In light of major structural changes at Willard Bishop we ran a piece Pundit’s Pulse Of The Industry — Willard Bishop Consulting’s Bill Bishop in which, among other things, we were advised that “…for some period of time AC Nielsen was out in front by itself in category management including perishables. Now, there is a strong initiative on the part of IRI to win a piece of that business.”
This led us to see what IRI was thinking, which led us to run an intriguing piece we called Pundit’s Pulse Of The Industry — Information Resources’ Thom Blischok.
Bill Bishop added another point during our original conversation, in which he said:
“Essentially IRI and FreshLook Marketing Group parallel AC Nielsen and The Perishables Group in terms of the services they offer. They’ve developed skills of processing and analyzing perishable data and putting it in a form that can be used for category management.
We don’t have a standard universal code like packaged goods. Identification and analysis depends on tying in PLUs, seasonal data, and many other variables. AC Nielsen for several years pulled way ahead of IRI in the category management area. In the last year, IRI has said this isn’t satisfactory and is taking steps to come back in and be more competitive.”
We’ve often praised the work of the Perishables Group, most recently here where we reflected on a top-notch presentation Steve Lutz, Executive Vice President for the Perishables Group, did at the United Fresh convention in Chicago on the role of organics in mainstream supermarkets.
A little competition is good for the soul so if IRI and FreshLook Marketing Group are becoming more active, we wanted to see what they had to say to the industry. We asked Pundit Investigator and Special Projects Editor, Mira Slott, to speak with Mark Degner, President and CEO, FreshLook Marketing Group and June Fenzel, Vice President of Product Management IRI so we could understand better what they are attempting to do in the perishables arena:
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Mark Degner President and CEO FreshLook Marketing Group |
June Fenzel, Vice President of Product Management, IRI
Q: What is the relationship between IRI and FreshLook Marketing?
A: June: In 2000, IRI spun off the perishable portion, and the FreshLook Marketing Group was formed. The relationship between IRI and FreshLook is interrelated. IRI provides the raw material from retailers to FreshLook, which processes the information, cleansing the data, and developing marketing level consistency for the retailers. A data set is provided back to IRI. Then IRI generates comprehensive data bases combining both the center store and perishables information for retailers to start utilizing with onsite assistance from the IRI team. The combined data accounts for 70 to 75 percent of the retailer’s total business.
Q: What perishables data are you processing?
A: Mark: The items that are scanned at the register when the consumer is checking out. Data is still coded at the retail level. Anytime a commodity is rung up we capture that code. We are able to look at a myriad of raw data feed in perishables, including produce, service deli and fresh meat at each retailer. We build data cubes. They’re massive; 4,000 or 5,000 products are active and we’re reporting on all of them. We’re trending weekly sales, market comparisons, how retailers are doing in relation to the competition.
With potentially 250 retail geographies and competitive geographies, our reporting is of a custom nature. We shape the reporting depending on the client needs. What we bring to the party is perspective.
A: June: For retailers to understand total store performance, it is critical to add the perishables side, not just center store categories. Benchmarking allows retailers to compare how they are doing to their market.
Q: What percentage of retailers are willing to provide data? How does this impact your competitive analysis in the marketplace? If Wal-Mart and Costco don’t participate, wouldn’t that skew results significantly since their presence in a market would presumably have great sway on sales and profit conditions, and therefore strategic category positioning?
A: June: In perishables, our service is concentrated on grocery retailers. Wal-Mart and Costco wouldn’t be included. Our coverage, according to census information, focuses on retailers representing approximately 73 to 75 percent of grocery volume.
A: Mark: We’re confined to the set of data in the supermarket universe. It’s a supermarket analysis of how Food Lion compares to A&P in a particular market. That doesn’t mean supermarkets don’t want to see insights from other retailers they consider to be in their competitive arena. But it is difficult to get this kind of information beyond the grocery universe.
Q: Could you provide some examples of the analysis you provide?
A: Mark: Retail numbers for a particular commodity showed the retailer had 10 percent growth and may have hit their goal or viewed the increase as excellent. Meanwhile, that category in their market was getting a 15 percent growth rate. The retailer didn’t know that they should be doing better.
Q: Aren’t there many factors that could influence that percentage difference?
A: Mark: Yes. It could be related to a promotion, pricing, merchandise mix, big store versus little store, demographics, among others. But this raises the flag that something is wrong. It brings competitive intelligence to the table.
Q: Wouldn’t analysis on that commodity growth rate be contingent on other commodity sales dynamics within the produce department, and for that matter other perishables categories and center store activity as well? In other words, the 10 percent growth in one commodity could be offset because consumers are gravitating to and replacing it with other commodities, perhaps of more value to that retailer.
A: Mark: The reality is that many variables could impact the business. A standard question to ask is how the market is doing, and if the market is performing higher, we let the retailer know.
A: June: IRI brings the analytic part to the table. Retail solutions teams take the data from perishables and analyze it directly to provide insights with category managers.
Moving on to total store, IRI reports on most center store categories as well. Paring this sales information up and comparing it with other inside store data can help category management staff see how sales are allocated through different departments. Previously, the data only provided a look at roughly 60 percent of store, but this was not helping manage the entire business. IRI’s FreshLook Marketing Group brings perishables into the fold, allowing the retailer to look at the entire store.
Q: Is it more difficult to gather accurate and comprehensive data in the perishables arena, and particularly in fresh produce, compared to dry goods categories and packaged items?
A: Mark: This is a misconception. There is a stream of data available through normal checkout scanning. Perishables are more challenging because of unique sets of codes at different retailers.
The bigger challenge is changing the way retailers think. Category management folks aren’t always able to own up to where they are falling short, to admit to a problem. Change is always difficult in the retail world. Here’s the last kicker. Retailers want to protect what they’re doing that’s winning. We get data from approximately 70 percent of retailers in a given market but getting the retailers to understand how their business fits within that market is the challenge; the concept of how to help them expand their category management program to management of the total store.
The category management lynch pin is building from certain sets of categories to include the entire perishables department. The next stage is applying knowledge from individual categories to the whole. Integrating insights on 3,000 categories with proprietary information specifically geared for that retailer is a complex undertaking. Retailers will find this challenging to do by themselves.
Much progress has been made and more and better data is available than ever before. Non-participating retailers, such as Wal-Mart and Costco, make the data far less robust than it could be. The PLU numbers used on ringing up produce are simply not specific enough to give the kind of information we need.
Many shippers who felt they had superior product valued selling to Wal-Mart under its old DC assignment system because it was easy to compare one distribution center to another. If one had lower shrink, higher sales, etc., that could be tied to specific brands and producers.
Most retailers would buy from many people, assign all the product the same PLU and any benefits from a superior product got, and in most cases still get, lost.
Every retailer we know complains about the organic product being rung up at conventional prices or at having to run all the plums at the same price because the cashiers will never get it right.
Mark hits the nail on the head when he focuses on the fact that going from data, to understanding, going from one product or category, to the whole store, is an enormous challenge.
It is good for the industry to have at least two vibrant players. We can expect them to work harder, develop new products and sharpen their pencils on price.
It is vital to try and understand what our customers tell us through their purchases. It also is vital to remember that the great merchandisers are masters of the data, not slaves to it.
Many thanks to Mark and June for updating us.
