Data Will Differentiate The Winners And Losers

Source: Franziska Schmidt, Friday, Aug 10, 2018

Smartphone adoption and its role in consumers’ daily lives has led to unprecedented amounts of shopper data. Brands and retailers need to establish data-driven business models to make sense of this mostly unstructured data to acquire leadership in consumer satisfaction.  

In anticipation of our annual future of retail report, Global STEIP, to be published in September, we are previewing some of the dramatic changes retailers and suppliers can expect as they prepare for future disruption.

Data only becomes an asset with best-in-class analytics

Global smartphone ownership is connecting consumers to the internet at a rapid pace and expanding the population addressable by modern trade. But as expanding connectivity translates into fast-growing amounts of consumer data, retailers and brands have been slow to unlock its value.

In emerging markets like China, where data security is less of a consumer concern than in developed markets, data analytics allow for enhanced shopper insight. This is key for international CPG suppliers aiming to extend their geographic reach. The most advanced retailers, like Alibaba and JD.com, are also using this data to inform supply chain, product and assortment decisions.

Global data generation is following the fast-rising smartphone ownership rate, allowing for precise shopper profiles where appropriate data analytics capabilities are available.

Smart manufacturing delivers necessary back-end flexibility

The benefit of consumer data-driven business models profoundly impacts product development. Continued digital innovation in retail is creating new paths to purchase that shift demand and sales rapidly. This necessitates that data and analytics utilisation is not only insightful, but is also quickly actionable into key business functions like supply chain, manufacturing and logistics.

Smart manufacturing helps suppliers build agile and automated supply chains by employing advanced information and manufacturing technologies, flattening out internal information hierarchies and enabling manufacturing flexibility to address dynamic demand. This gives CPGs competitive advantages as retailers seek on-demand suppliers capable of supporting them in satisfying on-demand consumers. Agile CPGs can help drive differentiation through curated ranges, including mass personalised consumer goods.

Industry leaders in this area, like General Mills, have digitised large parts of the production process enabling production of smaller batches of more variants, such as gluten-free cereal. Even so, smart manufacturing is only beginning to break through in grocery while already established in other sectors. Clothing manufacturer Inditex, for example, has connected its design department to its factories, allowing it to change design instantly and react faster than competitors to new trends.

By enabling substantial production cost reduction, smart manufacturing also helps defend supplier margins against rising price pressures, fuelled by eroding middle classes, fast discounter growth, the spread of buying alliances and declining physical shelf space. Retailers typically seek to pass these pressures on to suppliers, who must keep pace or risk loss of commercial relevance and potential delisting.

Many retailers and brands are finding that the newly required digital capabilities are not inherent to their legacy skill sets. This has, for example, led Walmart, JD.com and Carrefour to sign strategic partnerships with Google, while alternative analytics capabilities are available from Microsoft, IBM, Amazon, Alibaba and Tencent.

This data analytics capability will be a critical future battleground, as retailers and CPGs try to become more efficient and personalised in a faster moving world.

RECOMMENDATIONS

  • Integrate digital teams into all departments to establish a data-driven mindset across the organisation, essential for day-to-day execution and innovation.
  • Make data exchange a key aspect of negotiations with your retail customers as obtaining real-time and more detailed performance data are key to establishing smart manufacturing.
  • Prepare for faster product lifecycles with agile marketing programmes that can support unplanned product launches and rapid assortment changes.
  • Leverage the value proposition of smart manufacturing with retailers, turning it into a mutually beneficial process.
  • Venture into D2C operations once smart manufacturing has been adopted to accelerate innovation and drive personalisation further, taking control of consumer relationships and reducing dependence of retailers that keep challenging brand visibility.