SUCCESSFUL STRATEGIES IN TRADITIONAL TRADE ......Branding re-usable product packaging or containers for top-ups and repurchases Providing small, portable display stands for kiosk vendors

SUCCESSFUL STRATEGIES IN TRADITIONAL TRADE AROUND THE GLOBE

2Copyright© 2016 The Nielsen Company

World trade dynamics will be affected by the demographic evolution. GDP growth in developing markets will outpace those in developed markets and this growth will be driven by the new middle class, which for the first time, will have discretionary income to purchase products and brands they previously couldn’t afford. In addition to the accelerated movement to urban populations and an increase in the labor force and female participation.

Taking advantage of the emerging opportunities will remain a challenge as people become busier and busier thus the need for a higher level of convenience, consumers making more conscious decisions. Demand of products with more value-price.

To define our sales department strategic plans, we should consider that convenience is still a key driver for developing markets - 51% of shoppers in developing markets, consider the store location as the number one driver of purchase – therefore across the globe, there is a rise of proximity retailing.

TRADITIONAL TRADE

MODERN TRADE*

DRUGSTORES

HARD DISCOUNT

CONVENIENCE

SMALL SUPERMARKET

HYPERMARKET

LARGE SUPERMARKET

35%

30%

7%

15%

5%5%2%1%

LEAD MARKETS

13%

12%

14%

3%2%7%

11%

38%

GROWTH MARKETS

18%

11%

18%

3%10%

40%

CHINA

36%

64%

EMERGING MARKETS*


AVERAGE GROWTH IN TRADITIONAL TRADE

ALPINE

BRAZIL

ARGENTINA

CENTRAL AMERICA

COLOMBIA

GERMANY

GREECE

HUNGARY

INDIA

KUWAIT

MALAYSIA

PERU

POLAND

RUSSIA

SAUDI ARABIA

SINGAPORE

SLOVENIA

UKRAINE

MEXICO

URUGUAY

LOSI

NG S

ALES

LE

SSTH

AN

- 1%

��

��

�

��

NOGR

OWTH

RE

PORT

ED

+/-1

%

�

�

�

BETW

EEN

1% T

O 5

%

�

�

��

�

5.1%

TO

10%

�

��

MO

RE T

HAN

10.1

%

�

�


Globally 30% of sales come from traditional stores -an average of 44% in developed markets. As seen in the previous figure, traditional trade is the largest channel with the largest reach -one store per 205~ people. Contrary to world expectations, traditional trade has not been pushed out by modern trade, at least we haven’t seen that happened in developing countries.

GROWTH MARKETS

GREATER CHINA

EMERGING MARKETS

3 MARKETS AVERAGE

4%9%10%

14%21%23%

26%29%29%31%32%32%33%35%37%37%37%38%39%40%40%

43%43%

46%48%49%50%

56%57%60%60%62%

65%67%69%70%70%

74%83%

94%96%98%98%

KoreaEstonia

SlovakiaChile

Czech RepublicLithuania

LatviaMalaysia

SingaporeArgen�naColombia

MéxicoPhilippines

BrasilGreece

CAMHungary

UAERomania

South AfricaChina

PolandPerú

UkraineAverageCroa�a

TahilandVenezuelaIndonesia

RussiaTurkey

Saudi ArabiaBulgaria

MontenegroBosniaSerbiaKenya

VietnamBelarus

IndiaGhana

CameroonNigeria

SHARE OF MARKET TRADITIONAL TRADE IN EACH MARKET


WHO AND HOW ARE THEY SHOPPING IN TRADITIONAL TRADE?

Families with children are the most relevant group of shoppers (65%), these families have higher relevance in Peru, Colombia, Venezuela, Turkey, Philippines, Vietnam and Indonesia by more than 70%. Most of the shoppers are male (54%), increasing their relevance in UAE (90%), Kuwait (88%), Turkey (86%) and Venezuela (62%), however females have (46%) increased their relevance in Vietnam (67%), Philippines and Brazil (61%), Argentina (59%), Czech Republic, Peru, Cambodia, Colombia & Russia with more than 50%.

In Developing markets, stocking up of high rotation categories is the most important mission for this channel. Shoppers visit daily on average 28 visits per month, regularly they arrive walking (68%) unaccompanied (86%) and spend only 5 minutes per visit. On average, shoppers buy 2 items per visit, favoring high rotation categories in personal and small packages.

% OF COUNTRIES WITH THESE CATEGORIES IN THE TOP 5 OF SALES

SOFT DRINKS57.9%

BEER52.6%

CIGARRETTES31.6%

MILK31.6%

FRUIT JUICES26.3%


his doesn’t mean that other type of FMCG have less opportunities at traditional trade, because in these countries (which ones) 29% of shoppers tend to do out of home consumption, while 20% use this channel to satisfy urgent replacement needs. Therefore, manufacturers just need to develop the right strategy to reach the channel, and it isn’t easy with more than 23 thousand million Traditional stores around the world.

If manufacturers really want to win in Traditional Trade they need to consider:

1. All successful strategies should take into account a deep understanding of how shoppers differ in the world… how and why they are choosing stores and products, how they arrive to the stores, etc., and what are the main concerns of shopkeepers at local level

2. Traditional Trade shopping is not a “monthly stock up trip”, nor is it always a ‘top up’ shop - it all depends on the size of the store, the range available (depends on the shopkeeper’s budget -limited- and their deals with distributors) and the purchase occasion, shoppers need, preferences and out of pocket

3. Merchandising can also take on a life of its own in a Traditional Trade environment where interior and display space is limited, especially for fridges or free standing units. Shopkeepers often use cross merchandising so color coding and labeling becomes key in order for products to stand out, packaging is key for offerings such as everyday staples which are displayed at the front of the store

4. Manufacturer’s Market Playbook by Nielsen

Segmenta�on Strategy

Shopkeeper & Distributor Loyalty Plans

Execu�on Standards


SEGMENTATION STRATEGY

Through proven practices around the world, we have acquired the experience and knowledge to state that if we focus our efforts on the right place, results will be much better and manufacturers will have more opportunities in the market place.

In this fragmented world, a simple segmentation is not enough, channel and micro-understanding is crucial, an analysis done in partnership with McKinsey has demonstrated that successful companies in Latin Americas’ Traditional Trade, segmented their stores using criteria focused on growth potential and portfolio needs – winners considerations for store segmentation include: 100% channel, 67% own sales at the store, 67% store SOM, 67% Socioeconomic level of the area, 50% quality of relationship, 50% potential share, 50% physical store characteristics, 50% consumption occasions, 33% profitability potential –

Winning Strategies for Store Segmentation:

• Locationattributes Dividing stores into regions or areas by store density, GDP, population density, economic class or income level enables efficient planning of sales force, numbers per region and provides guidance on brands/SKUs to be pushed in each region. Modeling across multiple data sources will help identifying high potential provinces/districts that will help realize potential with lower reach costs.

• Performanceattributes Whether at total store level or individual category level, performance attributes provide a clear focus for store visits to the highest potential stores. Sales territories can be allocated based on a store e performance profile. It is complex and cost- intensive for manufacturers to reach all the category stores. Understanding how your distribution is built can help to identify and quantify distribution opportunities


We already know that around the world shopkeepers strongly influence the purchase decisions of shoppers, 68% of Developing markets in the study declared that Traditional store owners are relevant because they decide the main product portfolio in the store and will continue selling any brand that they decide. This is why retailer’s voice needs to be heard and we should consider at the same level how can we improve our relationships with distributors in order to have stronger working partnerships – distributors are the main purchase place for shopkeepers around the world.

OWNER PRIORITIES & CONCERNS AROUND THE GLOBE

31%OF COUNTRIES

store credit with suppliers

50%OF COUNTRIES

Discounts and promo�ons per

volume of purchase

44% OF COUNTRIES

Threat: Be�er pricesin other channels

33% OF COUNTRIES

Threat: Small Formats Growth

81%OF COUNTRIES

Margin

Listen to retailers voice to help manufactures

to innovate and elevatethe rela�onship

SHOPKEEPER AND DISTRIBUTOR LOYALTY PLANS


The same study in partnership with McKinsey, demonstrated that Latin American manufacturers who are winning in Traditional Trade, are using third party distributors, prioritizing exclusive and collaborative relationships rather than partnering with larger, lower-cost players. Consider implementing and engaging programs for shopkeepers and distributors in order to help them to take the business to the next level will be a key strategy around the world.

Community of entrepreneurs

Business training

Micro financing

Space planning and management

POS and inventory management, etc.

WHERE DOES THE STOCK MAINLY COME FROM?

52.7%

47.4%

26.3%

21%

WHOLESALERSCASH & CARRYPRICE CLUBS

DIRECT DELIVERY FROM WHOLESALERS

AND MANUFACTURERS, CASH & CARRY,

PRICE CLUBSDIRECT DISTRIBUTION FROM OTHER COMPANIES WITH A DELIVERY SERVICE

DIRECT DELIVERY FROM MANUFACTURERS


All brands should aim to land at the store – front in order to maximize visibility, because shoppers’ contact with the brand in store could push purchases; in terms of execution, discounts to the shopkeeper is still the most effective activation in Traditional Trade.

Activation in store: What types of marketing activities are the most successful in Traditional Trade for your country?

EXECUTION STANDARDS

DISCOUNTS FOR SHOPKEEPER

BRAND FURNITURE

POSTERS INSIDE THE STORE

PROMOTIONAL PACKAGES

PAINT THE WALLS OF A

STORE

INNOVATEPRODUCT DISPLAYS

42.11% 31.6% 31.6% 15.8% 15.8% 5.3%

ALPINE

BRAZIL

CENTRAL AMERICA

HUNGARY

MALAYSIA

POLAND

SINGAPORE

SLOVENIA

ARGENTINA

COLOMBIA

MALAYSIA

PERU

SAUDI ARABIA

URUGUAY

CENTRAL

AMERICA

COLOMBIA

GREECE

PERU

URUGUAY

UKRAINE

BRAZIL

CENTRAL

AMERICA

INDIA

CENTRAL

AMERICA

PERU

URUGUAY

ARGENTINA


As mentioned earlier, shoppers store visit is only 5 minutes long and 76% of purchases in this channel are planned, but not all is lost, there are opportunities to promote and drive purchase intentions, as well as to build brand equity for at least 3 minutes in which you can capture where the shopper is idle.

To be present is not enough, it is necessary be there with the right portfolio, creating affordability with innovative packaging, and this will translate into a higher shopper value perception.

In

5minutesyou can…

SHOPPERSSMS promoexclusive in TT

Men�on there`s a new product ora promo item

SHOPKEEPERS

SAMPLINGHand out aprodct sample

Play a 15 sec TVC 4x viaLCD display

IN-STORE COMMS

OPPORTUNITY• Find the right pack and price to provide value and convenience• Innovate with new convenience friendly pack formats e.g. sachets, pouches, etc.• Single use packs meet TT consumer needs for immediate consump�on and

frequent store visits

AFFORDABILITY CONVENIENCE


IN ORDER FOR THE SHOPKEEPER TO BE FLEXIBLE, TAKE INTO CONSIDERATION THE FOLLOWING:

Repackaging and branding products into single servings or smaller sizes

Providing branded packaging such as wrappers or sachets that retailers can use if they spilt up larger por�ons

Providing branded cooler boxes for table-top vendors to sell products which require refrigera�on

Branding the selling vessel, for example, the basin from which water sachets are sold

BRAND

Branding re-usable product packaging or containersfor top-ups and repurchases

Providing small, portable display stands for kiosk vendors to stack products and add visibility

What is the Main Role (Shopper Need) of the Tradi�onal Trade in Your Country?

WINNING STRATEGIES AROUND THE WORLD

57.9%

LAST MINUTE REPLACEMENT OF HIGH ROTATION CATEGORIES*

15.8%

STOCK UP FMCG FOR THEIR HOMES (ENTIRE

FAMILY SHOPPING)

47.4%

STOCK UP ON HIGH ROTATION

CATEGORIES*

10.5%

READY-MADE MEALS TO EAT

AT HOME

42.1%

LAST MINUTE REPLACEMENT

FOR FMCG

5.3%

READY-MADE MEALSTO EAT OUT OF HOME

(OFFICE, STREET, SCHOOL)

What is the Main Role (Shopper Need) of the Tradi�onal Trade in Your Country?


MANUFACTURER’S MARKET PLAYBOOK

Segmenta�onFocus in the real opportunity

EnReachGolden Stores

Trade DimensionsSpectra / Sabines

Execu�onDefine and guarantee

Store Observa�onInstant Survey

Advantage Survey

Shopkeeper & Distributor Built a rela�onship

LoyaltyShopper

Merchandising

Value-PriceRight price points and Assortment

Price Elas�cityMarke�ng Mix

Assortment


LEAD MARKETS

AUSTRALIA

AUSTRIA

BELGIUM

CANADA

DENMARK

FINLAND

FRANCE

GERMANY

IRELAND

ITALY

NETHERLANDS

NEW ZEALAND

NORWAY

PORTUGAL

SLOVENIA

SPAIN

SWEDEN

SWITZERLAND

U.K.

U.S.A.

GROWTH MARKETS

BRAZIL

MEXICO

COLOMBIA

CHILE

JAPAN

KOREA

INDONESIA

SINGAPORE

SRI LANKA

MALAYSIA

NEPAL

RUSSIA

POLAND

TURKEY

CZECH REPUBLIC

SLOVAKIA

HUNGARY

INDIA

GREATER CHINA

CHINA

BANGLADESH

HONG KONG

TAIWAN

HONDURAS

ISRAEL

JORDAN

KAZAKHSTAN

KENYA

KUWAIT

LATVIA

LEBANON

LITHUANIA

MONTENEGRO

MOROCCO

MYANMAR

NICARAGUA

NIGERIA

OMAN

PAKISTAN

PANAMA

PARAGUAY

PERU

PHILIPPINES

PUERTO RICO

ROMANIA

SAUDI ARABIA

SERBIA

SOUTH AFRICA

TANZANIA

MACEDONIA

THAILAND

UGANDA

UKRAINE

UNITED ARAB EMIRATES

URUGUAY

VENEZUELA

VIETNAM

EMERGING MARKETS

ALGERIA

ARGENTINA

BELARUS

BOLIVIA

BOSNIA

BULGARIA

CAMEROON

COSTA RICA

CROATIA

DOMINICAN REPUBLIC

ECUADOR

EGYPT

EL SALVADOR

ESTONIA

ETHIOPIA

GEORGIA

GHANA

GREECE

GUATEMALA

NIELSEN CLUSTERS

Looking to align countries with broadly similar needs, challenges and growth opportunities:

AuthorFABIOLA DE LA PORTILLA

SUCCESSFUL STRATEGIES IN TRADITIONAL TRADE ......Branding re-usable product packaging or containers for top-ups and repurchases Providing small, portable display stands for kiosk vendors

Documents