MAXIMISING TRADITIONS THE SHOP. SHOPPER. SHOPKEEPER OCTOBER 2015

Transcription

1 MAXIMISING TRADITIONS THE SHOP. SHOPPER. SHOPKEEPER OCTOBER 2015

2 THE MANY FACES OF TRADITIONAL TRADE IN SOUTHEAST ASIA... WARUNG kedai runcit sari-sari stores 杂 货 店 chap foh tim Tu-ra-kij-ka-pleek-bab-dang-derm 杂 货 店 cửa hàng tạp hóa corner grocery store chap foh tim Small shop round the corner sari-sari stores corner grocery store WARUNG chap foh tim chap foh tim cửa hàng tạp hóa kedai runcit 杂 货 店 mom-and-pop stores kedai runcit Small shop round the corner 杂 货 店 ran-show-huay ran-show-huay WARUNG kedai runcit sari-sari stores

3 DO YOU UNDERSTAND THE CHARACTERISTICS OF THESE SHOPS? DO YOU KNOW HOW SHOPPERS BROWSE AND BUY? DO YOU KNOW HOW THE SHOPKEEPER THINKS AND WHAT MAKES HIM TICK?

4 Samuel 1, a sales leader of a major FMCG manufacturer in Vietnam, was faced with a challenge: servicing Vietnam s slew of traditional trade stores with limited resources. In order to prioritise the multitude of traditional grocery stores scattered across the country, he ordered a store segmentation project which enabled him to group outlets based on claimed sales performance. Based on the store segmentation result, his sales force was directed to stores representing the biggest sales potential. But Samuel was dissatisfied with the outcome; the classification of outlets appeared inaccurate, and staff lacked insight into which products they should push in each store. Samuel s dilemma is not unique. In fact, it s a fairly common challenge. Many FMCG sales teams lack fundamental knowledge on the traditional trade landscape, such as the location (where) of the stores which represent the biggest opportunity, products (what) which offer the largest potential, and promotional activities (how) which will yield the maximum conversion. Such insights are critical to developing a comprehensive sales strategy which takes local market nuances into account. Due to the sheer diversity of Southeast Asia s retail sector, a one-size-fits-all approach is rarely sufficient. Indeed, brand building and sales development can be achieved by combining shop, shopper and shopkeeper insights into an effective segmentation to truly drive activation across the various shopper touchpoints along their path to purchase. A multi-lens view approach is required in order to win the hearts of both the shoppers and the shopkeepers. 1 Real case, but name has been changed HOW SHOPKEEPER WHAT SHOPPER WHERE SHOP IV MAXIMISING TRADITIONS THE SHOP. SHOPPER. SHOPKEEPER OCTOBER 2015

5 THE FRAGMENTED WORLD OF TRADITIONAL TRADE In Southeast Asia, traditional grocery is the largest channel both in terms of store numbers and sales contribution, and in major cities like Ho Chi Minh City or Jakarta, traditional trade accounts for more than 70% of FMCG sales. TRADITIONAL VS. MODERN TRADE IN ASIA RETAIL CHANNEL SHARES IN ASIA (INCLUDING INDIA) WEIGHTED SHARE OF TRADE 4.1% 1.7% 48.6% 4.2% 1.8% 48.2% 4.2% 1.8% 47.9% OTHERS DRUGSTORES TRADITIONAL TRADE CONVENIENCE STORES MINIMARKETS 4.9% 8.4% 5.2% 8.9% 5.3% 9.3% SUPERMARKETS HYPERMARKETS 16.8% 16.9% 17.2% 14.9% 14.6% 14.4% MAT 2014 Source: Nielsen Retail Index 2014 shares based on weighting of country importance Copyright 2015 The Nielsen Company 1

6 PLANNED OR IMPULSE PURCHASES, GROCERY STORES ARE A BIG PART OF TRADITIONAL TRADE TRADITIONAL TRADE FOR DAILY MEAL SHOPPING WHILE MODERN TRADE IS MORE FOR PLANNED MONTHLY TOP UPS 39% 30% 3% 35% 12% 5% 18% 7% 33% 5% 12% 7% 28% WINDOW SHOPPING IMMEDIATE CONSUMPTION MEAL FOR TODAY TOP UP MAIN SHOPPING 35% 45% 25% 35% 5% 13% TRADITIONAL TRADE MINIMARKET SUPERMARKET HYPERMARKET Source: Nielsen Home Panel Data FMCG 78 Categories % Spending Indonesia Urban + Java Rural MAT 2015 we 14 June By and large, shoppers visit traditional trade stores due the proximity to their homes, and a large proportion of purchases in traditional grocery stores are planned, from catering to everyday needs to topup shopping and even main shopping. The planned shoppers regard their local grocery store as a pantry extension, buying their daily cooking, homecare or personal care needs. Such purchases are planned in advance and the majority of shoppers have already made their brand choice before they enter the store. Importantly, planned shopping implies the potential for bigger basket size or offering new pack formats within the repertoire of regularly shopped brands. Yet, having elements of both impulse and planned in traditional trade stores can open up immense opportunities. Modern trade has an edge over traditional trade on variety, selection, promotional activity and high quality premium products. Traditional trade can replicate these by more frequent rotation of new products, adding variety within impulse categories, or having promotions by day of week to entice shoppers. 2 MAXIMISING TRADITIONS THE SHOP. SHOPPER. SHOPKEEPER OCTOBER 2015

7 A SHOP, ITS WARES AND SHOPPERS INDONESIA MALAYSIA PHILIPPINES THAILAND VIETNAM TRADITIONAL TRADE GROCERY STORE COUNT 3,064,353 33,082 1,081, , ,786 STORE GROWTH (%) 0.7% -10% AVERAGE CATEGORIES PER STORE AVERAGE FOOD CATEGORIES PER STORE % 1.1% % 12 6 Notes on Traditional Trade Grocery definitions by market: In general, Nielsen defines Traditional Trade Grocery as off-premise stores selling FMCG food or nonfood items, and excludes household stores selling building material, electronics, or household items, as well as excludes any on-premise channels or drug stores. This definition might vary by market, and a more detailed definition by market are as follows: AVERAGE CUSTOMERS PER DAY 57 ~ 25 AVERAGE STORE SIZE (SQUARE METRE) Indonesia: Includes Provision, Semi-Permanent Stores, Gerombong, Pasar, Semi-Retailer FMCG, Semi- Retailer (Food and Snack) Malaysia: Includes Provision, Chinese Medical Hall, Sundry 12 SQM 79SQM 6 SQM 51SQM 19 SQM Philippines: Includes Sari- Sari Stores, Market Stalls AVERAGE SPEND PER TRIP US$0.88 (11,842 IDR) AVERAGE TRIPS PER WEEK 4.5 Xs ~ ~ US$0.85 (38.75 PHP) 10 Xs US$3.32 (113 THB) 1.6 Xs US$1.80 (39,300 VND) 4.1 Xs Thailand: Includes Provision Vietnam: Includes Traditional Grocery Stores, Market Stalls, Cigarette Kiosks, Soft Drinks/Ice Cream Outlets, Dairy Shop, Milk/Biscuits/Spirit Shop, Biscuits/Confectionery Store, Semi-Retailer (Urban) Source: Nielsen Retail Establishment Survey 2015 Copyright 2015 The Nielsen Company 3

8 WHAT SHOPPERS BUY IN TRADITIONAL GROCERY STORES IN INDONESIA MOST COMMON ITEMS PURCHASED (%) BRANDED COFFEE POWDER 50 READY-TO-DRINK TEA 47 BISCUITS 45 SOY SAUCE 45 INSECTICIDES 32 MAKEUP DECORATIVE 30 READY-TO-DRINK MILK 24 VITAMINS 20 BRANDED COOKING OIL 18 MILK POWDER 13 BABY CARE PRODUCTS 13 LIQUID SOAP 11 BODY LOTION 11 Source: Nielsen Shopper Trends 2013/ MAXIMISING TRADITIONS THE SHOP. SHOPPER. SHOPKEEPER OCTOBER 2015

9 WHAT SHOPPERS BUY IN TRADITIONAL GROCERY STORES IN THE PHILIPPINES MOST COMMON ITEMS PURCHASED (%) COFFEE 32 LAUNDRY PRODUCTS 19 LIQUID SHAMPOO 19 BISCUITS 19 CARBONATED SOFT DRINKS 17 INSTANT NOODLES 17 CHOCO-FLAVOURED DRINKS 14 DISPOSABLE DIAPERS 11 MILK POWDER 11 POWDERED CONCENTRATES 9 TOILET SOAP 9 FABRIC CONDITIONER 9 PACKAGED WATER 4 Source: Nielsen Shopper Trends 2013/2014 Copyright 2015 The Nielsen Company 5

10 WHAT SHOPPERS BUY IN TRADITIONAL GROCERY STORES IN VIETNAM MOST COMMON ITEMS PURCHASED (%) CARBONATED SOFT DRINKS 87 SNACKS AND CONFECTIONARY 85 PERSONAL CARE 84 HOUSEHOLD PRODUCTS 81 PAPER PRODUCTS 81 CANNED AND PACKAGED 78 NON-ALCOHOLIC BEVERAGES 77 DAIRY PRODUCTS 76 ALCOHOLIC BEVERAGES 56 STAPLE FOODS 46 BABY FOOD 37 FROZEN AND CHILLED FOODS 30 PREPARED MEALS 24 PET FOOD 3 11 Source: Nielsen Shopper Trends 2013/ MAXIMISING TRADITIONS THE SHOP. SHOPPER. SHOPKEEPER OCTOBER 2015

11 HOW MANY SKUs CAN YOU PACK IN A 19 SQUARE METRE STORE? The typical traditional trade store offers limited space. For example, the average selling area of a traditional store in Vietnam is 19 square metres. Hence, manufacturers often jostle for shelf presence and share of voice. NUMBER OF SKUs HANDLED PER CATEGORY NOODLES: 15 CARBONATED SOFT DRINKS: 11 COOKING OIL: 6 BEER: 3 LAUNDRY POWDER: 9 Source: Nielsen Annual Census, Retail Audit Data, 2014 In many cases shoppers are unable to enter the store or prefer to stay on their motorcycle to save time, making it necessary to voice their product requests to the store owner. As a result, shopkeepers have a significant influence on product selection. Copyright 2015 The Nielsen Company 7

12 WINNING STRATEGIES FOR STORE SEGMENTATION FMCG manufacturers have long been segmenting consumers and shoppers into homogeneous groups, and developing specific products to appeal to specific segments has helped manufacturers to achieve new levels of performance. In the same way, manufacturers now realise the same principles of segmentation can be applied to retail stores to help their sales teams to be more successful. There are three typical approaches used to group and prioritise stores using location attributes, performance attributes, and a combination of store performance and physical attributes. Each approach has its benefits and limitations, and ideally an approach should be selected based on budget, resources and level of sophistication of the sales organisation. LOCATION ATTRIBUTES Dividing stores into regions or areas by store density, GDP, population density, economic class or income level enables efficient planning of sales force numbers by region and provides guidance on brands/skus to be pushed in each region. For example, a strong GDP per capita makes a market attractive for companies to push mass premium ranges. IDENTIFY HIGH POTENTIAL DISTRICTS FOR HIGHER REACH AND LOWER COST Modelling across multiple data sources will help identify high potential provinces/districts that would help realise potential with lower cost of reach. DISTRICTS PLATINUM GOLD SILVER BRONZE Source: Nielsen District Level Distribution Prioritisation, Illustration 8 MAXIMISING TRADITIONS THE SHOP. SHOPPER. SHOPKEEPER OCTOBER 2015

13 PERFORMANCE ATTRIBUTES Whether at total store level or individual category level, performance attributes provide a clear focus for store visits to the most potential stores and sales territories can be allocated based on the store performance profile. It is complex and cost-intensive for manufacturers to reach all the category stores. Understanding how your distribution is built can help identify and quantify distribution opportunities. QUANTIFY DISTRIBUTION EFFICIENCY AND OPPORTUNITY CONCENTRATION CURVE ANALYSIS CONCENTRATION CURVE APPLICATION VALUE CONTRIBUTION % 100% 80% TOP 50% 20% TARGET 60% 40% 20% NEXT 30% LOW 20% 30% 50% 0% SALES DEMAND NUMBER OF STORES NUMBER OF STORES Source: Nielsen Distribution Solutions Concentration Curve, Illustration Copyright 2015 The Nielsen Company 9

14 COMBINED ACTUAL STORE PERFORMANCE AND PHYSICAL ATTRIBUTES Defining store tiers based on actual performance together with tangible store attributes, such as presence of defined POS material, brands, variants, local vs. multinational manufacturer products, enables us to target the right store tier. Based on those tiers, the entire store universe can be segmented. EFFECTIVELY REACH CATEGORY STORES THAT MEET YOUR NEEDS HAS COOLERS/ CHILLERS 3 READY-TO-EAT CATEGORIES STOCKS WATER STOCKS BUTTER Source: Nielsen Store Targeting Analysis, Illustration 10 MAXIMISING TRADITIONS THE SHOP. SHOPPER. SHOPKEEPER OCTOBER 2015

15 BRINGING THE SHOPPER AND THE SHOPKEEPER INTO THE SEGMENTATION SOLUTION Efficient sales outreach which both drives sales and contributes to brand building can only occur when sales forces are equipped with actionable knowledge to implement effective in-store strategies. While traditional segmentation such as location and physical attributes provide helpful insight, actionable knowledge requires segmentation analysis which encompasses multiple dimensions on attributes around the shopper and the shopkeeper. WHAT S ON THEIR MINDS? SHOPPER SHOPKEEPER PROFILE WHO PROFILE MISSIONS WHY/WHERE/WHEN HISTORY PRODUCT NEEDS WHAT BUSINESS NEEDS IN-STORE BEHAVIOUR HOW STORE OPERATIONS Copyright 2015 The Nielsen Company 11

16 Sufficient shopper insight helps to drive brand, pricing and instore promotional activities efficiently. Shopper profiles based on demographics, behaviours, needs and psychographics, provide key indicators of the products to be placed and the promotions that should be implemented, as well as the price strategy to apply given shoppers price sensitivity. Understanding missions and store choice helps to identify the right categories and pack sizes to focus on. Further, understanding what shoppers are buying based on their mission type assists in defining product placement, and providing insight, while shoppers conversion triggers provide invaluable insight for brand and supporting point-of-sale material visibility. Conversely, building a greater understanding of shopkeepers helps to win their hearts by providing value not only to their business, but also to their personal situation. The profile of the shopkeeper, based on the same four areas, can be indicative of the type of sales call needed and which personal incentives will be most impactful. Meanwhile, understanding the business needs of traditional grocery shopkeepers and owners, which often gravitate around efficiency, longevity, differentiation and community, is a strong indicator for choice of products and in-store activities to be implemented. And understanding how the operations are being run helps to identify value-add activities that reduce operation time and costs incurred by the shopkeeper. 12 MAXIMISING TRADITIONS THE SHOP. SHOPPER. SHOPKEEPER OCTOBER 2015

17 SHOPKEEPERS SAY HOW MANUFACTURERS CAN HELP Pilfering is a barrier to encouraging shoppers to browse in-store Review packaging, provide mockups, position products either near shopkeeper or front-of-store XX.XX.XX They need greater support such as flexibility in payment terms for slow moving items They want to grow but are frustrated by the size of their stores Customers are becoming more conscious of quality and increasingly look at expiration dates Adapt payment schemes by sales rotation Expand product range beyond physical store, leverage mobile and online technology Develop a scheme to identify, sell-out or retrieval of perishable items Small retailers design their own promotions based on giveaways and promotional items from company salesmen to attract customers or push slow moving items Retailers are skeptical of visible point-of-sales (POS) material and prefer branded shelf displays and coolers for the added advantage of storage Provide more autonomy to shopkeepers in the mechanic and timing of promotions Provide POS material that also provides solutions to store operations My wife encountered a windfall, and this was the suggested business. The suppliers should help with consignments, and it s also a big help if they can provide POS material. Branded signage is OK, preferably of key brands that sell. Medium size traditional grocery retailer, Philippines I opened a store because it was needed by everybody. It allows me to help the people around. But age is becoming a problem. I would love suppliers to treat general stores the same as a modern store, supporting with modern shelves just like in a supermarket. So my store will look nicer and attract more people. Large size traditional grocery retailer, Indonesia Source: Retailer depth interviews with medium and large grocery retailers in Indonesia, Thailand, the Philippines and Vietnam Ensuring a good reach to both the shopper and the shopkeeper and developing messages and solutions which resonate and drive product support are the in-store executional drivers that make a store segmentation and prioritisation truly effective. In any of the solutions, attributes used to identify the segments should be easy and practical enough to be gathered by a sales rep for any store in the universe. Once able to understand the segment, the sales team can work on the strategic priorities and related tactical plans required within that segment. Copyright 2015 The Nielsen Company 13

18 MAXIMISING TRADITIONS IN SOUTHEAST ASIA Achieving productive store visits is a priority for sales force leaders across the world, and especially so in countries which are still dominated by traditional trade, and where there is an enormous number of stores in the universe. Efficiency can only be obtained through a rigorous approach that involves a prioritisation of outlets, and a focused approach to ranging and promotional activities within those outlets. TRADITIONAL TRADE IS HERE TO STAY TRADITIONAL TRADE DEVELOPING MARKETS (ASIA) 2020 MODERN TRADE DEVELOPING MARKETS (ASIA) % 73% 27% 44% 57% 43% Source: Nielsen Retail Index, Share of Packaged FMCG Sales Too often, sales force knowledge is limited to store size, location and performance when creating store clusters. While these attributes are effective in directing sales efforts toward the right stores, they provide limited insight into which strategic objective should be reached in each cluster. To develop and implement thorough, impactful strategies, it is critical to incorporate shopper and shopkeeper dimensions into segmentation parameters, either sequentially or simultaneously. Traditional trade is a complex and highly competitive channel that is here to stay for the foreseeable future. Understanding the dynamics across the three critical pillars of shop, shopper and shopkeeper is critical for manufacturers to become dominant market leaders. 14 MAXIMISING TRADITIONS THE SHOP. SHOPPER. SHOPKEEPER OCTOBER 2015

19 ABOUT THE AUTHOR CONNIE CHENG EXECUTIVE DIRECTOR, SHOPPER SOLUTIONS, SOUTHEAST ASIA, NORTH ASIA AND PACIFIC NIELSEN Connie helms Nielsen s Shopper Solutions in Southeast Asia, North Asia and Pacific. Based in Nielsen s regional headquarters in Singapore, Connie is responsible for growing the Shopper business regionally delivering insights and capabilities to help clients successfully convert consumers into shoppers. ABOUT NIELSEN Nielsen N.V. (NYSE: NLSN) is a global performance management company that provides a comprehensive understanding of what consumers Watch and Buy. Nielsen s Watch segment provides media and advertising clients with Total Audience measurement services across all devices where content video, audio and text is consumed. The Buy segment offers consumer packaged goods manufacturers and retailers the industry s only global view of retail performance measurement. By integrating information from its Watch and Buy segments and other data sources, Nielsen provides its clients with both world-class measurement as well as analytics that help improve performance. Nielsen, an S&P 500 company, has operations in over 100 countries that cover more than 90 percent of the world s population. For more information, visit Copyright 2015 The Nielsen Company. All rights reserved. Nielsen and the Nielsen logo are trademarks or registered trademarks of CZT/ACN Trademarks, L.L.C. Other product and service names are trademarks or registered trademarks of their respective companies. 15/9025 Copyright 2015 The Nielsen Company 15

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