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Navigating the Retail Revolution: Insights for Consumer Products Manufacturers

A new consumer reality is quickly changing the face of retail. The retail leaders that have been so dominant over the last thirty years may not make the transition. And while it is not often covered by analysts or the trade press, the retail revolution is going to have an immense impact on Consumer Products manufacturers. As the balance of power in the retail value chain tips, manufacturers have a window of opportunity to make plans for their own transition.

A new consumer reality is quickly changing the face of retail. The retail leaders that have been so dominant over the last thirty years may not make the transition. And while it is not often covered by analysts or the trade press, the retail revolution is going to have an immense impact on Consumer Products manufacturers. As the balance of power in the retail value chain tips, manufacturers have a window of opportunity to make plans for their own transition. Consumers rule today’s retail value chain – they are more connected, more educated, and more demanding than ever. Consumers cannot be managed in mass, but have to be engaged individually. Even a single bad experience given voice through Twitter, YouTube, or Facebook has the potential to go viral and significantly damage a company and its brands. Neither manufacturers’ marketing muscle nor retailers’ superstores can rival consumers empowered by the internet.

The new consumer has changed the basis of retail competition. The traditional value proposition of selection, price and convenience afforded by traditional retail is less and less compelling as compared to internet retail. As a consequence, physical stores are no longer the consumer’s default choice. In their recently found motivation to become more consumer focused, retail leaders will reconsider everything from the layouts of their stores to the products on the shelves. There’s no choice. Every retail dollar spent online erodes the economies of scale underlying their physical stores. Management theory suggests that many of today’s retail leaders will struggle with the internet format and eventually fail. It is remarkable that Walmart, Target and Kmart all celebrated fifty years in business during 2012. Ironically, while most of the growth in retail over the past decade has been online, these well run companies and their peers have only recently begun to embrace the opportunities in a significant way. Why is it that none of these industry leaders became Amazon?

So what should Consumer Products manufacturers assess in light of this revolution? Almost everything. In a world where consumers and the retail landscape are changing fundamentally, the full breadth of the consumer product manufacturers’ enterprise deserves a reexamination. It may strike many as unspeakable, but a key element of the conversation must be manufacturers’ longstanding patronage of large retail
accounts through trade spend, dedicated account teams, and labor shifting. But don’t think that it is business as usual for the operations. New distribution channels, customer fragmentation, and item customizations are also in the mix.

Contributions by Bruce Twery

Tags: Retail Planning and Execution