Grocery Operations

3 Reasons Why Results-as-a-Service Is the Next Big Thing in Grocery

Tight margins give grocers little room for error when adopting new technology. One solution provides returns from day one.
Stefan Kalb by Stefan Kalb
Next Big Grocery Innovation is Outcome-as-a-Service | Shelf Engine

Nobody likes to spend money on business tools that don’t succeed or invest in products and services they don’t really need. Yet grocers, now in the throes of accelerated digital transformation, may be headed in exactly that direction. 

The pandemic has upended the grocery industry, and as a result, many chains and individual stores are exploring how technology like smart carts, touchless payments, robotics, e-commerce platforms, and ordering automation can help them grow their business and keep customers happy. 

But in an industry with thin margins and significant pressure to compete on customer value, grocers have little room for error when it comes to technology adoption. Tools must deliver, scale, and be built to last. They must provide returns from day one. Technology of this caliber is hard to come by in the grocery industry, and even among some of the more sophisticated solutions, results are often diminished due to problems with adoption, implementation, or administrative errors. 

This is why we’re such big proponents of a Results as a Service (RaaS) model, which is designed so that customers (in this case, grocers) only pay for the results and outcomes they receive, rather than expensive hardware and software licenses. We’ve adopted this model and built our platform upon scan-based trade and consignment merchandising as the solution to help grocers realize and maximize the benefits of technology, without the headaches. This allows our customers to seamlessly transfer their fresh and perishable SKUs to a scan-based trade agreement in which Shelf Engine assumes all of the risks by guaranteeing sales and margin performance. 

Successful digital transformation requires a mindset shift, and likewise progressing toward an RaaS model will require cultural and operational pivots. It might not be comfortable at first, but the positive impacts can ripple throughout an organization and beyond. 

We know because we’ve been through it. Our platform was initially deployed as a SaaS offering, with our focus on selling forecasting software to help grocers improve and automate ordering for fresh inventory. But no matter how accurate the forecasts, there was still a breakdown within stores. We adjusted the strategy and re-introduced our platform as an RaaS offering that guaranteed sales for our clients. Instead of deploying software and tools that grocery employees had to adapt, we took over the entire process, so grocers could refocus on their core job responsibilities (keeping shoppers happy) and enjoy the results of the solution without any of the work and complexity. 

At Shelf Engine, the RaaS foundation is paired with our predictive demand forecasting models that ingest store inventory data daily and overlay what is actually happening in the store with machine learning and probabilistic models that generate highly accurate orders. The system submits POs directly to vendors and provides supply chain auditing across stores and vendors on fill rates, shelf lives, and in-store operations and merchandising. Anything that doesn’t sell is bought back, removed from the grocer’s P&Ls, and donated or repurposed in useful ways.

In addition to virtually eradicating the cost of fresh food waste, this model provides three key benefits to grocers, including:  

1. Eliminate the risk of the “buy it and hope it works” strategy that grocers fear.

With an RaaS approach, grocers can enjoy the benefits of best-in-class technology without the cost of ownership, risk, long-term contracts, maintenance, license fees, and resource-heavy integrations they want to avoid. When the risk is removed from the equation, grocers are also liberated to try new products and experiment with assortments, displays, and promotions to deliver more customer value.  

2. Stronger bonds between retailers and their technology partners.

When a store’s performance is directly tied to the partner’s as it is in the RaaS model, there’s a mutually beneficial interest in success. Partners share in the grocer’s victories, and because of that, are motivated to only bring the absolute best and most efficient solutions to the table every single day. Our results with this model illustrate its power: Shelf Engine’s scan-based trade and intelligent forecasting solution have eliminated the cost of waste and enabled significant SKU-level gross margin improvements for thousands of stores.

3. Resilience.

Covid-19 has put every business to the ultimate test. Some adapted quickly, while others are still struggling to rebound. Making it through a crisis requires a level of flexibility and adaptability that today’s grocery processes and supply chains simply do not have. Customer demands and countless external factors can change on a dime, and under current models, grocers bear the brunt of the unexpected costs, food waste, and lost sales that often result. The RaaS paradigm alleviates these burdens and helps stores become more resilient because the entire system is designed to bolster their business and processes.  

Numerous industries, including energy, manufacturing, and retail have embraced RaaS approaches to make their operations more efficient and customer-centric. Because the grocery industry is so mature and risk-averse, stores have long avoided making significant changes. The beauty of RaaS is that it directly addresses the very barriers that have kept grocers from investing in transformation. With a RaaS approach, stores can embrace important advancements and reap the benefits of technology, all without heavy investments and exposure to risk.

What to learn more? Listen to this podcast to hear how top retailers are using a RaaS model to compete with the likes of Amazon.

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