CPG brands push retailers to up their tech games

Discussion
Photo: Walmart
Jan 17, 2018
Matthew Stern

CPG companies are becoming a driving force behind the technological advancement of their retail partners. That was one of the main takeaways from a panel discussion at the 2018 National Retail Federation Big Show in New York between Mike Luzzi, director of global IT innovation at PepsiCo, Brian Kavanagh, director of insights of driven performance and retail evolution at The Hershey Company, and Jason Breazeale, director of innovation at Ahold Delhaize.

Mr. Luzzi said that his company has run into difficulties with retail partners that are resistant to, or incapable of, implementing the in-store technology required to best position Pepsi’s products, including technology many consider retail table stakes.

“To work with retailers sometimes we need electricity; we need wireless connectivity,” said Mr. Luzzi. “We need to be on Wi-Fi, and retailers aren’t always playing in the sandbox with us to do that.”

Mr. Kavanagh noted that opening up the section of the store in which his brand has its products to technology is critical to making it an attractive place to shop. To facilitate this, brands like Hershey have moved from a model in which they worked primarily with merchandisers and category managers to determine shelf positioning, to one in which they work with in-store folks, technology, operations and marketing.

“It’s a big shift in the way we think about the way we run IT,” Mr. Breazeale added. “You have to have executive leadership that’s going to have the vision of creating teams that can work on innovative solutions and proof of concepts to be able to work directly with [brands’ tech teams].”

Mr. Breazeale noted that brands sometimes bring technology to retailers that the merchants are unable to do themselves. He further advised that any tech vendor should consider the retailer’s tech capabilities.

“If you come to us with a fourth of a solution and expect us to find the other three-fourths, we’re probably going to look for someone that’s got a little bit more of a complete toolkit,” Mr. Breazeale said.

Mr. Kavanagh stated that defining metrics for success and determining a clear, shared goal is key to making the most out of the brand-retailer relationship and preventing promising tech projects from cancelation.

DISCUSSION QUESTIONS: How much should retailers allow CPG brands to drive their in-store tech projects and how much should they invest in technology in order to facilitate brands’ projects? How can CPG companies demonstrate their product as being worthy of investing in tech upgrades for a given project?

Braintrust
"Retailers need to view vendors as true business partners, not a funding source."
"Technology should be defined as part of a retailer’s strategy to win in the marketplace, not be viewed as a tactical project. "
"The smart retailer will embrace the relationship and figure out who is the alpha dog later on."

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23 Comments on "CPG brands push retailers to up their tech games"


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Chris Petersen, PhD.
BrainTrust

Customers’ expectations are the biggest driving force in retail. They now expect many things beyond products on shelves. They expect “seamless,” and seamless runs on technology. Technology requires infrastructure in-store to enable brands to create the kinds of experiences customers are expecting. Retailers should be welcoming CPG and any other brands that help build out their infrastructure to remain competitive in what has become a real-time retail world. In the future of retail, the store is a wired connection “node” in the retail ecosystem.

Phil Masiello
BrainTrust
Unfortunately, this discussion has been going on for many years. Walmart proved parts of the model with their RetailLink platform and open access to stores for vendor partners. By using technology and the data that is accessed, the vendor and the retailer can work together to reduce costs and improve sales throughout the extended supply chain. Having store-level access and information allows the retailer and vendor to modify a product mix to suit that markets needs. Some retailers don’t understand the power of technology in growing sales, reducing costs and providing a better understanding of what their customers want. When they do understand it, they are hesitant to share access with their vendor partners. Those that do share it want to charge the vendor for the access and information. The vendors have valuable information and knowledge that can help retailers adjust their merchandising by market. That will provide better service to customers and improve retention for both the retailer and the brands. This “resistance to share access” mentality is one of the fundamental reasons retail… Read more »
Phil Chang
BrainTrust

Retailers need to put up clear guidelines for brands to follow. Brands need to follow the guidelines. We (CPG in totality) haven’t been good at either of these things.

If both retailer and brand could stay within guidelines, right now as a retailer,I’d be creating guidelines for brands to help me fill in my marketing strategy and allow them into stores to run these projects.

Retailers need experiential right now and brands are equipped to help with that. If I’m a brand and I want to show that I’m worthy, I’d bring more than my brand to the table — I’d go out and find partners to bring a multi-brand experience to help the consumer stay longer in-store.

Art Suriano
BrainTrust
I believe each retailer needs to decide for themselves what will work best for their brand. My concern today is that we have way too many tech companies pushing everything imaginable with the scare tactic that it’s a must-have, or the company will be left in the dust. So many “must-haves” through the years died out before they even took off and, for many companies, they were an expensive waste of time and money. So retailers should start with the basics like having Wi-Fi because customers benefit as well. If a vendor needs electricity for their display and the retailer can provide it, that’s fine but make sure the display is not going to be something customers may find annoying. For example, a few years ago you’d walk into a store and on almost every aisle you’d see a small TV playing a video … it was a must have. The only thing was that nobody watched and, for many stores, the audio from the videos clashed with the in-store music. Today you don’t see… Read more »
Neil Saunders
BrainTrust

Many grocery retailers in the U.S. are a long way behind on technology, and some are even backward on the basics of the store experience.

That said, U.S. CPG companies are not all that great either. While giants like Pepsi are progressive, some do not seem to have moved out of the 1970s on basic things like packaging design and marketing. It’s one of the reasons niche and innovative CPG firms are enjoying their success.

There is much work to do on both sides!

Michael La Kier
BrainTrust

The question of who owns the real estate has long been decided in the retailer’s favor. Now the question is “who owns the air and space in store?” I think the answer is the same — the retailer — and CPG companies would be wise to partner versus try to bring something in store without notice. Retailers must have their own agenda for technology that can benefit the shopper but, where the interests align, should partner with CPG.

Adrian Weidmann
BrainTrust

Retailers should welcome and embrace any brand that is willing to experiment, test and fund new technologies to reach their target customers in a sea of digitally-empowered shoppers that have an ever-increasing vista of expectations. Retailers that insist on “owning” the shopper will continue to be marginalized. The funding for any, and all, of these in-store initiatives will ALWAYS be carried, directly or indirectly, on the backs of the CPG brands — and they know it! Retailers: the status-quo is dying! It’s time to shift your perspective and question, if not bust, every paradigm to delight your shoppers.

Dave Wendland
BrainTrust

You are precisely right, Adrian. The status quo is no longer sustainable.

Joy Chen
BrainTrust

Technology should be defined as part of a retailer’s strategy to win in the marketplace, not be viewed as a tactical project. The tech requests from CPG brands must benefit the consumer and be consistent with the retailer strategy. The best way to demonstrate the viability of a tech upgrade from a CPG brand is to set the right metrics and test in a few stores. This type of test is usually invested in by the CPG brand.

Paula Rosenblum
BrainTrust

RSR has seen in our data that grocers are far more open to upping their technology game than they’ve been in the past. But I don’t think they should facilitate brands’ projects … rather they should buy solutions that are applicable to both private label and branded product.

If brands want to bring their own technologies into stores, I don’t think I’d refuse, but I also would be very careful to maintain independence. It’s all about leverage.

Lyle Bunn (Ph.D. Hon)
BrainTrust

Basic utilities like electricity and connectivity have too long been the impediment to better approaches to customer experience. I cringe at retailers getting their heads around analytics and AI when shelf-level and other enabling technologies only get as far as a security system.

Ryan Mathews
BrainTrust
To me this — and related issues — come down to two slightly different questions: a.) Who ought to “own” the store from a merchandising, branding and customer experience point of view and what are they rating to accomplish? and b.) Do you see a store as fixed real estate divided into sections or as a platform broad enough to facilitate a wide variety of technologies, media, customer uses, etc.? If you don’t think of it this way you get stuck in what I call, “old think,” or seeing the future as variations on past practices. So for example, if retailers believe they are creating a “platform” it should be as fully technologically enabled as possible in order to accommodate any possibility. This puts the onus on manufacturers to have offerings equal to the platform. If, on the other hand, manufacturers are driving changes to meet their proprietary needs — sometimes at the expense of the greater good — then we will quickly evolve to high-tech versions of slotting allowances and performance fees. Upgrades shouldn’t… Read more »
Kai Clarke
BrainTrust

Retailers know their market, their budgets and their goals. CPG brands are not aware (and often they don’t even care) about these things, despite its importance to a retailer. Retail still depends on the basics (anticipating product velocity, eliminating out-of-stocks, product positioning, proper pricing, marketing, etc.) and this is the lifeblood of most retailers — and it should be.

Dave Wendland
BrainTrust

Although it may seem like a chicken-and-egg conversation, it is in the best interest of both retailers and CPG brands to work together to meet consumer expectations. Simply put shoppers are not only expecting connectivity, interactivity and an experiential engagement at shelf, but they are DEMANDING it!

Hershey’s acknowledgement that the conversation has shifted from one of shelf placement/category management to technology and operational dialogues is precisely what should be happening. To remain relevant and current, retailers must reinvent their traditional thinking and CPG brands need to support technology investments, access and utilization. We are definitely living in a brave new world.

Camille P. Schuster, PhD.
BrainTrust

What do customers expect from retailers? What do they do if a retailer does not live up to their expectations? If customers switch their loyalty based upon technology availability, retailers have to change or risk going out of business. The new atmosphere requires cross-functional collaboration by both retailers and manufacturers because the solutions involve more than one function. This situation is just another example of what has been required in the marketplace for years and the difficult position of those companies that think this change (use of technology and collaboration) is not necessary.

Harley Feldman
BrainTrust

As the use of technology increases for buying online, using mobile applications and the use of beacons increases, brands will put pressure on retailers to use these technologies to attract consumers to their brands and increase customer support and satisfaction. Retailers will need to increase spending on technology to keep pace with their competitors, their customers and their brands.

The more important a brand is to the retailer’s sales, the more investment retailers will need to make to meet the expectations of the brand. CPG companies can demonstrate their worth for the investment by partnering with the retailers, setting proper goals where the retailer and the brand both succeed and measuring how well the goals were achieved. One of those goals will likely be increased sales of the brand, the ultimate measure of success.

Seth Nagle
BrainTrust

Depends on the retailer and the brand. For some retailers, they have their own IT and innovation department that is doing a tremendous job building out the in-store experience and providing manufacturers with guidelines to follow for success. For others, they are behind the 8-ball and lack the resources to implement exciting new in-store experiences. When this is the case the manufacturer needs to be able to work with the retailer and their limited bandwidth to execute in-store displays and promotions.

Retailers that are resisting innovation and manufacturers that aren’t providing flexible programs are going to struggle in 2018 and on.

Ralph Jacobson
BrainTrust

This has everything to do with the perennial challenge of ecosystem collaboration that we all keep talking about, but evolution continues to move slowly. I met with a large, global CPG CIO yesterday afternoon in NYC, and the very first challenge he spoke of was around “ensuring great presentation of their products in-store.” I thought that was interesting that that one came up on top of all the other challenges. But this obviously goes right to the heart of collaboration. If the retailer customer of this CPG is out-of-stock on any of his company’s SKUs then the collaboration has failed. Period.

Whether you are concerned about this supply chain/merchandising issue, and even marketing-based (as it pertains to promotional campaigns that create OOS conditions) issue, you must rely on the retailer investing in the newest technological capabilities available. The retailer is just as concerned about OOSs as the CPG brand is. Once the OOS situation is eliminated, we will have our first trillion-dollar retailer a lot sooner.

Sterling Hawkins
BrainTrust

The physical store is a platform, just as the web is a platform. Creating the infrastructure to support electric, wireless, etc. gives the retailer flexibility to test and engage with a variety of solutions to see what works. Aligning with brand partners takes that to the next level as their budgets and access to technologies are typically greater than the retailer alone.

Jeff Miller
BrainTrust

I think from the CPG side you see a lot of tests and projects where they are trying to use technology more for “technology’s sake” as opposed to solving a real customer problem. The customer can be the end consumer or the retailer. Retailers should allow their stores to be testing grounds for quality tech projects, but it is the retailer’s job to assess whether it helps them and their customers.

John Karolefski
BrainTrust

Each month grocers are bombarded with more than a dozen tech innovations that would be “perfect” enhancements for their in-store experience. Many don’t have the time to evaluate all of them, and many don’t have the resources to deploy them.

Enter the CPG manufacturer as a potential partner for tech innovation. The smart retailer will embrace the relationship and figure out who is the alpha dog later on.
If grocers don’t partner for technology, their key competitors will.

Min-Jee Hwang
BrainTrust

Brands need to know that their retailers are following the guidelines they set for displays. (This is possible through in-store brand compliance carried out by crowdsourced shoppers.) At the same time, retailers need to be upfront about any technological or logistical limitations that could keep them from complying. On both ends it’s about setting expectations properly from the get-go. Investing in interesting and engaging experiences is profitable on the retailer and brand sides, so it’s worth the conversation and on going monitoring.

James Arth
Guest

The prospect of how best to connect with the shopper in-store and lead them to purchase is interesting but in world of growing ecommerce, this seems backwards. Research, after all, shows that 80% of retail shoppers interact digitally with brands prior to purchase.

Knowing that, would it not be more effective strategy for CPG brands to help shoppers purchase products wherever they interact with the brand (advertising, social media, or on a brand web site) and remove barriers to purchase from your retailers. Imagine being able to purchase your desired CPG product directly from a retailer of choice while interacting with a brand’s advertisement, social media post or simply researching a product on the brand website.

wpDiscuz
Braintrust
"Retailers need to view vendors as true business partners, not a funding source."
"Technology should be defined as part of a retailer’s strategy to win in the marketplace, not be viewed as a tactical project. "
"The smart retailer will embrace the relationship and figure out who is the alpha dog later on."

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