Shifting market conditions and increasing competition continue to hit pressure points for retailers as a whole. Grocery is no exception. The age of omni-channel is well underway providing more options for consumers. New store formats seem to pop up on a regular basis. Shopper loyalty hangs in the balance and all signs point to its continued erosion. Intercontinental competition is about to escalate.
One approach to overcome some of these challenges is retailer-supplier collaboration leading to operational excellence in the store. Efficient operations help drive more effective promotions, increased on shelf availability, optimized inventory levels and better approaches to merchandising and category management.
Mark Baum, SVP of Industry Relations and Chief Collaboration Officer at the Food Marketing Institute was interviewed last year and stated “The need for collaboration — on a micro and macro scale — is greater than ever. This is a consumer-facing industry. They’re more in control of relationships with brands and retailers and are more aware of products and services they’re being offered.”
A host of factors are driving grocery retailers to operate differently these days. Consumer awareness, consumer discretion, fragmenting markets, and the emergence of local and regional brands are all business drivers in this dramatically shifting landscape.
Given these trends, readers may wonder if collaboration is making a difference in operations today. Here’s recent news from the front lines – the names of retailers and suppliers have been protected but rest assured, the facts are the facts.
An international food and beverage manufacturer recently started distributing a new cereal product through their grocer. Since sales of the product were tracked on a daily basis by store and SKU, managers on both sides could see how sales were changing over time and noticed a pattern where only 66 percent of the stores were actually selling it. Further investigation indicated many stores hadn’t actually received and authorized the new item.
In this simple example, time series analysis using dollars sold by store was used to quickly identify a pattern that required further discovery. With 34 percent more stores selling this product, projected sales will increase substantially over the next 12 months.
Promotional Effectiveness to Optimize Pricing and Revenue
A major yogurt brand driving nearly 60 percent of single serve sales for a grocer noticed that sales were down at a time when units were rising. With millions of dollars at stake, an analysis of the promotional strategy jumped to the forefront of the collaboration agenda. In this case, the retailer and supplier needed to a find a price point for trade funds that helped both organizations build their business.
Past promotion analysis was used to identify how promotion types influenced unit sales which revealed a pricing sweet spot. A small adjustment in promotional differential led to over 100,000 additional units sold for one ad period. The retailer now has the potential to add new types of customers for specific products while also experiencing dramatic increases in dollar sales.
Speed to Shelf Maximizes Sales
Cutting in new items as fast as possible always had advantages. First to market, early life sales, advertising capital and shopper satisfaction are all achievable when time is on your side.
A frozen yogurt supplier with four new flavors worked with their grocer to analyze elapsed time from first store receipt to first sale at the store. Their analysis revealed that stores selling within the first week generated double the sales compared to stores that took less than four weeks to sell. This single change represented $65,000 in additional sales for one product over a 90 day period of time. By monitoring price points for new products including competitive pricing, the retailer was able to work with their supplier to ensure the right pricing strategy was in place while also tracking inventory position, location and speed to shelf.
Collaboration in Action
These three case studies share common attributes. When retailers and suppliers have the ability to visualize data and drill into the details, they can answer questions more rapidly. In these cases, both parties were using a shared view of integrated data. Their approach to collaboration included shifting from a reactive approach to a more planned approach based on facts, past performance and forecasted demand. A dialogue ensued helping to drive a more efficient use of resources. By working together, retailers and suppliers force multiplied their efforts and focused on root cause analysis. In turn, they implemented solutions much faster than they had in the past.
Savings and additional revenue are only two byproducts of retailer-supplier collaboration. These organizations recognize that shopper satisfaction is at least partially a function of operational excellence. It’s true – the need for collaboration is higher than ever as grocers and their suppliers continue to search for competitive advantages in dynamically changing markets.
You can read more about advances uses of analytics including demand forecasting using predictive analytics here: http://www.market6.com/about/predictive-analytics