…and how Analytics can help.
According to McKinsey, by 2030, CPG industry players will have to deal with five major trends in order to stay in front of the competition: the changing face of the consumer, evolving geopolitical dynamics, new patterns of personal consumption, technological advancements, and structural industry shifts.
But regardless of future trends, retail buyers’ primary concerns will remain the same: how to grow their category, how to make their business distinctive, and how to improve sustainability by reducing product waste.
1. Grow My Entire Category
Manufacturers play an important advisory role in guiding retail buyer’s decisions. Suppliers that present fact-based recommendations — via category reviews to understand category trends, in-depth consumer insights, and promotions analyses — tend to be the drivers of the category’s growth. Position your CPG to provide these insights to retail buyers in order to be the thought leader in your category.
Data-driven decisions can help retail buyers grow their category while avoiding risks that can negatively impact their sales. Education on shelf capacity is critical to ensuring that product sales velocities are maximized. Sometimes, limiting choice drives increased velocities. To ensure operational excellence and maintain in-stock conditions, managing shelf capacity with metrics such as pack out (case and a half, days of supply) should be top-of-mind during category reviews.
Clear category/segment/brand role definitions should be the basis for effectively managing promotion frequency and discount depths. Answering the following questions will lead you to the right promotional strategy: Is the item a traffic driver? Is it a basket builder? Is it a margin enhancer?
It is important to know how often to promote during the year as well as how deep of a discount to offer shoppers. Where applicable, take advantage of seasonality to maximize incremental sales. You do not want to erode brand equity by continuously offering cheap prices with the intent of driving sales. Customers will become numb to the price and frequency over time and will not buy as often. More importantly, it impacts base velocities which in turn impacts overall sales and margins. Make sure to manage the portfolio so that your brand remains a viable proposition for merchants to keep in their assortment plans.
2. Make Me Unique and Different
Leverage consumer insights to better understand how shoppers interact with your brands and what they expect from the retailer shopping experience. Customer Specific Marketing is increasingly becoming important. How does a manufacturer use their digital/social/mobile and other marketing tactics to activate 360-degree programming within a retailer to reach their targeted shopper? The Customer Specific Marketing plan should be an intersection of initiatives that are important to both the retailer and the manufacturer. For example, a co-marketing event that advertises a sustainability message between the brand and the retailer during Earth Day would target shoppers who care about preserving natural resources.
“All retail buyers love exclusives,” says Retail Path President Vanessa Ting. “Exclusives is a tactic retailers use to gain (and defend) market share from their competitors.” By offering consumers exclusive products, offers, promos, and services, retail buyers can provide them maximum value and at the same time increase sales through up-selling and cross-selling. But success may vary widely, according to Ting, and there are many factors product manufacturers and distributors should consider when entering into an exclusive agreement with a retail buyer.
The bottom line is that manufacturers and retailers should develop a unique program and agree on metrics upfront to define success. Retailer exclusives can work but be mindful of the complexity it will add to your operations.
3. Show Commitment to Sustainability
Consumer Brands that demonstrate commitment to sustainability outperform those that do not. In the past year alone, sales of consumer goods from brands with a demonstrated commitment to sustainability have grown more than 4% globally*, while those without grew less than 1%. Sixty-six percent of consumers say they are willing to pay more for sustainable brands — up from 55% in 2014 and 50% in 2013.
Retailers like Safeway, Target, Whole Foods and Wal-Mart are committed to sustainability practices and publish annual reports highlighting the progress they have made in areas of environmental sustainability, community impact, and responsible business practices. Manufacturers can align with a retailer’s commitment to sustainable practices by showing how their products and processes reduce waste. In 2013, Safeway achieved a No. 2 ranking onGreenpeace’s sustainable seafood retail scorecard and continued to make substantial progress in sourcing seafood sustainably, surpassing the 51% milestone toward having all fresh and frozen seafood responsibly caught or farmed by the end of 2015.
Walmart’s Sustainability Index is central to their ability to deliver sustainable products for their customers. Launched in 2009 in collaboration with The Sustainability Consortium (TSC), the Index helps retailers and their suppliers:
· Improve the sustainability of the products customers love
· Integrate sustainability into the business of buying and selling merchandise
· Reduce cost, improve product quality, and create a more resilient supply chain
· Strengthen customers’ trust in retailers and the brands we carry