Paddling Upstream with Downstream Data

By June 26, 2017Market-Driven

Have you ever paddled a canoe down a fast-moving stream? I am not referring to taking on Class IV or V white water rapids; but at least a challenging and slightly dangerous course that will get you pretty wet if you don’t pay attention. You must think in real-time and, at the same time, be looking ahead of the immediate threat to those you are about to face – and those come at you faster than you can often imagine. The line of danger is defined as how you do both – navigate the immediate and demanding obstacles and predict a course of action for those dangers ahead. The ROI is a somewhat dry and intact body and a whole lot of fun and excitement.

But like we say down here in Texas, sometimes it’s fun and exciting…sometimes it’s just exciting!

Downstream data has been an exciting arena for technologist and analysts over the past few years. To see how exciting it has been, we have recently completed a Downstream Data research project for one of our customers. The survey respondents were largely senior executives with an average of 11 years of experience using downstream data of one type or another, so they are the right people to give us the insights we were looking for. Overall, much of the data gave us confirmation of what many of us know about the retailers that typically send their point-of-sale (POS) data to consumer product suppliers and the relative content that these transmissions include. But there are some other interesting facts we have gleaned that tell us about the effectiveness and the value proposition of this type of data.

Of course, “downstream” refers to the field level data that traditionally comes from the channel sales data supplied either by the retailers themselves or syndicated data providers like Nielsen, GfK, IRI, etc. It is data that depicts the end results of the corporate and local marketing of both the consumer products manufacturers and the retailers such as direct-to-consumer marketing and trade channel promotion. Before the advent of social media listening, sensitivity analyses, customer service and support satisfaction, and consumer profile and online tracking analyses, direct POS data was really all that we had showing the end results of all these promotions.

Technology plays a critical role

Now, of course, the technology has created an entirely new and powerful pipeline of intelligence about the consumer that is extremely detailed, intimate, immediate and…downright scary. But the upside is that we now have the ways and means to really predict desire, demand, shopping, purchase and consumption of products and services with more precision and trust than ever before. The use of downstream data has ballooned since the early days of Walmart’s Retail Link POS reporting; but we wanted to know more about the current usage and the role downstream data plays in measuring successful customer engagement.

The growth of the Demand Signal Repository (DSR) technology has enabled many of the solution vendors to build and manage huge databases and analytical tools that can effectively merge retail channel and syndicated data along with brand loyalty, trade promotion, merchandising and consumer marketing intelligence. The problem is that these are largely sales organization tools with little in the way of collaboration and usage from corporate marketing organizations (see my previous blogs on this topic).  Still, the growth of this technology contributes to the importance of downstream data as a critical component in digital transformation of the consumer goods and retail industries.

Retail Channel versus Syndicated Data

Our survey distinguished between retail channel data and syndicated data – provided by third party organizations. We found that 93% of the respondents use retail channel data now – a significant figure of growth since those early days.  But “Not so fast, my friend,” as ESPN’s Lee Corso would caution.  87% of the respondents sell to Walmart, accounting for 63% of their total sales. 73% of those CPG companies have access to Retail Link data.  So that might look like the elephant in the room; but there is a significant number of the top retailers who are providing downstream channel data (e.g. POS and, in some cases, inventory data) to CPG suppliers.

Overall, 84% of all respondents receive BOTH direct retail channel data and syndicated data. The relative coverage of the revenues for the respondents is 55% for retail channel data and 67% for syndicated data. The leaders among the consumer products are telling us that they use the direct POS data from the retail channel reports to “fill in” the gaps in the market samples of the syndicated data providers and extrapolate to validate their all commodity volume figures for more accurate planning.

Nearly half of the respondents receive retail channel data from Amazon, Target and Costco, with about a quarter of the respondents receiving data from eight other national grocery chains. Department and specialty stores are getting into the swing as well with J. C. Penney, Kohl’s, Macy’s and Sears providing retail channel data to the discrete consumer products manufacturers as well.

An analyst from one of the leading automotive aftermarket suppliers explained what he was seeing. He writes, “Even though they represent a relatively small portion of our total sales, the mass merchandiser channel supplies us with ten times the intelligence as our major auto parts chains because of retail channel data.” He adds, “We have begun hiring CPG analysts to work with these large auto parts chains to show them the value of direct POS, inventory and shipment logistics.  As a result, we are beginning to receive the data directly from them; but they have a lot to learn in the way of data cleansing.”

Accuracy and Timeliness

It is no secret that retail channel data is viewed as more accurate and, in some cases, effective than syndicated data.  Where syndicated data is viewed as stronger working with assortment planning and new product launches, the critical operational issues like out-of-stocks, safety stock, buyer relationships and lost sales identification are more effectively analyzed through the direct retail channel data.

Finally, we checked to see how quickly the consumer products companies can convert the raw retail channel data into usable insights (defined as the availability of the finished analytics in the form of a report or dashboard).  The good news is that a whopping 38% of the respondents say that can now receive insights within a half day or less! That is a huge advancement over just a few years ago.  This, unfortunately does not include syndicated data which, most agree, continues to have issues of lag time.  To their defense, however, their data often contains consolidated analyses that are intended to increase the effectiveness of the intelligence delivered. And to continue the fairness, many of them are clearly beginning to deliver data on a more rapid time frame.

It is clear that downstream data use is on the increase and there are significant resources being applied to increasing the precision, trust and value of the data received from both the retailer and the syndicated data providers. But while 70+% of the users are satisfied with the retail channel data and only 51% satisfied with syndicated data, we have a long way to go.  Big data projects are commonplace right now; and the screaming pace of hardware and software development to deliver these insights still lags the user needs.

Consumer empowerment is pushing everyone – supplier, retailer, provider. POS data is a goldmine; and its use cases extend far beyond the planning of promotions, which seems to be the favored response to the question, “How do you use it?”  I will tackle that one in a later blog; but for now, know that you need to have a solid strategy and plan for POS data use.  If you are a consumer products analyst or depend on one to succeed in your job, know this: You may have to paddle harder; but hopefully not for long. It’s exciting now – hopefully fun later.

Stay dry.

Rob Hand

Author Rob Hand

For most of my career, I have worked in four industries: Consumer Products, High Technology, Retail and Wholesale/Distribution. I was fortunate to begin my career with of one of the oldest channel promotion management companies in the world where I cut my teeth on the heart of consumer marketing around the business processes of co-op advertising, trade promotion and market development. Within consumer products, I covered all major sectors including fast moving consumer goods, fashion, DIY/Hardware, home furnishings, consumer electronics, retail telecom, oil & gas retail, automotive and beer/wine/spirits. I have formed and brought to successful outcomes three companies focused on these business processes and technology. I have worked with companies like Frito-Lay, Southwest Airlines, Intel, Hewlett-Packard, IBM, Nike, Sealy, Hanes, SABMiller, Anheuser-Busch and so many more – all of whom enabled me to build a strong cross-industry and cross-line of business viewpoint. I have guided the industry strategy and product management for companies like SAP and Oracle. Each of those companies gave me unique insights that have helped forge the way I look at every aspect of the consumer chain. My career has also provided me with a drive to be realistic in my analyses of observations and a pragmatic view of solutions. My parents blessed me with a penchant for hard work and an attitude that honesty is the always the best policy. I am a musician and a former NCAA football and basketball official; and I have a wonderful wife and children who continue to teach me something new every single day. I consider my opportunity with Lora Cecere and Supply Chain Insights as an excellent and inevitable channel to provide guidance, counsel and advice to a transforming group of industry leaders.

More posts by Rob Hand

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