Keeping just the right amount of product on retailers’ shelves remains a challenge for food manufacturers but it is often mis-understood.
Only some of the time (estimated at 4% by ECR Europe) do shoppers find all of the products they want, in the right place, in the pack size they desire and with any promotions they can benefit from obvious and clear.
Procter & Gamble says shoppers decide what to buy within three to seven seconds – basically the length of time it takes them to notice something on the shelf. The company calls this “the first moment of truth” and it is a vital marketing opportunity its brands will miss and could cost the company and retailers thousands of pounds if the products are missing from the shelves, even for a few hours.
An inability to completely satisfy the shopper means margins continue to be eroded and sales growth suffers. The latest report about the state of price and promotions across Europe and the US from IRI shows sales volumes are declining despite a continued increase in promotions.
Food manufacturers are also grappling with the ethical consequences of overstocking. As much as shoppers’ brand loyalty can be impacted by unavailability, it seems waste can be equally distasteful. This affects retailers too as it goes against their attempts to operate in a more sustainable and ethical way.
It would be easy to assume stock issues are managed by retailers’ supply chain systems. In reality, however, these measure goods from the warehouse to the stock room and do not capture products all the way to the shelf.
The journey from stock room to shelf is wholly dependent on people in-store regularly checking and replenishing shelves. Some manufacturers visit stores and conduct spot checks. Are their products on shelf? Are they visible and is the retailer complying with their joint business planning agreement? Obviously this can be time consuming and costly to manage and it still doesn’t provide a fully representative picture of their on-shelf availability.
It does not have to be like this.
By increasing the use of data analytics, food manufacturers can make a difference to sales, supply chain operations as well as shopper contentment and loyalty.
They will need to conduct a granular analysis of the sales data collected from individual stores. Using complex algorithms they then overlay additional data such as promotions, sales of competitive brands, weather trends, holidays and other historic data in order to get an assessment of brand’s overall on-shelf availability now and in the future. They can use the analysis to pinpoint specific problem stores, expanding upon the “I know we’re selling well in 48% of stores but I don’t know which ones” problem.
The result will also give manufacturers an indication of where promotions are not working to their full potential so action can be taken quickly to repair the damage.
Wrigley uses a customised analysis of its sales by store to measure on-shelf availability, lost sales opportunities and display compliance, all of which is made accessible from a state-of-the-art mobile tablet device.
A fast-turnaround report such those as used by Wrigley can also reveal which shops are not complying with the agreed terms of a promotion, enabling field marketing teams to focus their attention more exactly.
Having more sales-data driven insight means food manufacturers can ensure sufficient product availability during high-impact promotions. It will know an offer will be visible in store and ensure enough stock will be available to gain maximum impact.
It can share this information with the retailer too since a lack of communication and collaboration are often at the root of in-store availability problems.
Retailers may, rightly, argue it is impossible to remove out-of-stocks completely but it’s clear that analysing data, which in many cases already exists, using next generation forecasting and analytics solutions could push up that 4% perfect shopping execution figure. ECR Europe estimates out-of-stocks costs the industry EUR4bn every year. We believe improving availability by 3% can equal a 1% increase in revenue. The opportunity of an incremental revenue increase with no major investment is startling and, considering the fragile condition of the European grocery market where value is too often being driven by price increases alone, something that every manufacturer should be reviewing.
IRI is offering readers of just-food a free trial of its new In Store Execution solution. Email: uk.marketing@IRIworldwide.com.