A VMT and CGT Whitepaper A CG Manufacturer s Guide to Retail Data Goldmines W h at yo u d o n t k n ow c o u l d h u rt yo u Once upon a time, syndicated data providers were the main source of retail POS data, and what was available was limited and extremely expensive. But times have changed, with richer, more detailed demand data becoming available from more and more sources: syndicated data providers, brokers, third party data managers, and increasingly, retailers themselves usually for free. But not all consumer goods (CG) companies are aware of who s sharing and what s available even from their own customers. While it s true that few retailers share data on the level of Walmart with its Retail Link portal, more and more are grasping the benefits of enabling their suppliers to access store-level sales and inventory information in virtually real time, and taking steps to make it more available. Store-level demand sensing is the fuel that fires a responsive, profit-enhancing CG demand chain. The ultimate goal is a robust analytics solution that drives actionable business decisions, from supply and demand management through sales and marketing. More and more CG companies are recognizing the need to maximize their access to retailer data to attain this ideal state. A Short History of Retail Data Sharing Data sharing gained a major enabler with the development of the EDI 852 product activity data transaction in the 1980s. However, CGs have been challenged with keeping up with individual retailers interpretation of the standard, which can vary widely. Purchasing syndicated data has long been standard practice, offering suppliers high-level retailer data such as sales volume and market share, yet it was and still is devoid of any inventory measures. In the early 90s, the data sharing concept expanded with retail s Efficient Consumer Response (ECR) initiative as well as the debut of Walmart s Retail Link, which triggered the beginning of the analytics era. As the new century turned, more retailers outside the mass merchandising pioneers began moving to direct data sharing. Sponsored by cgt_vmt_wp_0312.indd 1 Produced by 3/26/12 11:11 AM
A VMT and CGT Whitepaper Data sharing doesn t have to be expensive, and the benefits can easily justify the investment. Today there are several avenues for obtaining retailer data, each contributing its own piece to the consumer demand puzzle: Syndicated Data Providers: Companies such as Nielsen and SymphonyIRI tend to offer SKU-level sales data generally at chain or channel level, but not inventory data. They provide information about competitive market share, which makes this data relevant for marketing and top-level sales purposes, but not for robust demand chain analytics. On top of the lack of inventory visibility, there are also challenges with the timeliness and item segmentation of this data, which may not match well with the CG company s item classifications. Direct Data Sharing: The primary source of shared information is through direct feeds from retailers that contain a wide variety of POS and other data, furnished via the EDI 852, EDI 867 or supplier portals. These feeds provide suppliers with access to store-level pointof-sale (POS) and inventory in near real-time. Depending upon the sophistication level of the sources, CGs may also be able to access retailers forecasts, costs, item segmentation, store clusters, etc. Brokers: Some CG companies rely on brokers and sales agencies for value-added data delivery and analysis services around retailer data. Unless these groups deploy a robust demand signal repository and analytics strategy, this typically features only chain-level analyses of product performance and does not provide consistent insights on recommended actions at store-level. Third Party POS Providers: Retailers lacking the internal resources to share store sales and inventory data often contract with third party database companies or value-added networks (VANs) to make this available, along with optional data analysis services. Third Party Data Providers: A range of third party services also offer data to increase insight into POS data, such as weather, demographics, competitive ads and local events that may influence sales. Sharing by Channel Retail channels still differ widely when it comes to data sharing practices. Some view it as the means to mutually beneficial collaboration with suppliers; others consider data a profit center. A CG Manufacturer s Guide to Retail Data Goldmines MARCH 2012 2
A VMT and CGT Whitepaper Here s how data sharing looks by channel: Mass Mass merchants have led the way in data sharing. The retailer providing the most granular and robust data in this category is Walmart, followed by Target. Kmart s solid data sharing is also available through their Workbench portal or less well known among CG companies via a secure server connection. Drug Historically, the retailers in this channel tend to provide just the minimum (POS units, currency sales and sometimes inventory). The leader in this channel, CVS, offers powerful EDI feeds that include both sales and inventory data. Rite Aid s RiteInsight offers limited data. Walgreen s information is available for a fee through a third party. Grocery Syndicated data providers have long been the de facto source of top-line POS data, but now that is shifting to more direct data feeds. Food Lion uses a third party that provides the raw data dumps free to suppliers via FTP; CG companies pay only if they seek data analysis. This model is a good alternative for retailers unable to build data sharing structure internally. Kroger recently initiated data sharing through a third party, who charges for raw data. Other grocers are well behind the curve, only providing DC-level data. DIY Lowes Vendor DART program leads the way in this channel, backed by a strong EDI 852. The Home Depot shares weekly updates, and Menard s provides information manually on request, a significant obstacle to true collaboration. Data protectionism is a common trait among privately held retailers. Big Box Stores Best Buy offers a good data stream, but shares only units scanned, not actual retail sales currency. Toys R Us, The Sports Authority and Dick s Sporting Goods also provide limited data, but the key is that they do share data. Office Along with Big Box stores, the Office channel retailers (Staples, OfficeMax, Office Depot) also provide EDI 852 data and some have portals to augment the data. Internet Retailers Amazon.com and other online retailers, including the e-commerce arms of brick and mortar retailers, share data, but fail to break it down by region, which would help CG companies seeking to analyze interplay with brick and mortar sales and demographic analysis. Department Stores These chains tend to provide minimal data sharing as compared to Mass, and are similar to the Drug channel which tends to share only units sold and sometimes inventory at store-level. Dillard s leads in data sharing among department stores, followed by Nordstrom and others, but the data tends to be limited, reducing the potential impact their suppliers can provide to them. A CG Manufacturer s Guide to Retail Data Goldmines MARCH 2012 3
A VMT and CGT Whitepaper Barriers Remain Unfortunately, few retailers share promotion and event data, despite the high risks they face in inaccurate promotion forecasting and resulting stock outages. The forecast error rates on promoted goods are often easily twice that of forecasts for items not on promotion, according to Retail Systems Research s Crystal Ball 2.0: The State of Retail Demand Forecasting. In an ideal consumer product supply and demand chain, retailers and suppliers would collaborate on promotional events to ensure the right inventory levels to support the forecasted event results. Similarly, sharing planograms and their specific store assignments would help CG companies measure the effectiveness of assortment planning. CG companies also need to revisit some of their thinking about data sharing. Retailers that do share forecasts typically offer it in terms of weekly consumption data. In contrast, CGs generate shipment-based forecasts based on calendar months, making it challenging to allocate shipments into the same time buckets and units used in retail. They should consider forecasting production in the way they get the data, by week and by POS scanned sales instead of cases shipped a daunting transformation for many. Fortunately, this capability is inherent to a well-planned demand signal repository, potentially making this shift easier than many CGs anticipate. Good Data and How to Get It Many retailers understand the value of sharing daily/store/item-level data with their supplier community, but technology and financial obstacles prevent their sharing it using the most ideal formats. Fortunately, there are more avenues than ever to exchange storelevel POS data, some of which retailers may not have considered. These include: EDI: EDI is still the most commonly used standard for retailers to share data electronically with their suppliers. EDI allows retailers to transmit an 852 document containing POS data down to daily store level. EDI can be easy to automate and is more reliable than portals for larger data files. CGs that dismiss EDI as a viable option are missing out on the opportunities that it could bring to their organizations. Some people have commented that POS data can be wrong in the EDI 852 and therefore worthless. But what they aren t recognizing is that the information is a reflection of the retailer s systems. If a data point is wrong, such as store-level inventory, it means that there is a problem that needs to be addressed so replenishment flows smoothly. Using EDI requires specific expertise to translate and harmonize for business analytics, but EDI transaction sets themselves remain extremely valuable. A CG Manufacturer s Guide to Retail Data Goldmines MARCH 2012 4
A VMT and CGT Whitepaper Web Portals: Retailers are increasingly creating and expanding supplier Web portals to offer POS data to suppliers. These portals provide an avenue for querying chain-level basics on product performance and allowing suppliers to download that into Excel. However, these portals typically do not perform well for robust data loading into demand signal respositories. Some retailers that recognize the limitations of their portals offer one-off methods for obtaining large data sets. AS2: AS2 helps retailers send data files directly to suppliers over the Internet without having to go through a third party, thereby minimizing transmission costs. It s used by Walmart, Target, Lowe s and many other retailers for automatically sending EDI and other large data sets. For example, Target offers bulk data POS downloads that can be initiated through their Partners OnLine portal and then scheduled to automatically transmit to the registered supplier via AS2. This automated process positions suppliers to keep their demand signal repositories as timely as possible, enabling virtually real-time demand sensing. What Data Can Do Rich, accurate retail POS data, integrated into a demand signal repository and analytics solution, can work wonders within CG organizations and help them provide considerable value to retail partners. Benefit areas include: Sales: POS-based analytics is a requirement for CG companies to provide actionable insights and planning in order to be that go-to source of information for their retailer partners. For example, knowing how specific displays or shippers have performed can set a supplier apart from its competitors, opening the door for future collaboration and potentially leading to additional shelf space within the retailer. Trade Promotion Planning: CG companies spend an estimated $200 billion annually on trade promotions; that level of risk demands close monitoring to ensure promotions are executed properly. POS is an essential data point in determining compliance, as well as in evaluating the P&L impact of the promotion. Demand Planning: An efficient demand chain requires visibility into every movement, from factory to shelf to checkout. POS data facilitates a complete, end-to-end view of the business to ensure forecasts and promotions are delivering on both retailer and consumer goods goals and highlighting areas for correction when they re not. Merchandising: Providing store-specific exceptions to individual store merchandisers may produce more effective visits and improved sell-through. Marketing: Brand managers need to understand how their brands are performing across retailers and channels. Leveraging POS data enables them to measure the performance of the investments they make in their brands such as TV ads, mailers, coupons, retailer ads, etc. A CG Manufacturer s Guide to Retail Data Goldmines MARCH 2012 5
A VMT and CGT Whitepaper Category Management: Retailers category managers or advisors are a great source of competitors data. When retailers share competitive information with their lead suppliers, they expect CG companies to provide certain analytics back to them. When retailers make this competitive data available in an easy access, automated way, it enhances CG companies market insight and analytical capabilities. In the Consumer Goods Technology/IDC Manufacturing Insights 2011 Shared Strategy Report, CG companies credit retailer collaboration with improving the customer experience and reducing costs. FIGURE 1 The results of retail collaboration RESULTS 67% We deliver a better customer experience We reduce costs related to duplicate work 17% 39% We reduce logistics costs We produce more accurate demand forecasts 33% Our customers are more loyal to our brands 56% 22% We reduce inventory carrying costs 26% ACHIEVED OVER LAST TWO YEARS ATTRIBUTE ACHIEVEMENTS TO RETAIL COLLABORATION Source: CGT, IDC Manufacturing Insights, 2011 NOTE: Multiple responses permitted. In Leveraging Customer Demand Signals, a custom research report by CGT, more than 80% of respondents confirmed that higher customer satisfaction levels and increased sales were benefits that they expect from a customer-centric, demand-driven supply chain. A CG Manufact u r e r s G u i de to R e ta i l Data G ol d m i n e s M ARCH 2012 cgt_vmt_wp_0312.indd 6 6 3/26/12 11:11 AM
A VMT and CGT Whitepaper FIGURE 2 what are the top three benefits you would expect from a customer-centric, demand-driven supply chain? (Select three) Higher customer satisfaction levels 84.6% 80.8% Increased sales 38.5% Lower inventory levels 34.6% Margin improvements Higher e-commerce conversion rates 19.2% Faster time-to-market 15.4% Reduced inventory holding costs 15.4% Higher in-store conversion rates 11.5% Increased efficiency in sourcing/manufacturing 7.7% Lower transportation costs 7.7% Increased warehouse/dc efficiency 7.7% Improved supplier relationships and collaboration 3.8% Source: CGT, JDA Leveraging Customer Demand Signals, January 2012 The Ideal State Anticipating consumer behavior will always be difficult. But CG demand chain managers have at their fingertips a considerable arsenal of tools to make refined, educated predictions. Each of the parties to the CG supply and demand chain CG companies and retailers, as well as the third parties that support their activities own a puzzle piece in the form of critical data and analytical capabilities. The more of these puzzle pieces that are brought together, the better and more efficient the CG demand chain can predict and act. A CG Manufact u r e r s G u i de to R e ta i l Data G ol d m i n e s M ARCH 2012 cgt_vmt_wp_0312.indd 7 7 3/26/12 11:11 AM
A VMT and CGT Whitepaper The more open and easy it is to share data, then, the more everyone benefits. Simplistically, here s what an ideal retail supply chain looks like when it comes to data sharing: 1) 2) 3) 4) Retailers make a wide variety of daily, store-level data available free of charge in an automated way that can be easily loaded into each suppliers demand signal repository or DSR. CG companies provide high quality, actionable analytics and recommendations in a way that makes it easy for the buyer to implement. Retail buyers recognize the quality of consumer goods companies analytics and are receptive to adopting their recommendations where appropriate. The partners collaborate to create the most efficient and effective forecasts, inventory plans and promotional spend plans, increasing profits and revenues for every party. Ideals are hard to attain. But the CG demand chain can certainly come a lot closer to this vision than they are right now. Those that share really do reap benefits over those that do not, and those that share more, win more. It takes education, investment, relationship-building and trust among all parties, but as data sharing increases, so will the positive results. l About the Author Jennifer Beckett has worked in the field of demand and supply chain management for over 25 years covering multiple industries. She holds an undergraduate degree from Michigan State University in Supply Chain Management and a MBA from Loyola Marymount University in International Marketing and Management. Over the last 15 years, her core area of focus at Vendor Managed Technologies, Inc. has been enabling CGs in their quest to optimize their sell-through and overall profitability at retail through best-in-class demand signal repository and retail analytic solutions. For further discussion on this topic, please feel free to contact Jennifer at Jennifer.Beckett@ VMTSoftware.com. Retail Link, Partners OnLine, Workbench and Vendor Dart are registered trademarks of Wal-Mart Stores Inc., Target Brands, Inc., Sears Brands, LLC and Lowe s Companies Inc., respectively. Copyright 2012 Vendor Managed Technologies, Inc. All Rights Reserved. http://www.retailvelocity.com Sponsored by cgt_vmt_wp_0312.indd 8 Produced by 3/26/12 11:11 AM