In the past decade, we’ve seen a number of changes across the fast-moving consumer goods (FMCG) industry. While retail store counts and in-store square footage have gone down, the number of products on the shelf has gone up. And, when you consider the 1.2% fewer trips that consumers are taking to FMCG stores and the 33% sales growth that’s being driven by e-commerce, it’s safe to say that the opportunities to reach consumers are shifting.
But, despite these stats, 60% of decisions—either brand-narrowing or reminder purchases—are being made in store. So, how can manufacturers and retailers strike the right balance to reach consumers in their ever-changing path to purchase? This question was on the minds of manufacturers and retailers at the 2018 Category Management Association (CMA) Annual Conference and the focus of Kirsten Londono’s keynote speech.
Kirsten, a senior vice president in Nielsen’s sales effectiveness practice, took center stage to talk about these changes, how the industry has been responding to them and to present a new path forward that’s centered on a better understanding of the “total” consumer.
“We [as an industry] haven’t always responded [to these changes] with discipline,” Kirsten said. “Unfortunately, our reactions have been a little unthinking.”
She cited that these responses have lead to a chain reaction that includes:
- A misuse of pricing and promotion: 55% of key value items, or the items that matter most to consumers, are overpriced.
- Forced, quick innovation that’s changed assortment dynamics: an overabundance of items on the shelf has enacted a cycle of shelf resets, which is concerning when you consider that 85% of them break even or lose money. In fact, about $1.36 billion is wasted on category shelf resets each year.
Kirsten went on to say that it’s not too late to correct these missteps and that retailers and manufacturers should optimize in-store dynamics before FMCG e-commerce reaches full maturation.
“There certainly is a bright spot, and it’s called e-commerce,” she added. “We estimate that the online environment is going to mature in the next five to seven years, and that’s a lot faster than the industry had initially anticipated. So we’ve definitely got to place some of those bets online, but we also can’t forget about our brick-and-mortar stores.”
“It’s about balance,” she added, and then outlined four consumer trends that she thinks can help manufacturers and retailers succeed in store:
- Convenience as a mindset.
- Private label and “premiumization” are on the rise.
- What’s in (and what’s not) in products.
- Voice assistants are powering the digital “shelf.”
So how can manufacturers and retailers put these insights to good use? Here are the four key takeaways that Kirsten proposed at CMA.
- Get to know your consumer segments
- As physical boundaries blur, consider expanding the scope of your strategies
- Play at the “sweet spot” of consumer demand
- Knowing your opportunities to reach consumers starts with collaboration—between manufacturers and retailers, and manufacturers, retailers and digital platforms.
You can see more of the presentation on our CMA landing page.
Putting it All Into Action
In addition to being on the main stage, Nielsen also hosted two breakout sessions that honed in on price, promotion, space and execution.
In the first session, “Overcoming the Analytics Blindspot,” Nielsen’s Pete Conti and Mike Dorgan focused on the pitfalls of inefficient pricing. Bringing the ineffectiveness of discount private label to life, Pete noted that 59% of private-label items, when compared to their branded counterparts, are priced too aggressively due to strategic blind spots from a lack of or poor pricing analytics.
To illuminate these areas for improvement, Mike said it’s important for companies to use analytics to figure out how to apply national guidelines in a way that’s best for each account instead of putting one-dimensional plans into place.
Nielsen’s Patty Gregory and Trax’s Matt Holland presented the other breakout session, “Elevate Your Shelf Game,” which highlighted the competitive nature of today’s shelf. In an FMCG environment that’s saturated with products, Patty pointed to the importance of having constant visibility into the shelf and ensuring a fair share of space to category sales. To do this, Matt outlined how companies can build an effective space and execution strategy and regularly use KPIs to help them gauge compliance against their ideal shelf blueprint.
You can download all of the presentations on our CMA landing page.