How should consumer brands team-up with their retail partners in an omni-channel world?
Despite a growing number of consumer brands and retailers already working together to step up key business areas, significant collaboration opportunities remain still untapped or not thoroughly exploited for most. While this is not new, collaboration has never been so necessary and complex due to digital disruption.
To provide the advanced omni-channel propositions that customers expect today, it is essential for manufacturers and retailers to team-up and strengthen their ties.
We can distinguish three main levels of collaboration between brands and retailers
1 Transformative: Develop activities to optimise experience and service for consumers, e.g. in the development of assets across channels, service improvements, product or distribution innovation.
2 Traditional: Optimise core areas of current collaboration, e.g. how do brands and retailers think about business planning, trade terms and how do they manage the category and marketing activities?
3 Foundational: Create joint initiatives to build solid omni-channel capabilities and enablers, e.g. aligning operations for maximum efficiency and co-develop (and even embed) technological solutions and data sharing.
…which in turn break down into 12 main support areas enabling omni-channel excellence:
Most often, main collaboration activities revolve around commercial, marketing and merchandising areas, very much focused on the day-to-day trading. On the other hand, collaboration around transformative and foundational areas is generally less explored or short lived despite offering the highest value creation potential. This is mainly due to the higher investments required, the lack of resources committed (and support from leadership), and the often uneven benefit split between retailers and manufacturers (usually benefiting retailers).
Collaborating in foundational areas can be especially critical to enable an advanced and efficient proposition, and many brands and retailers are already reaping its benefits:
Operations & fulfilment: Tracking and sharing of inventories enables advanced omni-channel service and delivery propositions. For brands, this avoids sales losses (having stock where and when needed) and significant operational improvements. For retailers, it offers an easier access to brand’s stock, more flexibility and the incremental sales from brands directing sales to stores.
Best practice in this area are brands providing access to retailer inventory from brand sites, ring-fenced stock, quicker order turnaround, product and packaging innovation, flexible pallet sizes or use of RFID inventory tracking. Gillette US, for example, provides stock availability of its products on Walgreens and Walmart at a store by store level on its brand site.
Omni-channel expertise sharing: Brands can bolster omni-channel and digital expertise at retailers through training, shared best practices, resource sharing or establishing omni-channel specific communities. For brands and retailers, this helps mutually grow omni-channel maturity and deepen understanding of ways of working.
Data, analytics and insights: Shared operational and consumer data enables brands and retailers to make better informed commercial decisions, track effectiveness of activities and improve operational efficiency.
Numerous technology platforms allow brands and retailers to share access to the same information. A major UK grocer, for example, shares real time POS and inventory data with brands, which means both parties can see the same dataset and reporting and analytics, simulate scenarios to plan promotions and shipments, and identify out-of-stocks across channels
Technology strategy: Aligned technology roadmaps allows investments optimisation and implementation success. Brands benefit from early visibility of changes and greater return on aligned investments. For retailers, it allows access to advice and support and best practice insights from other retailers/markets.
Can a direct-to-consumer (DTC) proposition also help brands support their retail partners?
Even if this may sound counterintuitive at first, the development of DTC platforms is often not meant to generate relevant sales volumes, especially in FMCG. Brands understand very well the challenges of making a low margin category profitable and attractive for consumers on DTC. However, despite the limited direct sales potential, its development can enable opportunities for retail partner support:
- Consumer insights: As per the earlier point, consumer insights are vital for brands to place their investments and inform their product development pipeline. Retailers often limit the information they share with brands due to lack of capabilities or internal policies. A DTC channel enables brands to directly access consumer insights at a large scale. If shared, this information can also complement retail partners’ own insights, enabling them to further improve their operations.
- Product innovation and testing:Introducing a new product represents a logistical hustle and potential opportunity cost risk for retailers, who often demand advantageous commercial terms and high marketing investments. Brands can use DTC models to test new concepts, mitigating risks and financial commitments for both. On DTC channels, brands can be more bold and playful, ‘cheaply’ testing more concepts (also including new omni-channel models) before pushing them to retailers.
- Publicity/PR:To cheaply increase their content pool, the media often covers innovative new product launches or distribution methods. A DTC platform can allow brands to showcase their innovations, not only to test them (most of them will never be meant to be commercially viable) but also to generate free publicity, generating brand awareness and ultimately benefiting retailers.
Staying relevant in the digital era by building advanced (and evolving) omni-channel propositions is one of the main challenges retailers and brands are facing today. Exploring and fostering collaboration opportunities across key business areas is a fundamental driver and accelerator of change and innovation.
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(1) Based on Javelin Group’s experience working with leading consumer brands and retailers