Retailers, CPGs Using Big Data Analytics to Outperform Others

Retailers and consumer packaged goods companies that are applying big data analytics to better understand consumers and adjust to their needs are outperforming their competitors who don’t, according to a pair of studies released today by IBM.

“These studies show that no matter where you sit in the retail ecosystem, big data can have tremendous impact on your success,” said Jay Henderson, strategy program director, IBM Smarter Commerce. “Leading retailers and consumer packaged goods suppliers are increasingly looking to the consumer to inform better business strategies. By using data analytics, these top performers are more in tune with retail trends that turn market opportunity into market leadership.”

The new IBM/Kantar Retail Global CPG Study of over 350 top CPG executives revealed that 74 percent of leading CPGs use data analytics to improve decision making in sales compared to just 37 percent of lower performing CPGs. By the same token, the new IBM study of 325 senior retail merchandising executives, conducted by IBM Center for Applied Insights in conjunction with Planet Retail, reports that 65 percent of leading retail merchandisers feel big data analytics is critical to their business compared to just 38 percent of other retail companies.

Both studies demonstrate how deploying advanced strategies such as big data analytics drives overall results for their companies. For example, the stock prices of top CPG organizations grew at a 60 percent higher rate than their laggard counterparts over the last three years. Similarly, the stock price of top retailers rose three times faster than the laggards.

While most leading retailers already focus their merchandizing strategies on end consumers, the study shows that CPG companies are now planning to take the same path. For example, in the next three years, the number of CPG companies that plan to focus more on the end consumer will rise significantly from 28 percent to 49 percent. But while this may cause a power struggle between CPG companies and retailers for ultimate influence over the consumer, companies can mitigate these risks by placing a higher importance on collaboration between internal and external stakeholders. This focus on collaboration enables CPG companies and retailers to work together to get the most out of big data and drive shared business results.

The two independently developed studies also found that the top performing organizations of both CPG manufacturers and retailers share three common characteristics that manifest themselves in slightly different ways:

Advanced use of analytics: Top retailers are using analytics to understand consumer behavior and drive assortment planning, price and promotion strategy. Top CPG manufacturers use analytics in a similar fashion in addition to driving more factual conversations with retailers.

  • Sixty-three percent of top retail merchandisers have the data they need to conduct meaningful analytics while 33 percent of other retailers do not.
  • Thirty-seven percent of leading CPG companies make decisions predominately on data and sophisticated analytics versus 9 percent of lower performing CPG companies.

Increased focus on the end consumer: For CPG companies, this means merging marketing consumer data with the sales department’s retailer data for a more complete picture of the business. For retailers, this means more focus on what consumers want as opposed to focusing primarily on just the product itself.

  • Eighty-three percent of leading retail merchandisers are focusing more on the consumer, compared to just 47 percent of lower performing retailers.
  • Forty-three percent of leading CPG company’s sales organizations are highly focused on the consumer versus 28 percent of others.

Collaboration with stakeholders: With more focus on the consumer and more data to base their decisions, collaboration between retailers, CPG companies and their internal stakeholders will be critical to success. Leading retailers and CPG manufacturers collaborate well with each other and across departments internally, including between merchandising, marketing and IT within retailers, and sales, marketing and IT in CPG manufacturers.

  • Sixty-nine percent of the marketing departments of top retail merchandisers are highly collaborative vs. 39 percent of other retailers.
  • Forty-four percent of leading CPG companies report a "robust partnership" between marketing, sales and IT versus only 20 percent of their competitors.

Click here to read the full results of the IBM/Kantar Retail Global CPG study.

Click here to read the full results of the retail merchandising study conducted by IBM Center for Applied Insights.