The Question Facing Retailers: To Substitute or Not to Substitute?
Picture the scene: You’re walking up and down the aisles of your supermarket, making a beeline for the first item on your list. Your usual brand isn’t there. Out of stock. A quick sigh later, and you’ve reached out for the next best thing instead – a different brand, a different quantity, a slightly different version perhaps. It’s unlikely that you’ll think too much about it unless it happens repeatedly. It’s hardly an emotional crisis.
Now transport your mind to an online delivery of your shopping. You’ve selected what you want to receive and you’re waiting for the delivery. Then you see the list of unavailable items and substitutions and your heart sinks – partly, because you feel let down, but also because the changes can be far from what you would have picked as a ”Plan B.”
Substitutions in general are one of those underdiscussed nuisances in the consumer world. We don’t spend too much time thinking about them between deliveries, but at that moment of arrival, the replacements put forward can often be a source of annoyance and frustration. Stories of sending green peppercorns instead of green peppers aren’t uncommon, and one weird and wacky replacement I once received was “ice fragrance” deodorant instead of a bag of frozen ice cubes.
It all sounds quite trivial, but in a retail climate where loyalty is determined by an ever demanding and less forgiving customer base, substitutions are a critical element that retailers need to get right. Retailers are not just inconveniencing customers through their substitutions but depending on the price match or substitution promise offered, some customers may find themselves having to pay more for their weekly shop than they envisaged. The retailer may offer them a voucher for money off the next basket, but this does not help much during a cost-of-living crisis.
The art of substitutions is a gauge of two key capabilities that determine customer feeling and loyalty. First, if substitutions are an increasingly regular occurrence, then clearly something is going awry when it comes to optimum availability or inventory positioning of products. And second, at the back end, when substitutions are still, inevitably, required, but not representative of what a shopper would alternatively choose in store, then the personalization box is also not being ticked.
There needs to be a mutual acceptance between both retailer and consumer that substitutions will be needed on occasions. There is an overly dramatic sense of relief or even joy when every single item actually arrives.
Retailers must do better at getting into each individual shopper’s psyche. What would they have picked instead? What are their preferred brands? What are their dietary choices or requirements? What are their price points? What would they have picked as a secondary choice, in-store?
It’s an unforgiving task, but really, it’s the only way to forego that instinctive “sigh” moment, and the subsequent let down feeling.
Loyalty cards have gone some way to painting a picture for retailers around frequent selections. Ideally details of the items bought in-store should be reflected when a customer is creating an online shop. Machine learning (ML) could analyze a customer’s buying habits – looking at what they have every single week and learning which substitution items are returned to the driver so that algorithms can quickly understand the unacceptable alternatives.
The Online Advantage
Of course, the best way to really optimize substitutions, is to avoid them.
Often people who shop online do so weekly as part of a routine. This involves booking their desired delivery/pickup slot ahead of time, placing their order and then waiting for everything to arrive. This gives retailers the opportunity to forecast what is needed and then tailor replenishment, assortment, and inventory positioning to be able to pick and deliver what the customer wants.
In theory, therefore, online offers a distinct advantage. Not only can the retailer rely on ML to dictate general replenishment and logistics decisions, but there is this additional opportunity to react specifically to demand that has already been signposted ahead of time.
It’s not easy. In the actual stores there are other customers buying the same items or picking them up, changing their mind and putting them down somewhere else in the store, so this can affect what is actually available to satisfy online orders.
Substitutions as a Last Resort
Understanding true demand is the holy grail, and online shopping in a grocery context is as close as the retail sector can get to visualizing each consumer’s precise wants. If you chose something else in store, the retailer wouldn’t know anything about it but if you ordered the item online and it had to be substituted or excluded if it wasn’t available, then that adds to the “data lake” available to the retailer.
Knowing what is required, from which location, at what time, is critical to order management processes. Blue Yonder provides Commerce and Order Management (OMS) solutions to enable retailers to get the answers to each of these aspects to provide their in-store and online customers with what they want, when they want it – with the fewest number of substitutions as possible!