The New Retail Math
Winning the market share battle today requires mastering the new Retail Math. What’s that? Not familiar with the new Retail Math? It’s like the old math, but with some important benefit differences!
Like old math, it operates with the basics – addition, subtraction, division and multiplication. So let’s start with addition.
The addition of new products: Over 250,000 new items are launched globally every year. Today’s hot categories span from craft beers, functional beverages and premium wines to a new galaxy of digital products like education technologies and wearable devices. Consumers, many of whom suffer from ‘squirrel syndrome,’ are easily distracted by what’s new and exciting. Companies who aren’t steadily innovating are slowly stagnating. Meaning: there isn’t much room for the status quo.
The added pressure for market share: US population growth has slowed to a trickle; just 0.8% per year. Since most consumer items are in the mature product stage, there’s not much growth in demand. Flat sales and excess capacity put increasing pressure on market share.
Growth of e-commerce: US Shoppers have been moving more purchases to e-commerce, subtracting from retail sales opportunities. Today, e-commerce sales amount to nearly $600 billion dollars – up almost 300% in six years. This growth represents a shift in dollars away from traditional brick & mortar sales. The heat for increasing same-store sales just got hotter.
Decline in the center-store: In grocery there’s been a steady subtraction of floor space devoted to traditional ‘center-store’ shelf staples in favor of growth in the more profitable ‘perimeter’ sections of the store – deli, bakery, produce, and seafood. As center-section shelf space shrinks, the need for packaging that sells harder will continue to increase.
Fewer retailers: We’ve witnessed a subtraction in the number of competing retailers. In 2000, the ten largest grocery retailers composed less than 30% of all grocery industry sales. By 2010, that number had changed to nearly 70% of total industry sales. Meaning a subtraction in the number of shopping choices. Plus a subtraction in the leverage manufacturers have to promote their own brands.
Shorter shopping trips: Consumers are spending less and less time shopping. Browsing behavior is disappearing as available time – that unrelenting metronome we all move to – appears to be speeding up. Between 2003 and 2011, the duration of the average shopping trip decreased 12.5% to just 43 minutes. Today, shopping is more like a well-planned, precision executed military campaign. Meaning for impulse purchases to occur, your packaging has to perform at a much higher level!
New product failure rate: Earlier, we noted that over 250,000 new items are launched annually. Unfortunately, the new math divides that number into a tiny fraction when it comes to products that actually succeed. Successful launches are only in the range of 5% to 15%.
Divided consumer attention spans: We’ve already talked about the ‘squirrel syndrome’ prevalent among many consumers today. Then it’s not surprising only 25% of respondents in a recent poll were able to recall a new item from a list of the current year’s top ten launches.
Many challenges: The hurdles your brand faces today are numerous. More competition, increased pressure for market share, faster failure rates, less shelf space, shorter shopping trips and reduced account leverage.
More than ever, your packaging has to sell your product at a faster rate. To do this it must have a visible difference delivering eye-catching sharp color and impactful graphics. Without these two factors your sales cycle has ended in the blink of an eye.
What’s the Answer?
Proactive Packaging & Display: Can improve your sales. We’ll help you solve the new Retail Math, by injecting a Coefficient of Understanding. It allows us to successfully partner with your: marketing, purchasing and operations teams.
Why? Because we see the full context of today’s retail environment. We understand the realities you face and what is required to succeed in today’s marketplace. More importantly, we deliver best value, strategy relevant solutions that allows you to start calculating new profits.
The new Retail Math has a formula at Proactive Packaging & Display:
Plus Sales = Coefficient of Understanding X Reliable Service X Impactful Packaging
Make the formula part of your brand strategy. It’s time for a conversation. You’ll enjoy our authentic style and transparent approach. We’re also easy to work with. Call today: 909.390.5624.
And you know, your parents probably always knew you were good at math.