Retailers Overlook Supply Chain Impact in Search for Product Innovations

Consumer goods sellers press innovation to boost sales, but the costs and complexity often are neglected

The Wall Street Journal

Sept. 22, 2015—Consumer goods companies aren’t accounting enough for the costs and complexity that new products add to supply chains as businesses seek to drive sales growth with innovation, according to a retail industry report.

Terra Technology, a retail forecasting software provider, said it reached the conclusion after a survey showed the number of new products on shelves has soared by 32 percent since 2010 while overall sales of surveyed companies has expanded only 4 percent.

“Everybody’s looking for next big thing, but I don’t know that people are weighing the added cost and complexity sufficiently when making those trade-offs,” said Robert Byrne, Terra Technology’s chief executive and author of the report.

The report surveyed 14 large multinational consumer-products companies making up $250 billion in annual sales. While companies add new flavors of potato chips, change the wrapping on cookies and seek out seasonal fads—like pumpkin-spice beer—the vast majority of the new items rarely register at store checkout lines. In many cases, sales of a new flavor simply come at the expense of sales for an original product.

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