In a scenario where brands are keen to be prudent with spends, rationalizing distribution and sales strategy are imperative to maximize performance of brands in the last mile to the consumer. In an effort to break down this formidable task into actionable steps, we have evolved a four-step guide to maximize efficiency.
The ‘Path to Performance’ includes:
Numbers show that a staggering 60% of Fast Moving Consumer Goods (FMCG) sales can be influenced at the store level. In fact, 30% of FMCG stores account for 80% of sales. Since presence at every store is financially unviable, the right store choice is the first step towards efficiency. A meta-analysis across 15 categories and 155 brands reveals that overall sales effectiveness is primarily driven by availability and visibility. This includes whether stores are covered directly or not, whether the right assortment is present, the frequency of servicing the store, and the actual visibility of products. Says Vijay Udasi, Executive Director, Sales Effectiveness Practice lead at Nielsen India, “Among various levers at your disposal to drive strong in-market performance, reaching the right store is on top of the heap. I would go as far as to say that reaching the right stores is half your job done. Needless to say, reaching these right stores directly, and with adequate servicing levels will go a long way in driving sales, growth and incremental share.”
Right stores are coveted by all brands and therefore have four times higher assortment than average. Says Udasi, “How much and what we place in the right stores is a critical decision and gives the right outcome in terms of sales increase.” Our figures show that even an increase of a single Stock Keeping Unit (SKU) across stores can trigger an uplift of 9%. In order to maximize gains, the choice of additional SKUs must be right.
Servicing is the third key imperative to sales strategy. A study of servicing across competing brands revealed the insight, that for stores, it is not just servicing levels that matter, but relative servicing, compared to competition. According to the study across 155 brands, in stores where servicing levels were lower than competition, the brands performed to 81% of their average. However, in stores where the relative servicing of the brands was higher than competition, the share of these brands was 1.2 times the national average.
Visibility is another key parameter for maximising efficiency in sales. To supplement the main analysis, a test was conducted across 18 brands to study visibility, location and accessibility in store. The results were then compared to sales figures to reveal a pattern. Placing merchandise above eye level, placement relative to the counter, and in case of impulse categories - placing the shelf and product outside the store, resulted in incremental sales.
Vijay Udasi adds, “The statistics that emerged across our studies are particularly telling, because they expose the considerable headroom that exists, to drive significant growth in sales, by optimizing in-market execution.” Reaching the right stores can potentially give us a 33% increase in sales; being there with the assortment desired by the consumer can give brands incremental sales of 15%, and improved relative servicing can help increase share in these stores by 1.2 times. Finally, having the right placement and visibility of products can yield an additional 15-30% of incremental sales.
With market dynamics changing and brands flooding stores, wisdom dictates maximising this crucial last leg of execution to stay ahead.