5-Vanguard-Blog

IBP
BLOG

Image(post.get_field('post_image')).alt
in CPG , Retail , Supply Chain

The Convergence of Retailers and CPGs

by Vanguard Software

Leading retailers are paving the way for online shopping. By combining strategic and innovative techniques, they’re taking customers from brick-and-mortar stores to click-and-mortar, where they experience both the benefits of quick online transactions and traditional face-to-face customer service. Leading CPG companies are also focusing on direct-to-consumer models. From strategic ways to meet demand to optimizing consumer preferences, the following companies are leading the way in disrupting traditional retail.

Amazon

With profits that exceeded $1.6 billion, Amazon is the leader in e-commerce. By combining omnichannel (selling in-stores and online) marketing strategies with customer-centric approaches that target shopping trends, they’re seeing record growth. Amazon Pantry, Amazon’s online grocery segment, lets customers fill online shopping carts and have their groceries delivered. Prime offers same-day delivery, while the Dash button provides fast product refills. Amazon also has retail locations, including Kohl’s in-store set-ups and Whole Foods, which drew in $4.26 billion in revenue in just one quarter.

To mirror Amazon’s success, businesses must focus on strong management teams, strategic retail partnerships, improved customer experience, and targeted growth strategies. Amazon prices are approximately 10 percent less than competitors, based on e-commerce analytics research. Competitors may need to test promotional offers while understanding the incremental risks of offers meant to target more traffic. Maximizing returns while also minimizing risk is a tricky balancing act.

Target

Target is a strong traditional retailer facing heated competition from both Amazon and Walmart. Despite a drop in profits over the holidays due to increased employee wages, Target continues to gain an online presence, with same-store sales exceeding 3.6 percent at the close of 2017. Target will have to work strategically to maintain a profit.

Businesses that offer coupons, for example, can drive profit for certain segments but must ensure they don’t subsidize purchasing behaviors from existing consumers that would have made purchases regardless of the offer. Investing in advanced demand planning software and demand forecasting software to model what-if scenarios (coupons) and simulate the effects on cashflow is a smart way to compete in today’s ever-changing market.

Walmart

To keep up with Amazon, and distance itself from Target, Walmart uses incentives like price-matching with 53 percent of its products, free two-day shipping, and easy mobile shopping to attract customers. Walmart is also successfully improving targeted ads and promotions. Businesses that offer omnichannel retailing increase their value and convenience by providing an improved customer experience.

Jet (now owned by Walmart)

Jet.com is another online retailer that’s disrupting conventional retail and projected record sales growth of $1 billion in their first year. Jet targets businesses and value-conscious shoppers that need grocery items and cleaning supplies. The more consumers add to their online shopping carts, the deeper the discounts.

Jet is popular with parents who want to send groceries to their kids while they’re away at college. Jet.com, along with Walmart and Target, are able to offer pricing that’s only 4.5 percent higher than Amazon. Recently Jet’s traffic has declined, but Walmart’s CEO Doug McMillion told analysts back in February that Jet will bounce back.

Proctor & Gamble

One of the largest CPG companies in the world is Proctor & Gamble. In 2013, they made a record $83.7 billion in revenue. Proctor & Gamble’s focus is on popular or leading consumer products and brands that meet every household need. CPG companies are becoming increasingly more successful as customers enjoy the convenience of one-click shopping on mobile devices and smartphones. Bolstering online click-and-collect abilities, CPG companies are able to offer better pricing than their retail competitors, as well as more immediate availability and variety.

Advanced Planning Solutions

Many CPG companies are now digitizing and implementing advanced planning solutions to support direct retail efforts through:

  • Digital technologies that incorporate real-time data collection (FRID, Sensor Data, etc)
  • Supply chain management tools that include features for data-validation and data collection
  • Optimization/planning tools that sync near real-time with ERP and/or Inventory Management systems
  • Implementing Integrated Business Planning platforms to enable cohesive integration from a line of business to line of business

Today’s blurring lines of CPG and Retailer, in the end, benefit the consumer. The more options and increased competition help the economy by bringing lower prices and more options.

Want to learn more about strategic growth strategies? Vanguard Predictive Planning is a leading Integrated Business Planning platform, leveraging predictive analytics, artificial intelligence, and advanced automation.

About Vanguard Software
Vanguard Software introduced its first product for decision support analysis in 1995. Today, companies across every major industry and more than 60 countries rely on Vanguard Software’s Integrated Business Planning (IBP), forecasting and advanced analytic cloud platform. Vanguard Software is based in Cary, North Carolina.

Vanguard Software Applications

Our collaborative, web-based forecasting applications unite roles, teams and departments in achieving the most accurate forecasts in the world – bar none.