Ready to become an omnichannel brand? Learn how data can help you avoid common pitfalls in the retail business.
With increased competition and rising advertising costs squeezing the direct-to-consumer (DTC) channel, DTC-native brands are launching into retail to diversify their revenue streams. It’s a great opportunity to achieve scale and profitability, but most CPGs will face a frustrating challenge along the way: retailer data is much more difficult to collect, understand, and use than data from DTC.
In this article, we’ll lay out the five main pitfalls of the transition to retail and how data can help you overcome them before they halt your channel expansion, including:
Brands moving into retail face substantial risks in the form of high costs, long-term bets, and a more complicated supply chain. While every brand has to learn through experience to some degree, there are some common problems that can be avoided.
Let’s look into the causes and solutions to each of these common pitfalls, so you can rush through the growing pains of the retail channel.
When you’ve built a direct-to-consumer brand, you’re used to having sales, customer, and supply chain data at your fingertips since sales, marketing, and fulfillment happen in-house or with close partners. Though data analysis isn’t always easy, you generally have access to the inputs you need.
With retail, your product is carried by potentially thousands of retail locations – and each retailer has a different system for tracking, sharing, and organizing their data. Brands have to regularly log into data platforms from multiple different retailer partners, download dozens of spreadsheets, and then attempt to consolidate this data before getting any meaningful insight. Without an immediate and complete picture of your supply chain and product locations, it’s easy to miss important details and metrics that would have helped you make better decisions, like which retailer to prioritize for new product shipments, or which region to prioritize for marketing spend.
For example, Jordan Buckner at Tea Squares was selling to a distributor for over a year before he realized there were a large number of product returns. Because managing the data is so complicated in distributor partnerships, it took Jordan going through the chargeback data line by line to discover that his distributor had returned 30% of the product sold. This was eating up almost his entire profit margin. Stories like this are all too common.
If you’re going to build out a data collection, organization, and analysis structure yourself, be prepared to spend a significant amount of time and money to make it workable. Alternatively, you can use a data collaboration platform like Crisp to keep track of where your product is distributed and selling at all times.
Retailers strongly encourage brands to invest in trade spend that will help products move off the shelves. This includes coupons, temporary price reductions, co-advertising, or buying ad placements on retailer apps.
CPG brands are often surprised to learn that these promotions don’t usually bring in new customers (but they do eat at your margins). In fact, our partners at Promomash, a leading trade promotion management platform, estimate that 70% of all promotions fail. Tracking the actual sales lift and profitability of your promotions is necessary to determine if they’re actually helping or hurting you. Here’s how you can get that information:
Usually, CPG companies address trade promotions reactively: they do what the retailers ask for, then wonder what could have been different. But when you’re in control of your data and are creating your own goals, you can proactively let retailers know what type of promotions will work best for your brand.
To help brands do this, Crisp recently partnered with Promomash to integrate promotion plan and actual sales data all in one place, giving you real-time visibility to plan, execute, and measure more successful promotions.
When your product sales live entirely online, channels that don’t sell as well might not impact your bottom line, because a single inventory location can service endless channels and marketplaces. But when planning your expansion into retail, more isn’t necessarily better. Products that don’t sell will cost you more, and ultimately hurt your relationships with retail partners. Costs you take on with retail include slotting/listing fees, pay-to-stay fees, display placement, and costs associated with overstock and waste.
This means you need to understand your sales by market to expand strategically into stores where you know you’ll succeed. Here’s how:
When you track placement effectiveness, you’re able to lean into what’s working for your brand and product(s). By focusing on where you can do well, and not wasting time and money where you won’t, you’re able to use your resources wisely to avoid waste while selling as much as you can – and build trust and credibility with your retail buyer.
Tracking and driving your product velocity is possibly the most beneficial thing you can do to be successful with your retail strategy.
If you’ve secured a distributor or retailer, that’s a big win – but your work isn’t done. In reality, this is just the beginning when it comes to retail. When you continue to track sales velocity at each store, you can control your sales strategy and skyrocket profitability.
Tracking velocity can help you with:
Tracking velocity, put most simply, lets you know where all the money is at any given moment. Getting this right will give you nearly as much control as you’re used to with DTC.
Keeping track of inventory and supply chain data is all-important. It helps retail brands avoid issues like:
Dan Capraun, Senior Manager of Strategy and Planning at NotCo, says that one of the biggest pitfalls when launching a retail CPG brand is managing the weeks of supply necessary for each distribution center. When this goes wrong, sales are lost for both the brand and the distributor, and customers go to the competition instead.
The key to solving this issue is data. You can choose to track manually in spreadsheets, create your own systems and maintain them, or use a platform like Crisp for instant visibility into fill rates, weeks of supply, voids, and aging inventory.
Your greatest line of defense against the most common retail pitfalls is access to accurate, real-time data that helps you outsmart the operational complexities of the retail model.
At Crisp, we automate the flow of data from all of your retailers into one cohesive dashboard, so you don’t have to comb through mountains of raw data and maintain a system yourself.
Crisp also turns your data into practical insights, making it easy to understand where your product performs best, see how your promotions are doing, avoid out-of-stocks, and more. You can also track long-term trends at a glance as you manage a product across thousands of locations.
Want an introduction to Crisp? They design their pricing model for emerging brands. Plus the Foodbevy community gets discounted rates.
E-mail me for an intro: Jordan@foodbevy.com
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Scaling your CPG brand requires the right systems in place to support that growth. Without clear visibility into your operations, you risk stockouts, overproduction, lost profitability, and compliance issues.
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