Published in Retail World 03.03.08 by ShopAbility Directors Peter Huskins and Norrelle Goldring
What are your hot picks and new year’s resolutions? Where is the industry going? Directors of ShopAbility, Peter Huskins and Norrelle Goldring, share their nominations for the top five FMCG trends of 2008 – what the best suppliers and retailers are doing, and why.
Nomination: Best Overall Direction
‘Where my bread is buttered best: increased focus on shopper marketing’
In 2007, we started to see the the ‘oops, we forgot about the shopper’ revelation. Companies have been worried almost exclusively about consumers for the past 15 years, at the expense of the shopper. In 2008, the focus is squarely back on the shopper: the person who actually makes the decision and parts with the money!
What we will see more of in 2008:
- For suppliers: the growth of in-house shopper insights people and departments, as companies increasingly come to the realisation that their marketing departments are catering to consumers and their sales departments are catering to retailers, but nobody is catering to the shopper. Ultimately, beyond 2008, shopper will become its own department rather than reporting into either marketing or sales. Some of the leading edge companies are already implementing new business structures to allow ‘shopper’ as a direct CEO report the same as marketing and sales.
- For suppliers and retailers: Increased spend on in store marketing. The priority of the mix is starting to change and lean towards in store as the primary driver of sales, supported by before store communication, rather than the other way around. Point of Sale and In Store promotions will continue to be growth areas, and more category-leading companies will explore and invest in theatre and experiential marketing for their products.
- For suppliers and retailers: OBPPC: Occasion, Brand, Pack, Price, Channel – it all starts from the shopper occasion upward, rather than the shopper occasion being tacked on the end. We will start to see more of occasion-based messaging and occasion-based pictures of success and priority points of engagement within store. We will see shopper-anchored pricing and promotional programs
2008 resolution:
Where do you sit in relation to the shopper? What is the focus of your marketing spend, and is it actually reaching shoppers? Do you know the shopper occasions for your retail store or product? How much do you know about your shoppers? 2008 is the year to get it sorted.
Nomination: Best Foreign Trend
‘Let’s stick together: the growth of segmentation & clustering’
In 2008, we will be seeing more suppliers and retailers looking to optimise sales through segmented execution.
A major trend in the US, segmentation and clustering in Australia is about three years behind. We are just starting to see the emergence of this trend with the Woolworths rollout of their ‘store-led ranging strategy’ – a clustering approach based on the geodemographics of specific store clusters.
In the US, both retailers and suppliers are using a more sophisticated segmentations of shoppers, channels, categories and entire retail offer based on shopper sales drivers and behaviour.
Why are the market leaders doing this?
Because the market, particularly in the US, is now so fragmented. There are so many choices – of communication channel (120 television stations!), store, product, brand and value proposition that the only way companies can drive growth is to increase relevance.
What is relevant is different for various groups of people, so the ‘new black’ is tailoring your offer to specific segments of shoppers – the ones that are the most important to your bottom line. For example, companies such as Wal-Mart are classifying their retail into types based on a combination of factors including product range, dominant purpose, location, shopper type, footprint, and shopping trip / occasion type. Then comes the business of what the tailored offer is – from store layout, to product range, merchandising and display, ambience and theatre right through to the choice of specifically matched store staff.
2008 resolution:
Understand segmentation and whether / how it is applicable to you. For suppliers, increasingly retailers will be looking to category leaders to drive segmented execution, so it’s a case of lead or be led (or de-ranged in certain store clusters).
Nomination: Best FMCG Feature
‘What lies yonder: assessing the channel mix’
In 2008 we will see more retailers and suppliers looking closely at their channel / retail offer mix in reponse to the growing trend away from cookie cutter retail offers and into specialty, niche, convenient and small-store formats.
- For suppliers suffering the continued squeeze in grocery / private label – more will look to drive profits back up by extending distribution into non-grocery channels, including specialty and niche. Already, Petroleum & Convenience is on the hit list of many major suppliers as a potential source of growth. We will also see suppliers looking carefully at the opportunities presented by Away from Home channels, as smaller household types redefine where people are spending their time and money.
- More retailers will look to how they can emulate the destination-specific stores that are working (like Harris Farm). Others will take the multi-format response demonstrated by Woolworths and Coles (now in P&C, and inner city small stores) based on the success of Tesco US Fast and Fresh offer. SPAR, Foodworks and Metcash have all signalled further investment in this area, one they traditionally have dominated.
2008 resolution:
Look yonder! Where else could you be? What would that be worth to you, and what would be the cost of playing there? Time to take stock.
Nomination: Best Supporting Role
‘A vision of love: the new category’
In 2008, ‘Category Management’ will become passé. Leading companies will be focusing on category development – where the category is going in the future rather than tweaking yesterday for a slightly better tomorrow.
What we will see more of:
- Occasionality mapping: linking the shopper occasion to the category to the channel. More and more companies overseas are heading in this direction, and the big players here in Australia are starting to do it. Back to nomination 1 – the increased focus on shopper marketing – it all starts with the shopper occasion.
- Category definitions and segmentations based on shopper behaviour – back to nomination 2 – the growth of segmentation and clustering. This approach will now become the benchmark for how categories are viewed and executed. The future is all about differentiated execution.
- ‘Gap’ assessments: increasingly companies will ‘deep dive’ into their categories to take a look at where the possibilities and opportunities might be. In an increasingly competitive environment, some of the biggest sales growth jags have occurred as a result of good new product development that has been innovated directly out of gap assessments. Selley’s barbecue wipes, for example. A best-selling product that created a category that did not previously exist: outdoor cleaners.
- Category driver development: having strategies, plans and rationale for each category driver.
Ultimately, all of the above leads to a category ‘vision’ rather than a traditional category plan. It is more future-focused, and less about yesterday.
2008 resolution:
Back to the future! Time to look at where the category could be.
Nomination: Best Picture
‘Differentiate or Die’
This is our No # 1 trend for 2008 and is ultimately a culmination of all of the others. In a cluttered, competitive environment with a plethora of ‘me too’ offers (both retail and product), the companies that will survive and prosper are those that differentiate.
Differentiation is about having a set of activities that, when combined together, are very hard to emulate. Innovation in product alone is not enough – it can be copied.
How are you innovating in your process? Your supply chain? Your relationships? Your total value proposition?
What unique capabilities are within the company that can be exploited?
2008 marks the death of ‘me too’. It’s no longer enough – there are too many ‘me toos’!
Differentiation across every aspect of your value chain; your value to shoppers, to retailers, to your own suppliers or buyers, to consumers and to the community at large, will define the companies that bring home the gold at the end of 2008.
Download the published Retail World version here:
