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Forget the hearts and flowers: four ways CPGs can get closer to their Retail partners

From improved sales performance and faster product development, through to better customer experiences and smarter category management, great things can happen when retailers and brands work together – just ask some of the industry’s leading figures.

Published last year, dunnhumby’s The Future of Retailer and CPG Collaboration report takes a comprehensive look at the benefits that can be realised when both parties work together in service to the customer. Included in that paper are the thoughts of 79 executives from across the grocery retail and CPG worlds, providing a clear summary of the industry’s current sentiments about collaboration.

That’s useful for helping us understand more about collaboration as a whole – retailers see it as a way to drive growth and efficiencies, for instance, while CPGs believe it helps them adapt to changing shopper behaviours and go to market at speed. But the results of that study also help to explain why 80% of respondents expect to see more collaboration across the industry in the future.

In true cooperative spirit, there’s a great deal of alignment between CPGs and retailers about why they should keep working together. Around 50% agreed on the four primary drivers of collaboration, suggesting that as well as recognising the overall value they gain, CPGs and retailers are equally united on the specific benefits that result. In order, those four main drivers are:

  1. Dealing with the implications of the growth in online.
  2. Developing a shared focus on shopper needs.
  3. Addressing the growing need to differentiate.
  4. Aligning their strategic priorities, particularly during annual planning.

So, how does collaboration in those areas actually work in practice? And how can CPGs use those focal points to strengthen their relationships with their retail partners? Let’s look at each in turn.

 

Getting to grips with the challenges of online growth

 

One of the main benefits of greater collaboration between retailers and CPGs is the opportunity to learn from one another. Just as suppliers can gain a huge amount of insight from the granular, long loop data that retailers hold, the latter can derive similar value from a CPG’s deep category understanding and market-wide perspective. The same is true when it comes to online.

Just as retailers might want to tap into a brand’s category expertise when refreshing or re-evaluating an in-store aisle or display, for instance, the same rationale can also be applied to taxonomy – ensuring that shoppers can find what they want quickly and easily. And CPGs, given better insight into the specific behaviours of online shoppers, may in turn choose to adapt products or pack sizes to better suit those needs.

At its core, the rapid growth in online provides a novel way for retailers and brands to learn from each other’s experiences, particularly with many CPGs investing heavily into the acquisition of external expertise from pureplay e-tailers – something that should be naturally appealing to retailer-side ecommerce teams.

 

Pooling resource around customer needs

 

Understanding – and responding to – customer needs is something that we’re strong advocates for here at dunnhumby. It’s also a task that many retailers are innately equipped for by virtue of the huge volumes of loyalty and point of sale data that they typically hold. That’s not to say that CPGs can’t add additional value, however.

One area in which suppliers can make a substantial contribution to a retailer’s customer first approach is in emerging and fast-moving shopper trends. With issues like sustainability, health, value, and more all gaining significant traction over the past 12 months, CPGs can supplement overarching retailer insights with specific category learnings and attitudinal research, helping their partners achieve a new level of agility around emerging needs.

 

Differentiating together

 

Standing out from the crowd can be difficult at the best of times, even more so in an environment in which value has become one of the primary drivers of shopper behaviour. As a result, innovations in areas like products, stores, and channels can go a long way – particularly if they’re well attuned to evolving and emerging customer needs.

Here, retailers and CPGs can again team up to deliver an experience that is more than the sum of its parts. One example: by combining basket level analytics with category insights from suppliers, a retailer could refocus its aisles to offer a seamless shopping experience with complimentary products placed alongside each other. That would maximise navigability and new product discovery alike.

The same is true of national brands, which can serve as a strong point of differentiation when employed effectively. Understanding what the baskets of brand-loyal shoppers say about their overarching needs can aid with new product development and competitive contrast in equal measure.

 

Creating a joint vision for success

 

With common challenges come common objectives. While the specific goals of retailers and CPGs may differ, they’re ultimately all in support of two overarching priorities: drive growth and deliver value for customers. The realisation that those things are easier to do in unison than they are individually has been reason enough for many to adopt a more collaborative approach to strategy and planning.

Category management provides an excellent example of how that works in practice. While CPGs need to know how important different categories are to a retailer and its shoppers in order to allocate their resources effectively, retailers have traditionally been reluctant to give that information away lest it results in a plan that’s heavily skewed in favour of the brand.

Nonetheless, transparency is crucial here – and the more data that retailers can share about the importance of levers like variety, innovation, and price, the better aligned a CPG’s plans will be to shopper needs. Trust, and a willingness to co-create, are vital if retailers want to ensure that CPG trade and R&D investment is funnelled in the right direction.

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