retail news in context, analysis with attitude

• According to The Nielsen Company’s Retail 2015 Forecast, revealed at its Consumer 360 Conference in Las Vegas, “the pace of change is only accelerating as technology, marketing trends and retail formats converge to redefine how CPG retailers and manufacturers interact with consumers.”

By 2015, Nielsen predicts, “mass supercenters and e-commerce to be the big winners by dollar share gains, growing by a combined five share points between 2009 and 2015. Warehouse club, dollar store and pet stores will also grow share positions. Nielsen forecasts that supermarkets will continue to lose share, but at a declining rate. While both high-end and low-end niche grocers will grow share, overall share positions will remain fairly low given lower per-store sales compared to larger formats. Other key CPG channels, including drug stores, mass merchandisers and convenience stores, will grow dollar sales but will suffer share losses.”

“While e-commerce sales felt the recessionary pain in 2008 and 2009, Q4 2009 sales were solid and interest from both CPG manufacturers and retailers to provide online buying options has never been stronger,” said Todd Hale, senior vice president, Consumer & Shopper Insights, The Nielsen Company. “With tech-savvy Generation X and Millennials growing in importance in both numbers and spending power, the time is ripe for the next step in the evolution of online searching and buying.”

Nielsen also notes that “driving the rapid adoption of smart phones is the seemingly endless variety of apps, which take full advantage of the smart phone’s geographic location and interactive capabilities. Retailers are already using smart phones as a replacement for frequent shopper cards, sending store coupons and deals directly to a shopper’s phone. Nielsen expects CPG companies to further leverage the smart phone’s location tracking abilities to target communications and promotions to shoppers both in and out of stores, and up sell consumers on other items based on prior purchases. In addition, consumers will have the ability to locate the best available price for a given item, access real-time product reviews and promotions and manage everything from household budgets and pantry inventory to tax preparation and filing.”

• Want to have successful new product innovations at your CPG company? Keep senior management out of the way.

That’s the result of a new study by The Nielsen Company that looked at “the innovation processes at 30 large CPG companies operating in the U.S.,” according to a Nielsen report. The study “reveals that companies with less senior management involvement in the new product development process generate 80 percent more new product revenue than those with heavy senior management involvement. Companies that employ this and other best innovation practices derive on average 650 percent more revenue from new products compared to companies that do not.”

According to the report, “Nielsen’s research shows that simply being physically near corporate headquarters can stifle new idea generation. In fact, it turns out that having no Blue Sky innovation team at all is better than having a team on-site at corporate headquarters. The best place for your breakthrough innovators? Far, far away. According to Nielsen, companies with an off-site Blue Sky innovation team report 5.7 percent of revenues coming from new products, compared to 4.8 percent from companies with no Blue Sky team at all. Companies with Blue Sky teams on site report just 2.7 percent of revenues coming from new products.”

Management does have a role, Nielsen says: “Senior management needs to play a different, more important role in new product development. Nielsen’s research shows that another important key to success is for senior management to precisely manage the new product development process, not the ideas themselves. According to Nielsen, CPG companies with rigid stage gates - - decision points in the process where a new product idea must pass certain criteria to proceed forward - - average 130 percent more new product revenue than companies with loose processes.”
KC's View:
These are two intriguing studies that speak volumes about the ways in which the CPG world is changing. Proximity, it seems to me, is the common thread between them. In the case of the technology study, it suggests that CPG companies are going to use the means at their disposal to get ever closer to the customer; in the case of the innovation study, it suggests that senior execs should not be too close to the product development process.

It is all a balancing act. The good ones are going to pull off both tricks, and it will give them a strong differential advantage in the marketplace.