To enable sustained success, food, drug, mass retailers recognize the need to base category management decisions on a truer read of the omnichannel consumer, new research shows
Food, drug and mass retailers are still coming to terms with the events that swept the industry beginning in March 2020, as the world confronted the COVID-19 crisis. The consequences will be far-reaching, but some lessons are already instructive to merchants as they adjust their merchandising and category management methods to serve a transformed shopper base, including:
- Last year’s demand distortion caught the entire industry off guard. Food and drug category sales surged 9.2% for the period from March through December 2020, versus the comparable period a year earlier, according to the IHL/RIS News Store Matters Study released this spring.
- Online food and beverage sales “shattered projections” for the 52 weeks ended last November, growing by 125% to reach 12% of total food and beverage dollars, according to the NielsenIQ Total US E-commerce measurement powered by Rakuten Intelligence.
- Grocers do not expect sales increases to continue in 2021. A member survey from FMI – The Food Industry Association titled Receipts from the Pandemic, released in March 2021 found that 63% of grocers expect sales to decrease in 2021, while 75% forecast a decline in profits for the year versus the inflated results of 2020.
These realities require a critical review of key retail category management execution aspects – especially strategy and tactics – according to new research commissioned by Precima, a NielsenIQ company and conducted by Coresight Research titled How Category Management Has Changed Forever. The results convey several key learnings in the areas of data and insights that have implications for retailers and their trading partners:
- Merchandising execution can only improve if the insights obtained from analyzing large data sets are actionable
- Actionable means complete, accurate and readily accessible to decision makers
- Unification of data supports both retailers and CPG manufacturers in effectively carrying out their long-term plans by providing more accurate insights
The survey findings support this, with almost six in 10 respondents citing a lack of robust data management as a category management challenge. Access to actionable insights can help retail category managers offer superior assortments, provide a more personalized experience to shoppers, improve planning efficiency and more quickly recognize market shifts, among other benefits.
Importance of Data Best Practices, Now and In the Future
Data analysis requirements pose a significant ongoing challenge for retail category managers, particularly as they fold e-commerce data into the decision-making mix. An AI-enabled analytical platform allows retailers to deploy large amounts of data in the most effective manner and improve their understanding of a customer base that moves among shopping channels to suit varying purchase missions. Findings in the Coresight-Precima survey illuminate several best practice areas for retail category management:
- Use of an analytical platform to access actionable data was cited as the topmost best practice today, with 59% of respondents citing it as “important or “very important” [Fig. 1].
- Almost six in ten respondents cited gathering suppliers’ data as an “important” or “very important” best practice. Providing a common platform for retailers’ data can support integrated business planning as well as help both retailers and suppliers work toward the mutual goal of customer-centricity.
- The majority of the respondents (79%) expect gathering suppliers’ data to become more important as a category management best practice over the next five years than it is today.
It is notable that a majority of retail respondents (63%) report they have separate procurement teams for e-commerce and brick-and-mortar retail. This is expected to change rapidly, as most respondents (76%) believe that migrating to a unified procurement structure will increase in importance over the next five years [Fig. 1].
In this context, data analytics will play an increasingly important role in supporting the transition from store-centric or disconnected procurement structure to a unified one.
Shift to a More Data-Centric Approach is Imperative
The business discipline of category management has long served food, drug and mass retailers well. Its core methods are proven by decades of experience. In the present era, there is an imperative to take a more data-centric approach to category decisions.
Unifying vast and fast-flowing data streams from both store and e-commerce channels is a crucial aspect of the quest to make insights more actionable.
It is also clear that access to analytical platforms will be crucial for retail category managers in their efforts to derive actionable insights from large data sets. This will make data more accessible to decision makers in their efforts to improve merchandising execution.
As the findings in the research reveal, most retailers recognize actionable insights to be a non-negotiable aspect of their category management decision making, now and in the years ahead.
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About the research cited in this POV paper: Data is from December 2020 Coresight Research survey of global grocery/drug retailers and consumer packaged goods (CPG) suppliers in France, Germany, the UK and the U.S. Some findings were compared against select findings from a separate March 2020 survey of a similar respondent base. These surveys had 110 respondents and 104 respondents, respectively, and asked the same set of questions.