Bulletins

Consumer & Retail - January 18, 2010

Changing Consumer Behavior and Distribution Models Call for Greater Sophistication in Market Intelligence in the Consumer and Retail Industry

The rules of the game have changed for Consumer and Retail companies. Distributor power, new entrants and a long economic recovery are among the biggest business threats in 2010 for companies, reveals the Global Market Intelligence* survey. Consumer budgets are tight and the focus is on cost, not brands. How will companies use Market Intelligence to explore new strategies and reach deeper into markets?

Conducted by Global Intelligence Alliance, the 2009 Global Market Intelligence survey consolidated the responses of 53 senior Market Intelligence executives at some of the world’s largest global or regional Consumer and Retail companies, and provided some interesting insights. (The total number of responses globally reached 724.)

The competition is getting fiercer and more crowded

Large global firms consider new entrants and local competition to be paramount threats in 2010.

Advancements in technology, data capabilities and logistics over the last decade have made it easier for companies to serve new markets and to source products anywhere. Brand and customer loyalty had acted as shielding factors to long established companies - until now. The current economic downturn seems to have taken the industry to another level of competition, as customers watch their pennies and forget about brand loyalty. In this climate, medium and small companies are gaining power in their domestic markets and exploring new markets as a hopeful source of revenue growth.

With this level of highly dynamic competition, companies are finding it hard to keep up with the market information.

Only 12% of the respondents in the survey said that they have the information they need to support important business decisions available as and when needed, while 33% expect to increase the level of investment in Market Intelligence significantly over the next two years, especially in the Greater China and Asia Pacific regions.

Two sides of the distribution coin

The second biggest concern mentioned by senior executives in the survey is the concentration of power in the distribution side of the value chain.

As distributors apply pressure on suppliers to deliver cheaper and better goods, profit margins for manufacturers in the industry are thinning. Consolidation and partnerships amongst manufacturers are seen as the preeminent business opportunity.

On the other hand, companies see the need to respond to the uncertain economic environment by increasing their customer base. They plan to do so by reaching deeper into markets in order to increase revenue growth and market share. Partnering and more intense collaboration with distributors comes as the winning business strategy in this environment, according to the survey.

Other threats mentioned by Market Intelligence professionals in the industry were the impact of inflation and exchange rates, and changes in legislation and taxation.

Market Intelligence could be better valued and funded

Despite the need for updates on market trends and competitors moves, the industry’s track record in Market Intelligence is among the poorest. A possible reason behind this could be the popularity of more localized consumer intelligence as opposed to global or regional research.

Amongst all the industries surveyed, Consumer and Retail players rank poorly in recognizing the importance of their Market Intelligence efforts during difficult times (50% compared to 82% for Construction and Property Development, 75% Leisure and travel). Furthermore, Consumer and Retail players come in last in their intention to increase their need for Market Intelligence during a business upturn (60%, compared to 73% average for all industries).

GIA_Industries_Bulletin_Importance of MI during downturn

GIA_Industries Bulletin_Need for MI in upturn

Annual budgets allocated to Market Intelligence are among the lowest in the industries profiled and only 33% plan to increase their investment over the next two years, compared to the industry average of 53%.

GIA_Industries Bulletin_Investment in MI over the next 2 years

GIA_Industries Bulletin_Size of annual MI budget

Yet, the level of integration of Market Intelligence with decision making at Consumer and Retail companies is among the highest (36%) in contrast with Leisure and Travel (25%) or the Financial Services industry (18%).

Looking ahead, Consumer and Retail companies can gain from more competitive intelligence and market monitoring on a global basis, as well as customer intelligence to gain a better understanding of the areas in which they can develop a competitive advantage in order to compete better in their markets and grow.

* Market Intelligence or MI is the discipline where organizations systematically gather, process and analyze information from their operating environment to facilitate decision-making.

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About Global Intelligence Alliance

Global Intelligence Alliance (GIA) is a strategic market intelligence and advisory group. GIA was formed in 1995 when a team of market intelligence specialists, management consultants, industry analysts and technology experts came together to build a powerful suite of customized solutions ranging from outsourced market monitoring services and software, to strategic analysis and advisory.

Today, we are the preferred partner for organizations seeking to understand, compete and grow in international markets. Our industry expertise and coverage of over 100 countries enables our customers to make better informed decisions worldwide.

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