M A XIM I SIN G
TRADITIONS
THE SHOP. SHOPPER. SHOPKEEPER
OCTOBER 2015
THE M ANY FACES OF
TR ADITIONAL TR ADE
IN SOUTHE A ST A SIA . . . . .
WARUNG 杂 chap foh tim
ke dai runcit 货
s ar i-s ari stores 店
cử a hàng tạp hóa 杂
chap foh tim
货
kedai runcit 店
S mall shop round the corner
Tu - ra - kij - ka - pleek- bab - dan g- derm
杂
货
店
corner grocer y store
chap foh tim
mom-and-pop stores
sari-sari stores
corner grocer y store
WARUNG
ran-show-huay
kedai r uncit
ran-show-huay
S mall shop round the corner
chap foh tim
cử a hàng tạp hóa
杂 WARUNG
货 ke dai r uncit
店 s ar i-s ar i stores
DO YOU UNDERSTAND THE
CHARACTERISTICS
OF THESE SHOPS?
DO YOU KNOW
HOW SHOPPERS
BROWSE AND BUY?
DO YOU KNOW
HOW THE
SHOPKEEPER THINKS
AND WHAT MAKES
HIM TICK?
Samuel1, a sales leader of a major FMCG manufacturer in
Vietnam, was faced with a challenge: servicing Vietnam’s slew
of traditional trade stores with limited resources. In order to
prioritise the multitude of traditional grocery stores scattered
across the country, he ordered a store segmentation project
which enabled him to group outlets based on claimed sales
performance. Based on the store segmentation result, his sales
force was directed to stores representing the biggest sales
potential. But Samuel was dissatisfied with the outcome; the
classification of outlets appeared inaccurate, and staff lacked
insight into which products they should push in each store.
Samuel’s dilemma is not unique. In fact, it’s a fairly common
challenge. Many FMCG sales teams lack fundamental knowledge
on the traditional trade landscape, such as the location (where) of
the stores which represent the biggest opportunity, products (what)
which offer the largest potential, and promotional activities (how)
which will yield the maximum conversion.
Such insights are critical to developing a comprehensive sales
strategy which takes local market nuances into account. Due to the
sheer diversity of Southeast Asia’s retail sector, a one-size-fits-all
approach is rarely sufficient.
Indeed, brand building and sales development can be achieved by
combining shop, shopper and shopkeeper insights into an effective
segmentation to truly drive activation across the various shopper
touchpoints along their path to purchase. A multi-lens view approach
is required in order to win the hearts of both the shoppers and the
shopkeepers.
1
Real case, but name has been changed
HOW
SHOPKEEPER
WHAT
SHOPPER
WHERE
IV
SHOP
M A XIMISING TRADITIONS | THE SHOP. SHOPPER. SHOPKEEPER | OC TOBER 2015
THE
FRAGMENTED
WORLD OF
TRADITIONAL
TRADE
In Southeast Asia, traditional grocery is the largest channel both in
terms of store numbers and sales contribution, and in major cities
like Ho Chi Minh City or Jakarta, traditional trade accounts for more
than 70% of FMCG sales.
TRADITIONAL VS. MODERN TRADE IN ASIA
RETAIL CHANNEL SHARES IN ASIA (INCLUDING INDIA)
WEIGHTED SHARE OF TRADE
4.1%
1.7%
48.6%
4.2%
1.8%
48.2%
4.2%
1.8%
47. 9%
OTHERS
DRUGSTORES
TRADITIONAL TRADE
CONVENIENCE STORES
MINIMARKETS
4.9%
8.4%
5.2%
8.9%
5.3%
9.3%
16.8%
16.9%
17.2%
14.9%
14.6%
14.4%
2012
2013
MAT 2014
SUPERMARKETS
HYPERMARKETS
Source: Nielsen Retail Index 2014 – shares based on weighting of country importance
Copyright © 2015 The Nielsen Company
1
PL ANNED OR IMPULSE PURCHASES, GROCERY STORES ARE
A BIG PART OF TRADITIONAL TRADE
TRADITIONAL TRADE FOR DAILY MEAL SHOPPING
WHILE MODERN TRADE IS MORE FOR PLANNED MONTHLY TOP UPS
39%
3%
5%
5%
WINDOW SHOPPING
35%
18%
12%
IMMEDIATE CONSUMPTION
7%
30%
33%
12%
35%
TRADITIONAL
TRADE
28%
MEAL FOR TODAY
TOP UP
MAIN SHOPPING
45%
35%
25%
5%
7%
13%
MINIMARKET
SUPERMARKET HYPERMARKET
Source: N
ielsen Home Panel Data – FMCG 78 Categories | % Spending | Indonesia Urban +
Java Rural | MAT 2015 we 14 June
By and large, shoppers visit traditional trade stores due the proximity
to their homes, and a large proportion of purchases in traditional
grocery stores are planned, from catering to ‘everyday needs’ to topup shopping and even main shopping.
The planned shoppers regard their local grocery store as a pantry
extension, buying their daily cooking, homecare or personal care
needs. Such purchases are planned in advance and the majority of
shoppers have already made their brand choice before they enter the
store. Importantly, planned shopping implies the potential for bigger
basket size or offering new pack formats within the repertoire of
regularly shopped brands.
Yet, having elements of both impulse and planned in traditional trade
stores can open up immense opportunities. Modern trade has an
edge over traditional trade on variety, selection, promotional activity
and high quality premium products. Traditional trade can replicate
these by more frequent rotation of new products, adding variety
within impulse categories, or having promotions by day of week to
entice shoppers.
2
M A XIMISING TRADITIONS | THE SHOP. SHOPPER. SHOPKEEPER | OC TOBER 2015
A SHOP, ITS WARES AND SHOPPERS
INDONESIA
MALAYSIA
PHILIPPINES
THAILAND
VIETNAM
1,081,839
408,135
1,011,115
1.0%
0.7%
TRADITIONAL TRADE GROCERY STORE COUNT
2,533,025
33 ,17 2
STORE GROWTH (%)
0.9%
-0.5%
2.2%
AVERAGE CATEGORIES PER STORE
30
25
56
25
12
AVERAGE FOOD CATEGORIES PER STORE
7
15
16
32
6
AVERAGE CUSTOMERS PER DAY
~
57
25
48
33
AVERAGE STORE SIZE (SQUARE METRE)
12 SQM
79 SQM
6 SQM
51 SQM
19 SQM
US$0.85
US$3.32
US$1.80
AVERAGE SPEND PER TRIP
US$0.88
(11,842 IDR)
~
(38.75 PHP)
(113 THB)
10 Xs
1.6 Xs
(39,300 VND)
AVERAGE TRIPS PER WEEK
4.5 Xs
~
4.1 Xs
Source: Nielsen Retail Establishment Survey 2013/2014
~ Data not available
Copyright © 2015 The Nielsen Company
3
WHAT SHOPPERS BUY IN TRADITIONAL GROCERY STORES IN INDONESIA
MOST COMMON ITEMS PURCHASED (%)
BRANDED COFFEE POWDER
50
READY-TO-DRINK TEA
47
BISCUITS
45
SOY SAUCE
45
32
INSECTICIDES
30
MAKEUP DECORATIVE
24
READY-TO-DRINK MILK
20
VITAMINS
18
BRANDED COOKING OIL
MILK POWDER
13
BABY CARE PRODUCTS
13
LIQUID SOAP
11
BODY LOTION
11
Source: Nielsen Shopper Trends 2013/2014
4
M A XIMISING TRADITIONS | THE SHOP. SHOPPER. SHOPKEEPER | OC TOBER 2015
WHAT SHOPPERS BUY IN TRADITIONAL GROCERY STORES IN THE PHILIPPINES
MOST COMMON ITEMS PURCHASED (%)
COFFEE
32
LAUNDRY PRODUCTS
19
LIQUID SHAMPOO
19
BISCUITS
19
CARBONATED SOFT DRINKS
17
INSTANT NOODLES
17
CHOCO-FLAVOURED DRINKS
14
DISPOSABLE DIAPERS
11
MILK POWDER
11
POWDERED CONCENTRATES
9
TOILET SOAP
9
FABRIC CONDITIONER
9
PACKAGED WATER
4
Source: Nielsen Shopper Trends 2013/2014
Copyright © 2015 The Nielsen Company
5
WHAT SHOPPERS BUY IN TRADITIONAL GROCERY STORES IN VIETNAM
MOST COMMON ITEMS PURCHASED (%)
CARBONATED SOFT DRINKS
87
SNACKS AND CONFECTIONARY
85
PERSONAL CARE
84
HOUSEHOLD PRODUCTS
81
PAPER PRODUCTS
81
CANNED AND PACKAGED
78
NON-ALCOHOLIC BEVERAGES
77
DAIRY PRODUCTS
76
56
ALCOHOLIC BEVERAGES
STAPLE FOODS
46
37
BABY FOOD
30
FROZEN AND CHILLED FOODS
24
PREPARED MEALS
PET FOOD
3
11
Source: Nielsen Shopper Trends 2013/2014
6
M A XIMISING TRADITIONS | THE SHOP. SHOPPER. SHOPKEEPER | OC TOBER 2015
HOW MANY SKUs CAN YOU PACK IN A 19 SQUARE METRE STORE?
The typical traditional trade store offers limited space.
For example, the average selling area of a traditional store in
Vietnam is 19 square metres. Hence, manufacturers often
jostle for shelf presence and share of voice.
NUMBER OF SKUs HANDLED PER CATEGORY
NOODLES: 15
CARBONATED SOFT DRINKS: 11
COOKING OIL: 6
BEER: 3
LAUNDRY POWDER: 9
Source: Nielsen Annual Census, Retail Audit Data, 2014
In many cases shoppers are unable to enter the store or prefer to stay
on their motorcycle to save time, making it necessary to voice their
product requests to the store owner. As a result, shopkeepers have a
significant influence on product selection.
Copyright © 2015 The Nielsen Company
7
WINNING
STRATEGIES
FOR STORE
SEGMENTATION
FMCG manufacturers have long been segmenting consumers
and shoppers into homogeneous groups, and developing specific
products to appeal to specific segments has helped manufacturers to
achieve new levels of performance. In the same way, manufacturers
now realise the same principles of segmentation can be applied to
retail stores to help their sales teams to be more successful.
There are three typical approaches used to group and prioritise
stores – using location attributes, performance attributes, and a
combination of store performance and physical attributes. Each
approach has its benefits and limitations, and ideally an approach
should be selected based on budget, resources and level of
sophistication of the sales organisation.
LOCATION ATTRIBUTES
Dividing stores into regions or areas by store density, GDP,
population density, economic class or income level enables efficient
planning of sales force numbers by region and provides guidance
on brands/SKUs to be pushed in each region. For example, a strong
GDP per capita makes a market attractive for companies to push
mass premium ranges.
IDENTIF Y HIGH POTENTIAL
DISTRICTS FOR HIGHER
REACH AND LOWER COST
Modelling across multiple data sources will help identify high
potential provinces/districts that would help realise potential with
lower cost of reach.
DISTRICTS
PLATINUM
GOLD
SILVER
BRONZE
Source: Nielsen District Level Distribution
Prioritisation, Illustration
8
M A XIMISING TRADITIONS | THE SHOP. SHOPPER. SHOPKEEPER | OC TOBER 2015
PERFORMANCE ATTRIBUTES
Whether at total store level or individual category level, performance
attributes provide a clear focus for store visits to the most
potential stores and sales territories can be allocated based on
the store performance profile. It is complex and cost-intensive for
manufacturers to reach all the category stores. Understanding how
your distribution is built can help identify and quantify distribution
opportunities.
QUANTIFY DISTRIBUTION EFFICIENCY AND OPPORTUNITY
CONCENTRATION CURVE ANALYSIS
CONCENTRATION CURVE APPLICATION
VALUE CONTRIBUTION %
100%
TARGET
80%
TOP 50%
60%
NEXT
30%
30%
LOW
20%
50%
SALES
DEMAND
NUMBER
OF STORES
40%
20%
0%
0
250
500
750
1000
20%
NUMBER OF STORES
Source: Nielsen Distribution Solutions Concentration Curve, Illustration
Copyright © 2015 The Nielsen Company
9
COMBINED ACTUAL STORE PERFORMANCE AND
PHYSICAL ATTRIBUTES
Defining store tiers based on actual performance together with
tangible store attributes, such as presence of defined POS material,
brands, variants, local vs. multinational manufacturer products,
enables us to target the right store tier. Based on those tiers, the
entire store universe can be segmented.
EFFECTIVELY REACH CATEGORY STORES THAT MEET YOUR NEEDS
HAS COOLERS/
CHILLERS
3 READY-TO-EAT
CATEGORIES
STOCKS WATER
STOCKS BUTTER
Source: Nielsen Store Targeting Analysis, Illustration
10
M A XIMISING TRADITIONS | THE SHOP. SHOPPER. SHOPKEEPER | OC TOBER 2015
BRINGING
THE SHOPPER
AND THE
SHOPKEEPER
INTO THE
SEGMENTATION
SOLUTION
Efficient sales outreach which both drives sales and contributes to
brand building can only occur when sales forces are equipped with
actionable knowledge to implement effective in-store strategies. While
traditional segmentation such as location and physical attributes
provide helpful insight, actionable knowledge requires segmentation
analysis which encompasses multiple dimensions on attributes
around the shopper and the shopkeeper.
WHAT’S ON THEIR MINDS?
SHOPPER
SHOPKEEPER
WHO
PROFILE
MISSION S
WH Y/ WHERE / WHEN
HIS TORY
PRODUC T
NE E DS
WHAT
BUSINE SS
NE E DS
IN -S TORE
B E HAVIOUR
HOW
S TORE
OPE R ATION S
PROFILE
Copyright © 2015 The Nielsen Company
11
Sufficient shopper insight helps to drive brand, pricing and instore promotional activities efficiently. Shopper profiles based on
demographics, behaviours, needs and psychographics, provide key
indicators of the products to be placed and the promotions that
should be implemented, as well as the price strategy to apply given
shoppers’ price sensitivity. Understanding missions and store choice
helps to identify the right categories and pack sizes to focus on.
Further, understanding what shoppers are buying based on their
mission type assists in defining product placement, and providing
insight, while shoppers’ conversion triggers provide invaluable
insight for brand and supporting point-of-sale material visibility.
Conversely, building a greater understanding of shopkeepers helps
to win their hearts by providing value not only to their business,
but also to their personal situation. The profile of the shopkeeper,
based on the same four areas, can be indicative of the type of sales
call needed and which personal incentives will be most impactful.
Meanwhile, understanding the business needs of traditional grocery
shopkeepers and owners, which often gravitate around efficiency,
longevity, differentiation and community, is a strong indicator for
choice of products and in-store activities to be implemented. And
understanding how the operations are being run helps to identify
value-add activities that reduce operation time and costs incurred by
the shopkeeper.
12
M A XIMISING TRADITIONS | THE SHOP. SHOPPER. SHOPKEEPER | OC TOBER 2015
SHOPKEEPERS SAY
XX . XX . XX
HOW MANUFACTURERS CAN HELP
Pilfering is a barrier to encouraging
shoppers to browse in-store
Review packaging, provide mockups,
position products either near
shopkeeper or front-of-store
They need greater support such as
flexibility in payment terms for slow
moving items
Adapt payment schemes by sales rotation
They want to grow but are frustrated by
the size of their stores
Expand product range beyond
physical store, leverage mobile and
online technology
Customers are becoming more conscious
of quality and increasingly look at
expiration dates
Develop a scheme to identify, sell-out
or retrieval of perishable items
Small retailers design their own promotions
based on giveaways and promotional items
from company salesmen to attract customers
or push slow moving items
Provide more autonomy to shopkeepers in
the mechanic and timing of promotions
Retailers are skeptical of visible
point-of-sales (POS) material and prefer
branded shelf displays and coolers for the
added advantage of storage
Provide POS material that also provides
solutions to store operations
“My wife encountered a windfall, and this
was the suggested business. The suppliers
should help with consignments, and it’s also
a big help if they can provide POS material.
Branded signage is OK, preferably of key
brands that sell.”
– Medium size traditional grocery retailer, Philippines
“I opened a store because it was needed by
everybody. It allows me to help the people
around. But age is becoming a problem. I would
love suppliers to treat general stores the same
as a modern store, supporting with modern
shelves just like in a supermarket. So my store
will look nicer and attract more people.”
– Large size traditional grocery retailer, Indonesia
Source: Retailer depth interviews with medium and large grocery retailers in Indonesia, Thailand, the Philippines and Vietnam
Ensuring a good reach to both the shopper and the shopkeeper
and developing messages and solutions which resonate and drive
product support are the in-store executional drivers that make a store
segmentation and prioritisation truly effective.
In any of the solutions, attributes used to identify the segments
should be easy and practical enough to be gathered by a sales rep for
any store in the universe. Once able to understand the segment, the
sales team can work on the strategic priorities and related tactical
plans required within that segment.
Copyright © 2015 The Nielsen Company
13
MAXIMISING
TRADITIONS IN
SOUTHEAST ASIA
Achieving productive store visits is a priority for sales force leaders
across the world, and especially so in countries which are still
dominated by traditional trade, and where there is an enormous
number of stores in the universe.
Efficiency can only be obtained through a rigorous approach that
involves a prioritisation of outlets, and a focused approach to
ranging and promotional activities within those outlets.
TRADITIONAL TRADE IS HERE TO STAY
TRADITIONAL TRADE
DEVELOPING MARKETS (ASIA)
MODERN TRADE
2020
DEVELOPING MARKETS (ASIA)
2012
1999
56%
73%
27%
44%
57%
43%
Source: Nielsen Retail Index, Share of Packaged FMCG Sales
Too often, sales force knowledge is limited to store size, location and
performance when creating store clusters. While these attributes
are effective in directing sales efforts toward the right stores, they
provide limited insight into which strategic objective should be
reached in each cluster.
To develop and implement thorough, impactful strategies, it is
critical to incorporate shopper and shopkeeper dimensions into
segmentation parameters, either sequentially or simultaneously.
Traditional trade is a complex and highly competitive channel that is
here to stay for the foreseeable future. Understanding the dynamics
across the three critical pillars of shop, shopper and shopkeeper is
critical for manufacturers to become dominant market leaders.
14
M A XIMISING TRADITIONS | THE SHOP. SHOPPER. SHOPKEEPER | OC TOBER 2015
A B O U T T H E AU T H O R
CONNIE CHENG
EXECUTIVE DIRECTOR, SHOPPER SOLUTIONS,
SOUTHEAST ASIA, NORTH ASIA AND PACIFIC
NIELSEN
Connie helms Nielsen’s Shopper Solutions in Southeast Asia,
North Asia and Pacific. Based in Nielsen’s regional headquarters in
Singapore, Connie is responsible for growing the Shopper business
regionally–delivering insights and capabilities to help clients
successfully convert consumers into shoppers.
ABOUT NIELSEN
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For more information, visit www.nielsen.com/apac.
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15