At Kantar Retail, we spend most of our energy dedicated to studying the retail, shopper, and macro environment around the world, and more specifically, where that environment is going and how it’s changing. In this series of articles however, we adjust our lens to focus on the future of major FMCG manufacturers, and how these companies will interact with their best customers going forward.
Historically, looking at this would have involved examining the capabilities of a sales team or how different functions can be connected to that team to bring a more cross-functional approach. These things will be important, but there are also some significant changes that will go beyond competencies and functions and may get to the heart of how FMCG companies develop, innovate, market, and sell their brands.
We will focus our conclusions on four critical implication areas, loosely divided into two central questions: Where and how will we access shoppers? The big “where?” involves reviewing capabilities by geography and go-to-market platforms; the big “how?” involves analytics and insight, and the change in and integration of consumer and shopper marketing.
- The first article of this series, “Everywhere Gets Better,” addresses the first critical issue of “where” to reach shoppers and is about capability development. This piece highlights the unique challenges posed by a world where every market’s capabilities are rapidly evolving.
- The second article focuses on a theme we somewhat jokingly call “Cover Your Assets,” and will examine the impact of asset productivity on the types of economic solutions required by retailers, and the need for suppliers to have a much more holistic view of brand, item, and category productivity.
- From there, we will tackle two critical issues around “how” to reach shoppers. The first is a look at what we call “The New 4Ps” and the importance of prediction, precision, personalization, and proof from an analytics perspective.
- Finally, we will explore the idea of “There Is No Line” and the impact on suppliers of the historic divide between “Above the Line” and “Below the Line” marketing being eroded by the blurring of the divide between retail outlets and media platforms.
This Big Idea was released as a four-part series on KRiQ.com. Our first installment, “The Big ‘Where’?”, is featured below. To download the full article, click here. If you have any follow-up questions, comments, or find your organization grappling with one or more of these issues, please reach out to Bryan Gildenberg. At Kantar Retail, a lot of our energy is going toward crafting solutions for our clients to take advantage of these changes and maximize future profitable growth.
The Big “Where?”
Capabilities by Geography – “Everywhere Gets Better”
Though many of the critical drivers of retail change are truly universal or global, there won’t be a global retail landscape in 2020, and in many key countries there may only be a vaguely national one. India, China, and the United States are all projected to have a stubborn mix of local, national, and virtual players. The key, though, is that unlike any time in history, virtually every market in which an FMCG company competes will be going through significant capability transformation.
From 1990-2010, large parts of the world remained “stalled” (notably most of Africa, and parts of the Middle East and Asia), and large postmodern markets like France and Germany hit something approaching competitive stasis. In the next 5-10 years, “emerging” markets will literally emerge, with virtually every country in the world developing consumption and spending behavior that needs to be addressed and managed differently. Africa will become a market as nuanced and differentiated as Latin America, with its various countries requiring vastly different skills.
The rest of the world is being disrupted by the digitization and mobilization of purchase behavior – a global “climate change” impacting every market in the world far more evenly than other revolutionary changes like television, the automobile, or other technological innovations. But more importantly, capabilities in many markets will evolve in patterns, and great global companies will need to understand the five stages of market evolution to be successful: exploration, concentration, penetration, maturation, and postmodern.
This is the stage where organized retail is still orienting itself to the needs of the market. Today, non-Bangalore India, Pakistan, and most of Africa fall into this description; parts of India will be beyond this by 2020, as may some major cities in Africa, like Nairobi.
Though historically, exploratory retail has been brick-and-mortar in nature, we anticipate that it will have a much more mobile/digital component to it by 2020. It is not hard to imagine a mobile-based retailer being a top 5 or 10 retailer in Nigeria, Bangladesh, or Uganda (all markets have much higher mobile penetration than any other attribute of a “modern” lifestyle).
This is the stage where emerging players scale and compete with each other viciously for share of relatively high-disposable-income shoppers (usually in similar trading areas). By 2020, this will include parts of India, non-coastal China, and tier-2 and tier-3 Russian cities in all likelihood; today, most of China is in this phase.
This stage involves the evolution of formats to access non-core populations: remote, niched, and densely urban. This transition is brutal for retailers, in that they need to learn a whole new host of skills to maintain a variety of footprints in a variety of geographies. Channel strategy moves from a “nice to have” to a “must have.” Today, Brazil is entering this stage, as is Russia; Turkey is currently in the midst of it; and Mexico is almost through it. By 2020, most of the Middle East/North Africa will be in this phase of development.
This stage involves the rationalization of existing square meters of space into more disciplined operations. The United States has just left this phase, while Poland and Mexico are just entering it.
This is the stage at which competition becomes concentrated and aggressive between massive retailers that are too big to be defeated but too small to conquer each other, and includes format reinvention, relentless demand optimization, and margin maximization (through smart merchandising, negotiation, and own-brand development). There is an intense focus on in-store merchandising and experience (and this will eventually mean online experience as well).
To proceed to Part Two, “Cover Your Assets”, and the full article, click here.