It’s not physical or digital; it’s physical with digital. Having multiple channels is good for business.
Leading companies are capitalizing on three basic human needs.
- Chain Drug Review, 16 June 2014
Direct to consumer retail models are a potential threat to community pharmacies, but with their neighborhood locations pharmacies are positioned well to excel at home delivery.
By Bob O’Meara, Raj Kumar and Vishwa Chandra
- The 2014 Global Retail Development Index™
International retailers and their regional rivals are expanding in developing markets, buoyed by a more upbeat economy and growing retail environments.
More than half of the 63 countries that have been ranked in the GRDI are no longer in the top 30. This special report examines why.
Since the first Global Retail Development Index, 63 different countries have graced the list of the top 30 developing markets for retail investment. A few have long-standing tenure—China, second in 2014, has consistently rated in the top 10 since 2002. However, more than half are no longer ranked.
This year we analyzed the countries that are no longer ranked in the GRDI and why they fell from the rankings. The list includes Poland and South Korea, which developed into modern retail markets; Bulgaria and Romania, where stalled economic growth delayed retail development; and Algeria and Ukraine, whose social and political unrest unraveled retail growth. In this special report, we look at the common themes that emerge from these countries’ divergent flight paths.Close
Consumers want more local food options from their retailers—and they are willing to pay a premium for it.
Our second study of shoppers’ local food buying habits bears out the optimism about the “locavore” movement. The study finds that local food is fast becoming a necessity for attracting and maintaining customers. A growing number of shoppers, seeking more sustainable foods and hoping to help the local economy, say that the availability of local food is an important factor in what they buy and where they buy it. And, importantly, more shoppers say that they think more highly of retailers that carry local food and have even considered switching retailers to find better local selections. For big-box retailers and other national chains, there is plenty of work to be done to incorporate local foods, as the market remains dominated by farmer’s markets and specialty retailers.
We recently surveyed more than 1,000 U.S. shoppers to examine the strengths and weaknesses of large grocery retailers compared to other formats when it comes to local food. This study builds on our first report on the local food market, which was released in 2013. This paper summarizes our findings and the implications for retailers.
Our study highlights several major trends:
- Local food remains important for shoppers. More than 40 percent of respondents say they purchase local food on a weekly basis, and another 28 percent buy local food at least once a month.
- Local food awareness and price perception have improved. Sixty-eight percent of respondents (up 3 percent from last year) say they are aware that their supermarket of choice offers local food.
- Leaders are differentiating on “fresh.” Our survey respondents said that when they buy groceries, freshness is far and away the most important purchasing criteria (60 percent), followed by price 30 percent). Local sourcing is a powerful way for retailers to demonstrate their products’ freshness, as 30 percent of respondents do not differentiate between fresh and local.
- Shoppers are willing to buy local food—and pay more for it. Seventy percent of consumers say they will pay a premium for local food, the same number as in last year’s survey. However more of those consumers say they are willing to pay a bigger premium—one-third (compared to less than one quarter last year) say they would pay 10 percent more.
- Locally sourced food has broad-based appeal, with spikes in key customer segments. While local food has wide appeal for a host of reasons, some customer segments (such as more affluent people) are more inclined to buy local food and pay more for it.
- Large supermarkets are still struggling to gain customer trust. Big-box stores and national supermarkets are the most common places our respondents shop for food, yet they (along with online grocers) rank well below farmers markets, specialty supermarkets, and local supermarkets when it comes to customer trust of local food.
- Retailing Today, 18 April 2014
People are embracing retail opportunities more and more in Africa, and as A.T. Kearney’s 2014 African Retail Development Index™ rankings show, there is clearly room for massive growth in African countries big and small.
As India's population soars, the challenge of feeding its people is growing. The food processing industry will be a primary part of the solution.
Economic growth over the past decade has reduced poverty significantly, bringing 20 million people above the poverty line every year. However, India continues to face significant bottlenecks in feeding nutritious food to more than a billion people, leading to chronic undernourishment and malnutrition, lifestyle diseases, and micronutrient deficiencies. Resolving these issues will require improvements on several fronts: availability, affordability, consumer awareness, quality, safety, and access to food. We believe the food processing industry will need to play a central role in improving India’s nutrition situation, thanks to its link between farms and shelves, India’s unique market conditions, and the industry’s role in job creation and economic growth.
To feed the country’s currently undernourished population, India needs a 3 to 4 percent increase in its food supply. By 2025, two factors will impact the country’s food requirement, driven primarily by increasing incomes, rapid urbanization, and more inclusive growth:
- India’s food mix will continue to move away from grains and pulses and toward dairy, fruits and vegetables, meat, and edible oils.
- Aggregate energy intake levels are likely to increase.
Significant availability risks must be bridged by the food industry, especially for grains and pulses, edible oils, and dairy products. In addition to availability, the pillars supporting improvement in India’s nutrition future are affordability, quality and safety, and consumer awareness. Availability and affordability limitations for lower-income groups have led to persistent undernourishment. Lack of awareness and issues with food quality have driven overconsumption in upper-income groups, and all four contribute to the high incidence of micronutrient deficiencies.
Securing India’s nutrition future requires addressing the underlying structural causes of these gaps and limitations, including:
- A slowdown in productivity and lack of alignment on production incentives that impact farm output
- Limited organized presence and poor procurement and supply chain infrastructure, leading to waste, unnecessary price buildup, and poor food quality and safety
- Lack of scale and modern technology limiting the nutritional impact and added value in processing
- Inability to effectively monitor and ensure food quality and safety across the value chain
- Gaps in research and training that limit improvement programs across the value chain
- Absence of consumer awareness about balanced diet, quality, and food safety issues
Eleven initiatives for India’s food and nutrition situation will effectively meet the goal of feeding a billion people (see figure 1). Across these 11 areas, four broad themes, discussed in detail in this report, form the basis of an action agenda for private players and government:
- Use private-public partnerships in production, extension services, supply chain, and high-nutrition foods
- Simplify regulations and policies, and ensure stronger implementation in integrated planning, implementation, and standardization
- Improve transparency in price, volumes, and food produce inventory
- Increase innovation and skills to drive growth over the next decade
- Ivey Business Journal, March-April 2014
Getting fulfillment right is more mission-critical for a multichannel environment compared to a traditional brick-and-mortar setting.
- Supermarket News, 24 March 2014
In the battle between online grocery and traditional retailers, those who win will innovate and cater to emerging customer needs, thus capturing a disproportionate share of the market.
- The 2014 African Retail Development Index™
Africa, with its billion people and growing economy, is brimming with potential for global retailers. How can they enter the market and succeed?
The African Retail Development Index ranks the top 10 countries in Sub-Saharan Africa for retail expansion. The Index analyzes several major macroeconomic and retail-specific variables to measure 48 countries in the region. The ARDI is unique because it identifies not only the most attractive markets today, but also those that offer the most potential in the future.Close
Nutraceuticals represent one of the most exciting areas of health innovation, but achieving full potential will require all stakeholders to adapt.
Consumer healthcare has become the battleground where pharmaceutical and consumer goods firms compete for growth. With more people around the world dying from obesity than starvation, poor nutrition is now recognized as a major risk factor for chronic diseases. Most health systems are ill-equipped to deal with this trend. Increasingly, patients are being encouraged to take part in their own treatments, and a consumer market has been developing midway between the supermarket-based world of consumer goods companies and the scientific, pharmacy-based world of pharmaceutical firms.
The front lines of this battle are nutritional products that have been proven to help prevent or cure disease. These “nutraceuticals” present a tantalizing opportunity for breakthroughs to prevent and manage common health problems, offering consumer-focused solutions to issues that are currently addressed only by pharmaceutical interventions—or not at all. However, despite being a hot spot for growth, they still suffer from the same challenges as the rest of the sector, with market growth barely keeping up with the rise in gross domestic product.
In this paper, the third in our Winning the Battle for Consumer Healthcare series, we delve further into the nutraceuticals market to understand the opportunities and barriers to growth. We also look at the successes and challenges faced by both consumer goods and pharmaceutical companies as they strive to gain the upper hand in this promising new market.Close
Learn about Pricing Full Potential (PFP) Analyzer and read current research.
The more market power you have, the more you stand to gain from your pricing strategy.
The next wave of green innovation uses digital technology to help consumers reduce their impact on the environment.
A smartphone app that monitors and controls a house's thermostat remotely. A recycling website that rewards people for making sustainable decisions. Social media sites that help users find carpools, reducing the number of cars on the road.
These are just a few examples of the next wave of green innovations: advances that arm today's empowered consumers with information and technology they can use to manage their impact on the environment.
We call this emerging industry segment Green 2.0—combining the traditional "green" industry with the Web 2.0 networking tools that have revolutionized business. Poised for significant growth, Green 2.0 is sparking new products, processes, companies, and high-value jobs along the way.Close
Survival for consumer goods companies requires becoming leaner, stronger, and more agile.
Under mounting external and internal pressures, consumer organizations can no longer reliably deliver a steady stream of profits in Europe. The diversity of regulations, languages, and cultures that characterizes Europe and the profusion of acquisitions over the past two decades have added to the cost of doing business.
Add to that heavy local operating structures, complex legal setups, and fragmented portfolios, and most organizations are unprepared to face the perfect storm of a maturing consumer market and tightening macroeconomic conditions. The cost structure generated by this legacy has become unsustainable, especially in smaller markets where the rapid development of modern retail has chipped away at sales but general and administrative costs have remained high, drastically reducing manufacturers’ margins.
Incremental, functionally targeted reorganizations are no longer enough. Global headquarters and shareholders are now challenging the status quo and calling into question the European exception. The same holds true for global companies headquartered in Europe, which are becoming more impatient with dwindling profitability and looking to invest elsewhere. This is now a driving force for radical transformation. The end of the European exception is forcing leadership teams to prioritize, optimize, and realign investments to regain the competitive edge.
The immediate priority for European management teams is to stem the current loss of profitability, but the longer-term goal is to once again become a target for investments. Doing so will require going well beyond low-cost operating models and building organizations that can respond to local market needs while also creating a structural cost advantage.
Ultimately, there are two options: Lead the transformation and develop solutions based on local knowledge, or follow as a frustrated global head off ice takes charge in response to slumping performance. Several players have already begun: Danone and Unilever recently launched large-scale restructuring plans to target redundancies, and Kimberly-Clark and Reckitt Benckiser went a step further by announcing their withdrawal from entire categories or a transfer of resources to developing markets.
The need for a radical transformation is clear, but the road map to get there is less so.Close
- The 2013 Global Retail E-Commerce Index™
E-commerce websites are no longer just offshoots of retailers' physical stores but valid alternatives for global expansion.
Today’s most successful retailers see global expansion as a crucial platform for growth. Wary of “real estate wars” and long ROI horizons, many have seized the online retail opportunity to overcome these challenges. Retailers everywhere are diving into online retail as consumers across the globe in both developed and developing markets go online to buy products. They are using a variety of growth strategies, from grassroots websites to acquisitions of smaller online retailers or expansion of international shipping capabilities.
A.T. Kearney 2013 Global Retail E-Commerce Index ranks the top 30 countries in both developing and developed markets for their online market attractiveness. The rankings are based on nine variables that measure both the current size of the online retail market and its potential for growth.
Following are some major findings of this year's index:
China takes the top spot. China occupies first place in the index. The G8 countries all fall within the Top 15. India is not ranked. India, the world’s second most populous country at 1.2 billion, does not make the Top 30, because of low Internet penetration (10 percent) and poor financial and logistical infrastructure compared to other countries.
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Developing countries feature prominently in the Index. Developing countries hold 10 of the 30 spots, including first-place China. These markets have been able to shortcut the traditional online retail maturity curve as online retail grows at the same time that physical retail becomes more organized. Consumers in these markets are fast adopting behaviors similar to those in more developed countries.
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Several "small gems" are making an impact. The rankings include 10 countries with populations of less than 10 million, including Singapore, Hong Kong, Slovakia, New Zealand, Finland, United Arab Emirates, Norway, Ireland, Denmark, and Switzerland. These countries have active online consumers and sufficient infrastructure to support online retail;
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Today's most successful retailers see global expansion as a crucial platform for growth. Retailers everywhere are diving into online retail as consumers across the globe in both developed and developing markets go online to buy products.
With a new economic community around the corner, Southeast Asia is poised for massive growth.
The Association of Southeast Asian Nations (ASEAN) encompasses 600 million people across 10 countries, with a combined GDP of $2.3 trillion. In two years, the ASEAN Economic Community (AEC) will come into effect to form a single market and production base with a free flow of goods, services, investment, and skilled labor.
JWT and A.T. Kearney recently conducted an in-depth study of the AEC bloc and its impact. Our conversations with 50 corporate leaders, most from domestic companies across Southeast Asia, and leaders of key Asian and Western multinationals that operate here, show the AEC is high on their radar screens. Sixty-four percent say their organizations plan to enter new markets in the region once the AEC kicks in; 60 percent say they will expand their existing brands or product lines; and 24 percent say they will add completely new ones to their portfolio after 2015.
The AEC will be a game changer. Companies across Southeast Asia are going to have to work harder to defend their home turf against a growing number of global and regional competitors.Close
The fresh prepared foods department offers one of the best opportunities to truly differentiate.
Food retailing is more competitive than ever, with mass merchandisers and warehouse clubs joined by drug and dollar stores, online providers such as FreshDirect and Amazon, and others encroaching on supermarket territory. Retailers need a unique offering to shift decisions about store choice beyond the traditional criteria of prices and location. Emphasis on perishables is a prevailing theme, but the fresh prepared foods department offers one of the best opportunities to truly differentiate. In addition, it brings higher-margin categories that can serve not only as a traffic driver but also as a potential growth avenue and profit center that will be critical for retailers to survive in today’s environment.
The key to achieving differentiation and growth is to develop a product mix and merchandising strategy focused on freshness, healthfulness, and value, and to build an efficient supply chain with the right economics.Close
Despite a host of new shopping options, talk of the demise of brick and mortar is premature.
Brick and mortar is dead. That's what many seem to believe. Reality, however, suggests a far different picture, one in which stores and store networks continue to play the leading role in building customer loyalty and supporting financial performance. In fact, our online study of 3,200 U.S. and UK consumers shows that stores remain at the heart of retailers' relationships with consumers, even in today's omnichannel world.
That's not to say that retail is business as usual. It's not. The advent of new retail channels has increased competition and price pressures. Stores, on their own, have become less productive and profitable.
The trick for retailers is to approach this new market context strategically, not only to understand the best roles for stores and the store network to play in today's retail ecosystem, but also to keep stores at the center of the customer relationship while maximizing value across channels. This paper provides four strategies to ensure that retailers' stores and store networks remain exactly there.Close
The methods of getting products to market in India and other developing countries are outdated. These days, direct coverage is better than indirect.
For consumer products companies in India, getting goods to retail locations faster and more cost effectively than competitors is key to top-line growth and competitive advantage. Yet India, like many other developing countries, has yet to update its distribution models to keep up with today's competitive, connected markets. As soaring costs put pressure on margins, and channel partners want better returns and faster growth, rethinking distribution and developing the right "win-win-win" distribution model could well be the ticket to improved sales and top-line growth.
Developing such a model requires taking a close look at three dimensions: coverage of retail outlets by channel partners (direct versus indirect), channel productivity (more sales, lower costs), and the payout (total retail expenditures). The paper focuses on the first dimension—direct versus indirect coverage—and explains why now is the ideal time to take another look at direct coverage.Close
Not only is the concept of merging without merging not crazy, it's already happening. And the results can be significant.
Collaboration is not new. Companies have exchanged data and forecasts for years. Virtual vertical collaboration, however, means capturing the benefits of M&A without the associated complexities, and involves a retailer and manufacturer acting as though they are about to merge, and creating the efficiencies that come with merger integration. Abandoning their traditional adversarial relationship, they build a bond, make mutually beneficial business decisions, and gain advantages including a 10 to 15 percent increase in sales, 40 to 60 percent faster new product launches, and 20 percent reduction in cost of materials.
In the old way of thinking, such possibilities would be almost unattainable, since the costs would likely fall on one party and the benefits accrue to the other. That's why it is important to act as though a merger is just a touch away. If you can trust each other, then figuring out how to pay for your collaborative efforts and how to distribute the benefits is transformed from a matter of competitive survival to a value-sharing opportunity.Close
How can CPG companies cut waste and improve companywide P-O-P efforts.
Most CPG companies allow multiple internal groups with differing priorities to plan, develop, and execute their point-of-purchase (P-O-P) strategies, making the entire system difficult to manage and almost impossible to measure.
This paper, underwritten by RockTenn and produced in collaboration with A.T. Kearney and the Path To Purchase Institute, highlights a new A.T. Kearney framework that helps companies improve their in-store marketing efforts. The framework can bring savings of up to 12 percent sales increases, unit cost reductions of 45 percent, and increased speed to market.
Finding the best person to oversee P-O-P efforts is step one. Step two is creating an enterprise-wide system to address the problems of waste and inefficiency. The framework addresses three primary issues: strategy design and planning; supply chain; and improving execution.Close