Data Sharing in the Age of Analytics
Headlines everywhere proclaim this to be the “Age of Analytics,” observing that the consumer goods and retail industries, like many others, are becoming more and more data-driven. Analytics technologies are advancing at a rapid pace, while a broader range of data sources offer the potential for unprecedented new insights into every aspect of the business — most especially the all-important consumer.
All that new analytics firepower is exciting. Yet for many retailers, and particularly for consumer goods manufacturers, some longstanding data sources are still sharply limited: each other. Data sharing is a long-touchy topic in the retail demand chain, with issues such as scope and frequency, as well as the “data as revenue stream” question, continuing to plague supplier-retailer relationships.
In this age of analytics, no one doubts that data is the key to unlocking critical new insights. So the question becomes, is it a strategic advantage to share, or not to share, precious data with trade partners? The impact of data leaders like Walmart and Amazon, along with the changing nature of retailer-manufacturer relations — thanks to thriving private label businesses among retailers and direct-to-consumer selling on the part of CGs — are only making the question more complex.
Retailers have been the most reticent, due in part to fears of disintermediation. “Retailers that don’t share their data with suppliers are protecting their role in the retail channel,” says Ken Morris, principal at BRP Consulting. “By sharing too much data with suppliers, they may eliminate the need for their own existence.”
Daily Sharing
But there are clear benefits to some level of data sharing at least, particularly in areas where collaboration produces mutual benefits: think maintaining correct inventory levels or gauging promotion success. Daily sharing of POS data should be considered foundational to achieving those and other goals.
It takes infrastructure and resources to share that data, of course, but advances in integration and data management mean it’s not as hard as it used to be. That means if two trading partners want to share data more often, it’s more easily achieved.
But looking back historically at the levels of daily POS data sharing (the most-commonly shared type) through the years offers a concerning contrast: Fewer CG companies report receiving daily POS data from large numbers of retail partners in 2019 than did back in 2014.
This anomaly could be the result of having a larger number of small, newer manufacturers responding to this year’s survey than in 2014. However, the number of retailers who claim to send daily POS data today is remarkably consistent with that of five years ago. So, little progress is reflected here.
“It’s a daily struggle to get the information needed,” was the un-ironic comment of one consumer goods survey respondent.
The frequency of data sharing also lags expectations. No more than 20% of consumer goods companies report receiving any data type from retailers daily or multiple times a day — including POS transaction data (see Figure 2). CGs are least likely to receive online customer behavior and customer loyalty/CRM data. Retailers tend to hold these sources close to the vest as every participant in the demand chain competes to win the attention and loyalty of increasingly demanding consumers.
The Money Grab
CG companies have long pointed to the revenue- generating appetites of retailers as one major obstacle to collaborative data sharing. Whether they view it as compensation for the costs of sharing, a way to bring in extra dollars or a financial incentive to ensure CGs will really make use of the data, many retailers are charging. But while the majority of CGs (76%) say some portion of the retailers they work with charge a fee for data, just 33% of retailer respondents say they do (see Figure 3).
Bear in mind that 76% of CGs responding to the survey are consumer packaged goods manufacturers, whereas just over half of retail respondents (51%) sell them. Companies producing fast-moving consumer goods historically have been more data driven than makers of apparel, electronics or other goods, particularly when it comes to studying consumers. So, these companies have long coveted retailer data for its ability to help them drive brand loyalty. But even with this caveat, charging for data remains alive and well.
“Greater frequency is better because it drives closer connections, and hence enables better integration across the supply chain that results in better order fill rates, less out of stocks and overall more efficiency in inventory management,” says Jon Harding, global chief information officer at Conair Corp.
Does it make a difference whether retailers charge? It’s worth noting that, of the two names that stood head and shoulders above the rest of the industry when consumer goods companies were asked to name the best data sharers, one – Walmart – provides data for free while the other – Kroger – charges rates that several CG companies even labeled expensive. Walmart’s program is praised for its simple access, granularity, breadth and extensive reporting tools and, perhaps most of all, its price. “Due to the granularity and breadth of the data provided, managing the daily demands of such an important retailer is made much easier from data sharing,” one CG respondent noted.
Kroger gained similar praise, but also earned kudos for allowing manufacturers to mask and share the data with other retailers, according to one respondent. And despite the high cost, partners are generally happy. “Good partner with mutual interest in growing revenue and profitability,” one CG respondent commented.
Incidentally, Walmart and Kroger also topped the ranks of best-sharing retailers five year ago. Retailers were consistent in their rankings as well, once again naming Coca-Cola Co. as the top data sharer among CGs.
Those results are testimony to the early recognition at these companies of the benefits of data sharing, which has enabled them to continue extracting value and maintaining their market leadership today — even when fees are a part of the deal.
The Data They Share
Sharing is a two-way street, of course. Retailers benefit from the 50,000-foot view that consumer goods companies can provide about performance of their brands, the overall category and consumers. CG companies gain more granular insight into what’s happening inside each chain and store. A shared set of facts also helps both sides better understand the consumer and develop more successful programs.
But the fact remains that CG companies are more likely to share data toward these goals than retailers are. Figure 4 shows that the majority of CG company respondents share five different types of data, while retailers only top the 50% threshold for POS and inventory data.
“An additional benefit of sharing data with suppliers and getting reports on the generic movement of product is that it provides visibility on sales trends on an aggregate level, which can help identify if specific products are being sold more effectively by your competitors,” says BRP’s Morris.
The Data They Want
CG companies have been developing direct-to-consumer channels to better understand consumers and build stronger connections with them. Yes, part of the plan is to establish direct sales vehicles, either to drive immediate growth or to prepare for what could be a more-direct future. But the need to directly cultivate shopping insights — due in no small part to the fact that it’s so hard to get shopper data from retailers — is often the primary goal.
Hershey, for one, considers its various DTC plays more as “data acquisition vehicles” than sales opportunities. “That’s where the real value comes out of DTC,” said Doug Straton, the candy maker’s chief digital commerce officer, while speaking earlier this year at ShopTalk. For one, “You get a more expansive view of category management” when digital shopping data is added to the understanding, he said.
Not surprisingly, now that their partners have even deeper insights, retailers want access to that broad treasure trove of consumer data (see Figure 5).
Moving well beyond general demographic information, retailers want specifics to bolster their new, stepped-up focus on customers. They’re most interested in competitive information (70%), followed by brand-specific consumer/shopper insights (68%), category-specific consumer/shopper insights (59%), as well as more general consumer/shopper demographics (57%). All of that would help retailers put their own data in context to better understand how to compete and win customer attention in an increasingly high-pressure marketplace.
“The key component to selling is conveying to the consumer what makes it special, and that boils down to experience and ease of shopping,” says Amanda Astrologo, associate partner at retail strategy shop Parker Avery. “The brick-and-mortar experience is about see, feel and touch. But that must translate across all shopping channels, so the more detailed data suppliers can share with retailers to drive the overall experience with the brand, the more successful they will be.”
“The Holy Grail is shopper-specific information and the ability to target efficiently based on that data,” says CGT Executive Advisory Council member Kerry Farrell, senior vice president of sales and customer success at Eversight. “Ultimately, the ability to send the right offer to the right person at the right time — if the infrastructure and systems can ever catch up to the business desires — would have a transformational impact.”
What Data Sharing Does
Exchanging key data is critical for the mutual goal of driving sales among consumer goods companies and retailers. Therefore, the top benefits of data sharing for both sides naturally support block-and-tackle operations: maintaining stock levels, ensuring successful promotions, launching new products, correctly forecasting demand, and improving joint business planning (see figures 6a and 6b).
All of those are also key to satisfying shoppers from both the retailer and consumer goods company perspectives. But some things have changed. Five years ago, lowering inventory and safety stock levels was a top benefit: it was rated third among CGs and first among retailers. Today, that goal has fallen well down both lists.
Another area retailers can increasingly benefit from manufacturer data is sustainability, according to BRP’s Morris. “As more consumers are making more socially conscious buying decisions, it’s important to know where clothing was made and the source of its raw materials,” he explains. It also provides visibility through the supply chain, increasing a retailer’s understanding of where the product is through traditional EDI, shipping notifications and inventory availability information, he adds.
Shifts in Responsibility
Retailer data is highly important to CGs, so it’s natural that the largest group (46%) of respondents place responsibility for the sharing in the hands of their sales departments, the folks who typically manage those relationships (see Figure 7). That number is up from about one-third (32%) of respondents five years ago. Since then, it would appear that CG companies have shifted data sharing duties away from the supply chain and marketing functions.
For retailers, IT is most likely to own data sharing — although less likely than it was five years ago (41% vs. 30%). “Retailers look at data sharing as an obstacle and a technical hurdle,” says Joe Skorupa, editorial director at RIS News. “They are most likely to have licensed on-premise software, with proprietary code and database structure. They have to clean, massage and reformat it, and that requires IT.”
Those proprietary retailer systems impact the mechanics of how consumer goods companies receive data as well. These days, CGs are much more likely to use the same tool across all customer teams: 34% do so, up from just 9% five years ago. And another 24% are currently implementing a corporate-wide tool. Still, 42% of manufacturers still leave it up to each team to decide how to manage their retailer-direct data.
Moving to a single tool isn’t necessarily the right approach for everyone. “We have moved away from attempts to adopt a single tool because every retailer’s sharing is different,” says Conair’s Harding. “In some cases, there is a custom solution for a retailer, which always has ‘first mover’ advantage on that retailer’s data format changes. Instead, we’re adopting the most appropriate tool for each situation but with minimal customization and as much automation as possible.”
The means to move that data has also modernized. Five years ago, the most-used method was manual sharing, followed by EDI. While those methods persist today, 65% of retailers are now using web-based portals to share their data.
Where the Data Goes
While useful across numerous functions within consumer goods organizations, retailer data plays a bigger role in powering some processes than others. Those levels of usage have remained relatively consistent over the years — with two notable exceptions. Five years ago, category management was one of the lowest ranked areas for retail data usage; in 2019, it’s the area that CG respondents say is most powered by retail data. Promotion management also has moved up significantly.
Retailer data does not act in isolation, either. Consumer goods companies are combining it with an increasingly diverse array of outside data sources to generate richer, deeper insights. But much of that integration is still done on an ad- hoc basis; that’s the most dominant integration approach (50% to 60%) for most categories of data (see Figure 9).
Just under one-fourth of CG respondents have fully integrated their field sales/merchandiser store check data, syndicated data, internal data and their own promotional data with retailer data. The newest data stream, social media, is the least likely to be integrated with retailer data.
Putting the Data in 'Data-Driven'
Data has been called the new currency. Nowhere in the retail demand chain is that clearer than in the data sharing programs between retailers and consumer goods companies. As competition for the attention of a distracted and empowered consumer becomes more acute, the choice on what data to share and when, and how to make the best use of that data, will further complicate a process that has long been fraught with tension.
To read the rest of study, click on the links below:
Editor's Note: Companies Align on Data, Inside & Out
The Big Challenge: Balancing Maturity with Scope
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