What CG Firms Can Learn from NRF
By Lora Cecere, Partner, Altimeter Group
Attendance was up 30 percent. Attitudes were greatly improved. It was NRF 2010, and all gave thanks that the Great Recession of 2009 was behind them. With more than 50 percent of retailers seeing an increase in gross margins, the improvement in retail confidence buoyed the mood at the show. Grocery had a good year; soft goods were shaking off the recession. Here are two insights for consumer products companies.
Attendance was up 30 percent. Attitudes were greatly improved. It was NRF 2010, and all gave thanks that the Great Recession of 2009 was behind them. With more than 50 percent of retailers seeing an increase in gross margins, the improvement in retail confidence buoyed the mood at the show. Grocery had a good year; soft goods were shaking off the recession. Here are two insights for consumer products companies.
Price Management: Software as a Service (SaaS) dominated the show floor showcasing technology solutions. Pricing, assortment and forecasting are coalescing in retail solutions. The retail interest was high. These booths were full. It is clear that retailers are becoming more serious about price. Strategies are moving from Every-day Low Price (EDLP) to High Lo strategies.
What this means for consumer products companies: For consumer products companies that manage price and promotions as separate functions (40 percent of consumer products companies), this needs to be a wake-up call. Promotion and pricing strategies need to be managed together and closely tied to category management strategies. With Target cutting items at the store by 30 percent and Wal-Mart slashing the number of SKUs, getting control of these demand shaping techniques to drive store traffic is increasing in importance.
In 2008, with escalating commodity prices, consumer products companies raised prices. In 2009, prices were rolled back to attract the value conscious shopper. In 2010, commodity prices are increasing (corn is up 24 percent in six months), with retailers increasing their pricing capabilities, consumer products companies need to improve their skills in this area to get ready to do battle.
Meet the Digital Consumer: Social networking -- Facebook, Socialcast, Twitter -- are now mainstream concepts; and there is a scramble by retailers to win the hearts and minds of the shopper through mobile applications. The term cross-channel now has a new meaning. Retailers at the show were aggressively responding. Presentations and technology demonstrations on how to gain early advantage were well-attended. The work of the NRF ARTS committee on standards and the advancements of retailers on mobile applications were highlighted in many presentations.
What this means for consumer products companies: The energies and efforts of the consumer products companies in this area lag most retailers. There is no equal effort by any of the consumer products industry share groups to mobilize on this opportunity.
Consumer products brands were powerful in the 1990s. Over the next decade, the power shifted. With the disintermediation of media, consumer brand loyalty decreased giving power to the retailers. Over the last year, house brands increased by 2 percent to 4 percent by category. As we start 2010, the power is shifting to the consumer. It will redefine consumer products value chains. It is fascinating that retailers have more energy to be early adopters than consumer products companies.
The customer-centric response is changing. With the changes in price management and the digital consumer, a 360-degree view of the consumer is not sufficient. Consumer products companies need to prepare for battle. It is time to redefine the front office processes of the consumer products company. What we have now is just not good enough.