By Cheryl Sullivan, President, DemandTec
For all the talk a year ago about the rise of online shopping and despite its growth rates, until recently, it still constituted a relatively small percentage of the overall retail channel mix. COVID-19 has changed that with a vengeance, and even shopper demographics traditionally resistant to online channels have chosen (or been forced by store closure guidelines) to embrace online channels. As the pandemic drags on, the behaviors are settling in from novelty to habit.
If you look back in time, you will see an interesting competitive journey for retailers. Before the birth of online, their fears were limited to the competitor around the block. As online made its bold entrance, the competitive landscape expanded to include a whole new set of competitors of all shapes and sizes. Combine this with the fact that shoppers do not see channels, nor are they afraid of crossing global boundaries to get the products they desire, and retailers quickly found themselves competing against retailers around the world. Adding salt to wound, many brands, especially Consumer Packaged Goods (CPG) companies began to expand their distribution channels, developing and enhancing their online stores, and going direct to consumers. This created a little elephant in the room that long went ignored by grocers, given the historically minimal impact of direct competition with their CPG suppliers. But now the elephant has grown, and it is hard to ignore as today’s pandemic drives a new trend that will fuel the growth of shoppers wanting to shop directly with CPG companies.
Although there are signs that we are beginning to come out of the pandemic, it’s clear that it will take months, if not years, to recover fully. When we do, the impact on shoppers and the changes in the competitive landscape will continue to persist. Grocers and CPGs will both need to take aggressive, rapid measures to ensure that they protect their loyal customer base and squarely face the elephant in the room. This is where science-based technology can be their best friend: when they decide to meet the challenge posed by the fact that they will need to deliver optimal pricing and accurately predict demand in a world where virtually all historical data has become irrelevant.
In this fast-changing competitive landscape, retailers must work proactively to ensure that they retain loyal customers and provide a rewarding experience for shoppers who, during the pandemic, faced frustrations elsewhere and began trying out new retailers or going directly to the brand. Additionally, they must provide a counter-balance to CPGs working to establish a deeper direct brand engagement with shoppers while also maintaining solid relationships with their suppliers. Retailers must recognize that science-driven technology is no longer a nice-to-have if they are going to maintain strong CPG collaboration while they negotiate with their suppliers, especially around trade funds and promotions. They must have a willingness to let go of the reins and let science recommend optimal category strategies vs. trying to force science to achieve the unachievable when it comes to optimal everyday prices and promotional offers. Science needs to be used, rather than gut feel or irrelevant historical data when considering the interwoven intricacies of pricing between private-label and branded items, rapidly identifying and adjusting their pricing when new KVIs emerge or old ones leave the scene, or product affinities shift. Science can leave retailers with a sense of confidence that they are maximizing and optimally allocating the CPG trade funds and transforming them into optimal promotional offers within the right channels.
Retailers today and for the foreseeable future are juggling more complexity – both on the competitive landscape as they go head-to-head with direct-to-consumer CPG initiatives, and on the shopper front as baskets, price sensitivities and even KVIs shift at lightning speed. Fortunately, science is enabling retailers to find a path to meeting shopper requirements and driving desired business results.