“May Contain Nuts” – No Longer Acceptable 

Today’s consumer is also more health-focused and socially conscious than ever.  And these educated consumers are demanding more information about products before they make purchasing decisions.  Consider the case of food.  Today’s health-conscious consumer wants to understand not just the brand, price and size of each SKU, but they also want to know:  

• Is it organic?  Have the ingredients been genetically engineered? 
• Is it locally grown?  If not, has it been imported from another country?  
• Is it carbon neutral?  Were environmentally friendly or recyclable packaging materials used?
• Is it fresh?  How long before its predicted expiration time frame?
• Is it safe for me?  Does it contain ingredients from common allergens such as nuts or shellfish?       
• Is it heart healthy?  How much cholesterol or sodium is included?
• Is it dietary?  How many grams of fat and carbohydrates are contained?
• Is it diabetic friendly?  How much sugar is contained? 

This growing selectivity of consumers is changing the landscape of food products forever.  The result is a proliferation of SKUs catered towards a range of different consumer segments based upon social responsibility (environmentalists, locavores, naturalists) and upon health characteristics (diabetes, food allergies or heart disease).  The grocery sector is migrating from the mass-market of the twentieth century towards a long tail of highly, specialized niche markets.  Retailers and brand owners must now market towards these new niche segments or risk extinction.  The challenge for category captains and retail merchandisers is being able to define an assortment that meets the specialized demands of today’s consumers.  Food manufacturers and retailers have responded by introducing new SKUs (e.g. diabetic -friendly, heart-healthy), redesigning store layouts (e.g. organics section, local produce aisle) and more detailed labeling (e.g. transfat content, allergen notices).  But further challenges exist, ones that can be directly solved through broader adoption of data synchronization.

100 Mile Diet National Bestseller in the US 

Information Hungry Consumers and Shifting Buying Behaviors 

Consumers are demanding more detailed information to make purchasing decisions.  In fact, studies by leading retailers have shown that the degree of product information available for a particular SKU will influence not only which brand consumers will purchase, but also which retailer they buy from.  Having detailed item attribute information represented on a product label or store shelf display is beneficial to consumers walking through a store, but is insufficient to satisfy the full needs of today’s multi-channel shopper.  What about the consumers who research recipes on a brand-owner’s web site or purchase groceries on-line for home delivery?  These shoppers expect complete item attribute data to be displayed at all steps of the decision making process.  The steps include not only the physical product labels but also home delivery storefronts, brand owner sites, in-store kiosks and newspaper advertisements.

Ocado - Popular British On-Line Shopping Web Site

Merchandise Managers Growing Appetite for Product Data 

Merchandisers must have ready access to detailed product attribute information as well.  For each SKU, there is an average of 200 data attributes that can be used to describe it - everything from brand name and packaging dimensions to ingredients and recycling instructions.  If you multiple the attributes per SKU by the number of products in the marketplace, you begin to appreciate the magnitude of the challenge.   Yes, the item attributes are displayed on the product label, but most merchandisers do not keep an inventory of products in their offices.  Nor do the retailers have the time or resources to search through file cabinets full of supplier product specification sheets or to navigate supplier web sites to find the information required.  Item attribute details must exist in merchandising systems in order for retail personnel to make decisions about which products to stock.  Highly automated, data synchronization processes are the only means of achieving any type of scale for managing product data. 

Retailers versus Suppliers – The Power Struggle 

Many of us who monitor and study the retail industry often debate whether the retailers or the consumer products companies have more power and influence over the supply chain.  Fifty years ago, the industry was dominated by large national brands which shaped consumer demand and drove retailer behavior.  Today, global retailers with multi-national footprints and large private label assortments have amassed considerable leverage over their suppliers.   But I believe that question of whether the retailer or supplier has more influence in the supply chain is becoming increasingly less relevant.  In today’s retail value chain it is the consumer that holds the greatest power.   And we see evidence of this phenomenon in IT investments.  Retailers continue to be more focused on customer-facing, store operations functions than internal-oriented, back office processes.  I believe the growing hunger of consumers for rich item data to perform purchasing decisions will shift data sync from a back office, cost reduction technique to a customer-facing differentiation strategy.  And this shift will ultimately be the catalyst that drives demand for data synchronization in the retail sector.

Steve Keifer

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