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Grocery shortages abound amid supply chain issues and Omicron

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IBM Global Managing Director of Consumer Industries Luq Niazi joins Yahoo Finance Live to discuss grocery supply and labor shortages primarily fueled by Omicron and the rise of hybrid shopping.

Video Transcript

ALEXIS CHRISTOFOROUS: You may be paying more at the grocery store, but that's only if you're lucky enough to find what you need in stock. Joining us now is IBM Managing Director of Consumer Industries Luq Niazi to discuss supply chain issues at the supermarket and how Americans are changing their shopping habits to adapt. Luq, thank you so much for being with us.

So about these empty store shelves-- how much of it is a supply shortage and how much of it is a labor shortage? Because you've got lots of workers from truck drivers to the stockers calling out sick with Omicron.

LUQ NIAZI: Yeah. Hi, Alexis. Well, reality, it's more of a combination of both. The long-term issues, of course, we all know-- manufacturing globally distributed, freight in the wrong location, containers in the wrong places finally getting to ports, not enough labor to get them from the ports, not enough truck drivers. So the supply chain and location imbalances is part of the problem. But that's been exacerbated in the last three months because of Omicron-- Omicron hitting the stores and, of course, we can't ignore what's also happened around the weather here in the North Americas.

KARINA MITCHELL: And, Luq, Target CEO just came out and said he expects a drastic change in consumer shopping habits this year. He says, for example, people will make fewer trips to buy in bulk and consolidate their purchases. He also says that they will eat out less, order in less, which means that they are going to need more groceries. So how do brands need to adapt to make sure that store shelves are stocked up? And how can technology help do that?

LUQ NIAZI: Well, Karina, we've just completed another major study with the NRF-- 19,000 people surveyed around the world. What we saw from around that-- and of course, all demographic groups and all categories-- is that hybrid shopping is what's happening. People are not just going to the store, they're not just buying online, they're using a combination and a combination of delivery models.

That hybrid approach is also about how they're disaggregating their spend and putting it in different places. So as a retailer, we've got to be able to deal with that hybrid challenge. And of course that's part of the challenge that we're facing right now, because it's hard to sense all of the demand in your consumer base when you're trying to work out which channel they're interacting with.

So that's the challenge. The solution, of course, is about the better application of demand sensing, the better application of visibility in the supply chain. And technologies such as AI, technologies such as blockchain can have a really big impact in addressing some of the challenges that I'm calling out here.

ALEXIS CHRISTOFOROUS: Now, Luq, last week on Albertsons' earnings call, the CEO said he expects these supply chain issues to last at least four to six weeks-- seems like an eternity for consumers who can't get those products that they need. So how would you recommend shoppers navigate through this time?

LUQ NIAZI: Well, it's a difficult thing, isn't it? I mean, you've got to really, rather than thinking about shopping week to week, you've got to shop from month to month or even a couple of months out. Some of the categories that are-- you know, baby foods, pet foods in particular. Those shortages are something that you can stock up for.

So we've got to take a longer term perspective in stocking up on some of those things that we can store more frequently. We've also got to be prepared to go and take different categories and, indeed, go shop in different places. And I mean by shopping in different places, not necessarily your big box store, you've got to go and search online until the situation abates.

KARINA MITCHELL: And IBM, as you said, just teamed up with the NRF. What are some of the big takeaways about consumer habits and how they're changing this year? I know sustainability is one thing that consumers are more interested in.

LUQ NIAZI: Yeah, well, two years ago we were here, and I was here face to face. And it's, by the way, good to be back in New York and be back at the show. We talked about the rise of the purpose-driven consumer. Two years ago, that was about 37% of the population that we surveyed was the second-highest category.

Right now, that purpose-driven consumer is now the biggest category-- 44% of the people surveyed. And what's fascinating about the purpose-driven consumer is that they're more data hungry. They research more online, they look more on social media. They want to see companies that connect to their values at each stage of the buying process, whether it's sourcing, manufacturing, distribution, and, ultimately, fulfillment.

And also, they're the category that tends to buy more and are prepared to pay more. So the big opportunity for retailers is to really connect their whole experience and their value chains to these purpose-driven consumers. It's going to be good for the consumers, it's going to be good for the planet, and, of course, it's going to be good for business because there's margin to be had if you can fulfill that in the right way.

ALEXIS CHRISTOFOROUS: For sure. All right, Luq Niazi, IBM's Global Managing Director of Consumer Industries, thanks for being with us.