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  • Optimizing Retail Investnent

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    Umair Muhammad Haroon
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    The document discusses optimizing retail investments for consumer packaged goods (CPG) companies. It notes that CPG companies now spend more on retail environments than traditional advertising. This includes slotting fees and other investments to get products placed on store shelves. When done effectively, these retail investments can increase sales volumes and drive lower costs, enabling lower selling prices that further increase volumes in a virtuous cycle. However, return on investment should be calculated based on incremental profits rather than just sales increases. Structuring retail investments to focus on changing shopper behavior and expanding consumption can optimize returns.

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    How to optimize retail investment

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    optimizing retail investnent

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    The document discusses optimizing retail investments for consumer packaged goods (CPG) companies. It notes that CPG companies now spend more on retail environments than traditional advertising. This includes slotting fees and other investments to get products placed on store shelves. When done effectively, these retail investments can increase sales volumes and drive lower costs, enabling lower selling prices that further increase volumes in a virtuous cycle. However, return on investment should be calculated based on incremental profits rather than just sales increases. Structuring retail investments to focus on changing shopper behavior and expanding consumption can optimize returns.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    14 views15 pages

    Optimizing Retail Investnent

    Uploaded by

    Umair Muhammad Haroon
    The document discusses optimizing retail investments for consumer packaged goods (CPG) companies. It notes that CPG companies now spend more on retail environments than traditional advertising. This includes slotting fees and other investments to get products placed on store shelves. When done effectively, these retail investments can increase sales volumes and drive lower costs, enabling lower selling prices that further increase volumes in a virtuous cycle. However, return on investment should be calculated based on incremental profits rather than just sales increases. Structuring retail investments to focus on changing shopper behavior and expanding consumption can optimize returns.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    of 15

    Optimizing Retail Investment

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    Companies spending more on retail than traditional advertising

    Billboard Television Social Media Newspaper

    Huge amount of money are spent on regular media


    We spend double the amount of traditional media in retail

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    Trade spends are escalating

    Why is so much spent in retail environment

    Most of the FMCG /CPG leaders are surprised to know


    that entire retail store is run through manufacturers’
    investment

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    Average retail / grocery store environment

    Almost every
    manufacturer pays
    slotting fee or listing
    fee to have its product
    placed o shelves.
    Manufacturers found
    more than just the
    obvious promotional
    discounts; its their
    cumulative investment
    that helps retailer to
    be cheaper than their
    competitor

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    Optimizing Retail Investment Model
    Higher volumes
    enable lower
    costs

    Lower costs
    Higher volumes
    enable lower
    for key suppliers
    selling prices

    Lower selling
    prices drive
    volume
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    Cost or Investment….. ??

    Cost
    Investment
    Retail Cost or Retail Investment

    Laying out money or capital in an


    Investment Technology consultant
    enterprise with the expectation of profit
    Gartner reported:

    Leading tool used by CPG


    team to evaluate
    promotion expenditure is
    Cost The price paid to acquire, produce, Microsoft Excel
    accomplish, or maintain anything

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    TESCO Example
    TESCO targeted couponing campaign delivered an average ROI of 400 percent

    Really…?
    Question:
    How do you calculate ROI without knowing the margin of each manufacturer ... ?
    Ans:
    Spend 1000 GBP, we expect 4000 GBP sales…. Ahhhhhhhhh…..
    Truth is ……..
    ROI should be calculated based on incremental profit accrued from
    the activity.
    8.0% margin on average
    Sales = 4000 X 8.0% = 320
    Cost = 1000 400 % OR 32%
    ROI = 320 / 1000 = 0.32 or 32%
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    Three key components to help optimize ROI in todays
    market…
    Gross Profit – Cost of investment
    ROI=
    Cost of investment
    If it was investment

    Discussion

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    Why invest in retailer ? Retailer invest in real estate..
    This simple question is commonly asked by naïve marketers

    They find their marketing budget is whittled away by profligate guy of sales team

    Shelves

    These help them build Shopping experience


    Displa Trolley
    y s

    All in one retailer holds shopper who is an ultimate buyer


    Produ Parkin
    ct g
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    Structuring trade investment

    There are only two ways


    COST Profit
    Investment drives growth are those that focus on changing shopper behavior

    This requires some rigorous thinking, but it has to start with fundamental notion that one invest
    only in channels that have a high potential to deliver significant change in shopper behavior

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    Structuring trade investment
    High target shopper relevance

    High potential Preferred channel

    High barriers to implementation Low barriers to implementation

    Rejects Time wasters

    Low target shopper relevance

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    Three golden rule

    Three golden rules


    First Second Third
    Rule Rule Rule

    Invest in availability Invest in Invest in offer when


    when changing communication when changing shoppers’
    shoppers’ behavior changing shoppers’ behavior expands
    undermines planed behavior will have consumption
    consumption profound impact on
    long-term
    consumption

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