PF Exclusive: Insights, Reinvention Key to Manufacturer, Retailer Success
“Without question, it’s tough out there, and it’s going to get tougher,” stressed Thom Blischok, president of Consulting and Innovation for Chicago-based information Resources Inc. (IRI).
Kicking off the March 24 general session of the IRI Reinventing CPG and Retail Summit: Insights to Impact, held March 23-25 at the Wynn Las Vegas, Blischok also told a packed audience of consumer packaged goods manufacturers and retailers that it is time for manufacturers and retailers to reinvent operations. The story for 2009 will be all about redefining how to go to market, he said. Among the critical factors for success during these difficult economic times will be consumer insights that help manufacturers and retailers understand and address the changes occurring in shopper behaviors.
Dr. Romesh Wadhwani, chairman of IRI and founder and managing partner of Symphony Technology Group, echoed Blischok’s comments. Speaking at the general session, he said the economic landscape is changing at “lightning speed.” The U.S. gross domestic product (GDP) fell 6% and the food GDP plummeted 15%, he noted, during the past six months.
Changes in shopper behavior during this timeframe have been dramatic, Wadhwani said. One notable difference is that the “first moment of truth is in the home, not the store.” Some 65% of consumers now are making the buying decision before they head to the store. Manufacturers and retailers, therefore, need to convert shoppers in the home first -- and the store second.
Wadhwani also said that “shopper loyalty is becoming an oxymoron.” Affordability is critical, and more shoppers are drawn to deals. As a result, shoppers are more fragmented.
Meanwhile, manufacturers are losing their pricing power, Wadhami noted. Retailers are “turning the screws” on manufacturers and are promoting private label much more than in the past.
Speaking of private label, Wadhwani predicted the U.S. will go the way of Europe, which boasts a private label penetration ranging from 30-40+%. U.S. retailers “really are nailing” private label now, he added, with penetration hovering around 20%.
Finally, Wadhwani pointed to huge changes within retail channel performance, with supermarkets down overall, and the drugstore and dollar channels doing very well. He singled out Wal-Mart as a particular bright spot among all the retail channels.
Attention to detail will be key to manufacturer and retailer survival going forward, Wadhwani stressed.
“We live in a real-time world, but the way we approach our business insights is [in the] stone age,” he said. “We need real-time insights.”
From the May 11, 2009, Prepared Foods E-dition