Insufficient shipment history, increases in pressure to reduce supply chain costs, skewed visibility of shelf-life, inaccurate reports of demand cycle and inventory analytics in addition to the increasingly intelligent customer—the retail industry is continuously pinched by such factors. And neither Consumer Packaged Goods (CPG) companies nor retail stores (brick-and-mortar and online included) are exempt from such ramifications. Not to mention, the lingering impacts of the economic recession leave some consumers still hesitant today about where they spend their dollars, causing unpredictable inventory demands. As a result, CPG companies and retailers must both work smarter about their go-to-market strategies and investments to overcome such challenges and win the customer back—outside of traditional management of POS and shelf-life inventory optimization.
“Customers are more intelligent—they want product where they want it, how they want it and when they want it,” said Sara Lewis, Worldwide Industry Marketing Lead, Automotive and Supply Chain for IBM. “And even similar to CPG companies, the level of service that is expected is huge. But for CPG specifically, what we have seen is a huge increase in volatility end to end. CPG companies are in dire need to find a way to reduce inventory costs as well as reduce out-of-stocks. A lot of the CPG industry talks about the up-and-coming private label phenomenon coming in with low-cost competitors. And based on these private labels, if a product is not there at the right time—consumers are smart and they have done the research and they know what the next best option is and they will buy that instead.”
Processes at play
Numerous industries require the customer to be the focal aspect of most decision-making—a vital driving force for both CPG brands and retail stores combined. And as consumers continue to demand more in quality of goods, convenience and service, a relevant shift has occurred in the way all angles of retail compete to deliver on those requests. In other words, the consumer has come to a crossroads of whether they want to stay loyal to their brand of product; or to the goods outlet that allows them to purchase an item.
One example of this is Amazon.com Inc., which most recently announced plans of delivering same-day shipping to meet consumers’ needs during the holiday season and beyond. On top of that, retail giant Wal-Mart announced it would no longer carry the Kindle e-reader or tablet. As a result of this, consumers are faced with a number of scenarios such as: ‘A). As loyal Wal-Mart customers now have to go elsewhere to purchase the Kindle items, does this increase the chances that they may also start to turn to other outlets to purchase other electronics items as well? B). Does the ‘potential option’ of same-day delivery mean that they will start to only purchase items from Amazon.com? And C). what impact do these developments have for online retail versus brick-and-mortar retail depending on where consumers go to purchase specific items?’
“If you walk into a store as a consumer and you don’t see a product on the shelf, there is nothing that prohibits you from taking your smartphone out, looking up a product on Amazon or on any other sites to see where else you can find it,” confirmed Guy Courtin, Director of Product Marketing, Retail Solutions Inc. (RSi). “And that could potentially take you away from that specific retailer. The CPG company might be ok because you’re still buying their product but now all of a sudden, instead of buying it at your local CVS, you might be buying it through Amazon or another channel. So as a retailer, you’ve lost a sale. And that’s going to potentially impact some of the consumer loyalty and allow switching cost to be greater in going from one channel to the other.”
In fact, 46 percent of consumers use their mobile device while in a store to locate a retail store, while over half (56 percent) make purchases via mobile while at a location, according to new data from Shopzilla Inc.