Credit from Nielsen
Consumption growth in Asia is driven by its middle class. In fact, about half of the world’s middle class population lives in Asia. So while we appear to be in a deflationary environment globally, the Asia Pacific region is set to drive the world’s FMCG growth.
In Q4 2018, Malaysia’s FMCG market grew by 4.9%. However, this growth has not come easily as companies have had to work hard to find pockets of growth, many of which remain untapped in the region. To unlock this growth potential, companies must answer two key questions: Where to grow? And how to grow?
To find the right answers, companies must be aware of changing consumption patterns in the country, driven by the explosion of smaller store formats and proximity shopping as urban dwellers seek convenience and proximity to fulfill their shopping needs, along with the emergence of mobile and e-commerce in a super-connected region such as ours.
WHERE TO GROW?
Against this rapidly evolving retail backdrop, manufacturers that can adapt quickly and find the right place for their products will ultimately win.
Now more than ever, distribution quality trumps quantity – reaching 100% distribution may bring in more sales, but it could also hurt a brand’s bottom line. This means knowing which stores to invest in to drive profitable growth, as each store’s growth potential depends on factors such as location, size and in-store executions.
By identifying stores that carry the greatest profit opportunities, manufacturers can better optimize their trade spend to ensure maximum return on investment. Indeed, in Malaysia, we worked with a client to identify priority stores – those with high category market share, but below average brand share – and narrowed down 53 priority stores which have the potential to deliver a US$ 1.7 million annual sales increase for that brand.
For those manufacturers asking if they should invest in online retail, our answer is yes. While brands may not see immediate return on investment, those that enter the online retail space will learn early on how to navigate an environment with new online players, master search engine optimization (SEO), learn how to adapt prices from day to day and discover how to use machine learning algorithms to set the optimal price of a product. As such, we believe that the right form of investment in online today will pay off tomorrow.
HOW TO GROW?
In a low growth environment, manufacturers often turn to price promotions for a quick win. However, the equation of more promotion = more sales does not always justify more margins, while presence in more formats would mean having to maintain many price and promotional activations.
A staggering 67% of promotions globally do not break even, which tells us that a vast majority of companies are struggling to deploy analytics successfully. A recent study we did for one of the categories in Malaysia showed that out of the 52% of promoted volume, only 22% is incremental, leaving more than half of the trade spend investment on the table.
One way that manufacturers can uncover hidden opportunity is by looking at what is being promoted, analyzing the elasticity of the products, and then calculating the right promotion balance to maximize profits and minimize trade spend wastage . To do this, sales teams must know the effectiveness of each sales touch point across every shopper journey, regardless of where they occur.
In summary, to win in store, companies should:
Focus your efforts on the best regions, area districts or stores to capture evolving distribution opportunities.
Invest in the future by building long-term relationships with retailers and investing early in online activity. Deploy your sales force at stores where there is a huge growth potential in faultless execution.
Invest in analytics to get out of the routine at store level.
You will get your return on investment through cost reduction and improved sales.
Innovate! True innovations are not a common theme these days but evolving shopper habits require evolving products.
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Website: www.worldline.technology
