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Grocery pricing and forecasting: machine learning with a human touch

Fabrizio Fantini, CEO

Five simple but profitable grocery retail questions

  1. At the end of each season, month or week, do you often observe a large gap between expected and actual demand?
  2. Are your price points entirely grounded on client insight and business objectives, or rather tactically based on costs, competition and previous seasons?
  3. Do you invest significantly in promotions and temporary price reductions to clear excess inventory?
  4. Are your sales forecasts leaving substantial margin value on the table?
  5. Last, but not least – can you accurately measure the answers to these questions in a way that can systematically guide your future trading decisions?

A new alliance between big data and human intuition

Few industries are as brutal as retail: hyper-competitive, multi-channel markets; complex global sourcing; wide ranges with strong links across products, categories and competitors; high sales volatility with strong macro and micro seasonality.

In this context, managers are called to place bets a whole season, or perhaps months in advance. Promotions and markdowns – double-edged swords – can help reduce waste and clear excess stock, but at a cost: reduced profits, and increased complexity of demand and impact monitoring.

In any case, at the end of the year, most of the margin is earned – or lost – depending on the gap between expected and actual demand. To keep abreast of markets changing faster and faster, new approaches are required to achieve the maximum potential impact on profitability.

Today, the latest generation of big data algorithms is capable of simultaneously optimising prices and assortment, growing profits and reducing unsold inventory. Thanks to new methods of data analysis informed by human intuition, the traditional grocery retail challenge can finally be solved: the right amount of product in stock at the right time and price in every store.

This white paper looks at the ways retailers can improve forecast accuracy and price / promotion decisions. Fixing each of these areas can produce powerful standalone results but, when managed together, the synergy is unstoppable.

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