion, innovation
in fresh food is essential to prolong the shelf life of the product, providing
variety of products to consumers, simplify operational management, reduce cost
of loss, increase more revenue and service upgrading. Innovation is always
crucial in a world in which grocery and mass retailers generally offer the same
product range as their competitors (Nielsen, n.d.). Thus, the cooperation
between retailers and suppliers or retailers and management are indispensable
to succeed. The role of retailers in
innovation is vital to ensure the process is successful eventhough they have to
deal with any issues or challenges ahead.
References
Alberta Value Chain
Initiative. Fresh Food Category
Management: Leveraging Strategic Options. Alberta: Agriculture and Food
Council of Alberta. Accessed on 1st October 2016, http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/agp11922/$FILE/RetailPaper2FreshFood.pdf
Allen,
J.W., McLaughilin, E.W. and Pierson, T.R. (1990). Strategic Directions in Supermarket Deli/Prepared Foods. New York:
Cornell University.
Bourlakis, M., Hirner,
S., Moiter, C. and Werkhoven, T. (2013). Six
Perspectives on Retail Innovation – Expert Group on Retail Sector Innovation.
Brussels: Publications Office of the European Union.
Carter, H. (2013). What’s Your angle on Fresh Prepared Food?
Burke. Accessed on 4th October 2016, http://meat.burkecorp.com/blog/topic/fresh-prepared-food
Donnan, D., Goldin, B.,
Ouimet, R., Anderson, A. and Hanson, W. (2013). Fresh Prepared Foods: Cracking the Code for U.S. Retailers. San Francisco: A.T.Kearney.
Duff & Phelps (2016).
Industry Insights: Food Retail Industry
Insights – 2016. Accessed on 5th October 2016, http://www.duffandphelps.com/assets/pdfs/publications/mergers-and-acquisitions/industry-insights/consumer/food-retail-industry-insights-2016.pdf
Harvard University Press. Harvard Reference Guidelines. Accessed
on 14th October 2016, http://www.hup.harvard.edu/resources/authors/pdf/hup-author-guidelines-notes.pdf
Miller, D. (2008). Retail Marketing: A Branding and Innovation
Approach. Melbourne: Tilde University Press.
Nielsen. Continuous
Innovation: The Key to Retail Success. Accessed on 12th October
2016, http://www.nielsen.com/content/dam/nielsenglobal/eu/nielseninsights/pdfs/Continuous%20Innovation%20The%20Key%20to%20Retail%20Success.pdf
Stones, M. (2013). Food Retailing to Polarise around Premium
and Value. Foodmanufacture.co.uk. Accessed on 29th September
2016, http://www.foodmanufacture.co.uk/Business-News/Food-retailing-to-polarise-around-premium-and-value
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