The grocery industry’s profitability is under threat. Sources estimate that half of the sector’s net earnings have disappeared in recent years, and that’s before we take the events of the past 18 months into account. While many Retailers have seen gigantic revenue growth during the pandemic, that hasn’t necessarily translated into profits – the costs of online fulfilment and Covid-related store modifications eating into those gains.
As a result, Retailers are now under increasing pressure to optimise their operations, ensure that every process and every asset delivers the maximum possible return, and generate incremental revenue streams.
One approach to tackling the challenge of profitability that has gained significant traction in the past few years is data monetisation. This concept isn’t new, of course. Even before the pandemic struck, the vast majority (85%) of retail organisations said that monetising customer data was one of the major priorities for their business, on top of their historical point of sale data sharing. And in the past three years alone, we’ve seen a 50% increase in the number of Retailers doing just that. By 2025, customer insights monetisation is expected to have doubled in value.
Today, with margins growing ever slimmer, I suspect that an even greater number of grocery businesses will now be contemplating what that approach might do for them.
As with any other retail strategy though, there are many different ways to approach data monetisation. And the reality is that only one of them is truly viable. Anyone considering selling their data solely to make a quick buck will find that the short-term gains aren’t enough to offset the negative impact such a practice can have on both the Customer experience and relationships with their consumer packaged goods (CPG) partners.
Instead, to build a data monetisation program that is genuinely scalable and sustainable over the long term, monetisation needs to be Customer First.
Insight and not just data
The first step is to transform data into actionable insight, served via a single portal, accessible by the retailer and CPG teams. The data science is the key enabler to get descriptive and prescriptive insights that can answer business questions, through a customer lens, in a scalable and efficient way.
Defining Customer First
Many organisations talk about the need to be Customer-centric. But without a firm definition on what that actually means, the idea of a Customer First approach can end up being little more than a fuzzy, albeit well-intentioned, concept.
Today, with the wealth of data that businesses have access to, Customer First can be a strategic and tactical approach to business growth that focuses on making every decision better using Customer insights. Executed optimally, Customer First practices drive sustainable long-term growth by increasing Customer satisfaction. That applies to assortment, pricing, media, and more, and it applies to the commercialisation of insights too.
A Customer First monetisation programme has multiple benefits for the Retailer. Not only does it enable them to “find” new revenues in the form of supplier investment, it also enables them to grow their core business and drive savings too. And the knock-on effect of that sales growth will benefit their CPG partners too.
Growth comes in the form of like-for-like sales uplift as a result of more Customer First category planning and decision making – as much as two to five percent in our own experience. Retailers save by outsourcing category reviews to those same partners, thus reducing the amount of internal resource that needs to be allocated against them. And they can find money via direct revenues from the sale of data insights to suppliers.
Many large CPGs, of course, are already data rich. As such, they buy insights not just to add to their understanding, but to ensure that they can align behind a Retailer’s Customer strategy and participate in shared decision making in service of it. And so, before Customer First monetisation, must come Customer First collaboration.
A shift in ways of working
While this might sound simple enough on paper, it can require a major change in mindset – both internally and on the part of CPGs.
Historically, trade relationships between Retailers and CPGs have been almost entirely transactional, relying on commercially focused negotiations to determine which products make it to store shelves. Decisions have been made based primarily on sales and margins, and that legacy can be difficult to shake off.
There are other complexities, too. Many Retailers still lack defined Customer strategies, meaning there’s little in the way of a focal point for these activities. Naturally, that needs to be resolved before anything else occurs. And while supplier collaboration and monetisation activities tend to be driven by a Retailer’s Marketing or Commercial Leaders, the rest of the organisation needs to be on board with the principles of Customer First too.
Crucially, this onboarding must start at C-Suite level. Commitment from the top is the only way to ensure that a Customer First mentality trickles down through the rest of the organisation – and particularly to category teams where those principles need to become embedded in strategy and activation.
Despite what some parts of the data science industry might like us to believe, none of these are problems that can be solved solely by an application or piece of software, no matter how sophisticated they might be. What’s required instead is a programme of change management, one designed to help Retailers and their partners embark on a fundamental and long-term shift in their business philosophy.
Underpinning this must be the right processes, closely aligned to the Retailer’s business, and the people who can drive that change forward and represent the voice of the Customer at its earliest stages.
Change for the better
Change of this kind ultimately needs to be owned by the Retailer. Not too long ago, one North American grocery chain approached us looking to improve the results of their monetisation activities. Once we got talking, we discovered that what they actually wanted was to create better, more Customer-focused ways of working. Successful monetisation was still the goal, but only within the context of a more sustainable, Customer First approach to doing business.
In Europe, one of our retail partners ensured the success of their Customer First strategy by making Customers the central element of their joint business plans with CPG partners. CPGs were asked to plan around the Retailer’s proprietary segmentations, ensuring that everyone spoke the same language and served the common goal of delivering plans that offered better outcomes for shoppers.
Including CPGs as integral partners in the discussion in this way is vital for reasons that go beyond the raw economics of trade negotiations. CPGs have valuable, market wide and cross-industry insights that can help Retailers further refine their own category understanding, not just in terms of what their competitors are doing, but how Retailers around the world are overcoming different challenges too.
Working transparently and openly with CPGs, outsourcing insight creation and utilising their inherent analytic and category expertise, can be hugely valuable to any Retailer.
Being Customer First isn’t just a philanthropic pursuit, doing what’s right for the Customer because that’s what’s expected. It’s a game-changing strategy that we’ve seen drive competitive advantage time and time again. Whether it’s insights monetisation, media monetisation, category management, or something else entirely, a Customer First strategy sets retail businesses up for success, no matter which direction they head in.
As behaviours continue to change in the wake of the pandemic, and the changing dynamics of online and in-store retail squeeze profits ever tighter, better, more Customer-centric collaboration between grocers and their suppliers will continue to be the only sure fire path to success.
 Economic value add of publicly traded grocery retailers*, $ billion – McKinsey Corporate Performance Analysis Tool
 The future of retail revenues must be data-led – Forrester Consulting report November 2019
 dunnhumby’s Insights Monetisation market tracking
The latest insights from our experts around the world
Speak to a member of our team for more information