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Owning the Traditional Trade – A ‘Window’ of Opportunity for CPG Manufacturers

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Traditional Trade

Modern Trade is cornering CPG brands

The relationship between CPG companies and retailers has always been that of partners with one, more or less, dependent on the other. However, with the increase of Modern Trade penetration in the retail space, Modern Trade retailers seem to have an upper hand in the negotiations. Nielsen data reveals that in the July-September quarter of 2019, modern trade grew at double the rate of traditional trade, despite an otherwise trying time for the CPG sector. This growth has brought in a huge boost of optimism for the Modern Trade retailers who are using this stat as a bargaining chip for favorable deals.

Based on what is selling the most, retailers are launching their own brands in the same categories which are directly competing with the distributor’s brand, sometimes giving inferior visibility to the distributor’s product in order to sell theirs. Retailers have also started pushing unreasonable pressure for high margins thus making it difficult for CPG companies to have special displays and promotional activities inside the stores.

Using Traditional Trade to their advantage

Traditional Trade

Even though Modern Trade is growing at a much better rate, the fact remains that Traditional Trade still occupies a lion’s share in retailing, especially in countries like India, Turkey, China, Philippines, etc. where its share ranges somewhere between 50 to 80%. 

Unfortunately, Traditional Trade stores are being overlooked in favor of Modern Trade when it comes to visibility programs, in-store promotional activities, etc. and given the huge presence of these stores in important markets, this certainly is an opportunity missed.

Thus, investing in visibility improvement programs in Traditional Trade stores can give CPG brands a good competitive advantage and may lead to upliftment in their sales significantly.

What are Perfect Stores?

traditional trade

One of the methods for visibility improvement in Traditional Trade stores is the Perfect Stores program.

Perfect Store is a concept popularized by HUL where they transformed local grocery stores (like mom-n-pop etc.) and chemist shops into one resembling organized retail stores but on a smaller scale.

A Perfect Store is defined uniquely by every company based on their requirements. In a nutshell, a Perfect Store partner with a certain CPG brands to give proper visibility of its products and merchandising in return for better margin or special incentives.

It sounds like a simple concept and is indeed one but the road to executing a Perfect Store Program is filled with many operational hurdles. So, let us dive deep and see how we can overcome these challenges and achieve perfect in-store execution of Special Stores.

Challenges in Executing a Perfect Store Program

1. On-Field Execution

The success of a Perfect Store program depends on the efficiency of on-field promoters and merchandisers who are responsible to make sure everything is going fine within the store. However, it is easy to set targets, guidelines, processes but incredibly hard to maintain its adherence when it comes to field operations. Since this exercise is done manually in most cases, its slow and prone to many errors.

2. Implementing Protocols

A lot of time and effort of multiple teams is spent on designing optimal displays. What should the window look like, what shelf strips should be there, how many SKUs to keep, etc. Matching displays to protocols can significantly increase brand visibility and sales life, and deviations from these protocols can hard the brand image. Missing assets, out of stock SKUs, competitors’ products in special windows are some common issues which are difficult to monitor and fix on a frequent basis.

3. Wear and Tear of Assets

A lot of time and effort of multiple teams is spent on designing optimal displays. What should the window look like, what shelf strips should be there, how many SKUs to keep, etc. Matching displays to protocols can significantly increase brand visibility and sales life, and deviations from these protocols can hard the brand image. Missing assets, out of stock SKUs, competitors’ products in special windows are some common issues which are difficult to monitor and fix on a frequent basis.

4. Wear and Tear of Assets

It happens, quite frequently. And you will not know until it’s too late.

In Perfect Store model shopkeepers are responsible to maintain the assets in best conditions and merchandisers should visit the stores frequently and fix it whenever necessary. However, due to operational challenges discussed above, it is difficult to enforce.

5. Visibility for Top Management

Execution of a Perfect Store program requires constant monitoring of metrics by top management and timely corrective actions whenever there are deviations. There are many steps between the collection of data on the ground and it is reviewed by management, and actions decided by management to execute them on the ground.

Monitoring and auditing of these programs suffer from usual challenges of errors in data collection, time wastage of field reps, the huge time lag in data collection and reporting, etc.

6. Fraud

On-field reps or 3rd party merchandising agencies can outrightly lie about the work that has been done on time and there is no way of knowing it other than expensive third-party auditing, which also gives the report after weeks or months of execution.

The Panacea – Shelfwatch!

The good thing is all the challenges are solvable with the help of the right technology and implementation. Shelfwatch can be the answer to all the challenges mentioned above.

Traditional Trade

The Shelfwatch app will allow the merchandisers and promoters to click pictures of the shelves. Those images will be analyzed and the insights will be available to these reps in a matter of minutes. The insights will highlight the SOS (Share of Shelf) and OSA/OOS (On-Shelf Availability/Out of Stock) of the SKUs in question thus the reps will be able to take corrective measures there and then.

Assets like Windows displays, End Caps, etc. can also be monitored with the Shelfwatch app. The app scores the assets w.r.t various elements associated with a particular asset and thus helping on-field reps to make sure the display protocol is followed.

Shelves in traditional trade stores normally have multiple individual SKUs placed on the shelf.

Since the insights from the on-field visits are available almost immediately to the higher management, their decision making becomes dynamic. They can also gauge competitor activities and targeted measures for improvement can be taken instantly.

The images clicked by the reps are always available for cross-checking, so the cases of fraud and misreporting can be nullified.

Shelfwatch streamlines the merchandising execution and brings discipline to the whole process.

Source: https://blog.paralleldots.com/image-recognition/owning-the-traditional-trade-a-window-of-opportunity-for-cpg-manufacturers/

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