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In the dynamic landscape of retail and consumer packaged goods (CPG), retailers and brands alike have been adopting increasingly sophisticated analytic tech stacks to optimize business operations. As a result, shelf intelligence solutions are emerging as a key area of interest.
Shelf intelligence solutions can supplement and contextualize the insights offered by other layers of retail and CPG firm tech stacks. In addition, they provide granular, and in some cases, real-time insight on shelf activity and customer behaviors that can supplement other data and analytics solutions employed by both retailers and CPG brands. For example:
Example Retail Analytics Tech Stack
Inventory Management & Pricing Optimization Solutions
- Inventory Management Systems provide category and store managers with insights on the product stocks in store, but not necessarily real-time availability on the shelf.
- Price Optimization Solutions enable retailers to determine prices throughout SKU lifecycles (i.e., regular, promotion, clearance), but do not provide visibility on shelf pricing visible to shoppers.
Checkout & POS Solutions
- Checkout and POS solutions track customers and demand for products from a storewide perspective and can provide retailers and CPG brands with high-level views of product performance.
- Shelf intelligence can contextualize performance metrics by layering in retail execution insights and competitive intel at the shelf level, allowing category managers to control for in-store variables.
Retail Analytics & Business Intelligence
- Retail Analytics and Business Intelligence tools can capture overall store P&L performance metrics, while shelf intelligence can supplement insights on frontline workforce efficacy and execution levels, sometimes on a near-real time basis.
Example CPG Analytics Tech Stack
Planogram Design and Compliance
- Category managers rely on planograms to understand how their SKUs are displayed and positioned on shelves relative to competitors, but retailers often fail to provide accurate or up to date planograms.
- Shelf intelligence affords CPGs greater visibility and control over planogramming with direct line-of-sight on SKU displays and share-of-shelf, and aids brands with shelf compliance and reset negotiations.
Competitive Intelligence Solutions
- CPG brands have historically relied upon data aggregators like IRI and Nielsen Retail IQ to furnish tactical data on store displays and brand-specific performance.
- Shelf intelligence solutions are able to provide more granular data access, capturing insights from all areas of the store (including categories excluded from data aggregators) at a more granular level (e.g., store by store) as needed.
Trade Promotion Management
- Trade Promotion Management (TPM) software helps brands launch promotions and track promotion effectiveness and consumers’ sensitivity to sales efforts.
- Shelf intelligence monitoring of retail execution and promotion compliance can add additional context to TPM analytics and provide granular insight on customer response to promotions at the shelf.
Stax provides insights into the growing demand for retail shelf intelligence solutions, exploring adoption drivers, data collection and analysis models, and use cases across retailers and CPG firms. By delivering granular insights into shelf activity and customer behaviors, shelf intelligence solutions enhance the overall efficacy of pricing, promotion and product strategies.
Adoption Drivers
Stax has identified several trends and shifts in consumer shopping behaviors that have accelerated the demand for shelf intelligence solutions—driving adoption of third-party, tech-enabled offerings across retailers and CPGs:
Growth in Online Grocery Shopping
Demand for online shopping services (e.g., Instacart) has grown, driving the importance for CPGs and retailers to ensure items being displayed online to customers are available on the shelf, reducing the friction for the shopper to find a replacement, which can create dissatisfaction with the retailer/brand.
Labor Shortages
Labor shortages have made it difficult for retailers to keep shelves fully stocked. This has increased the need for shelf intelligence solutions to audit shelves more frequently and provide actionable insights (e.g., bring stock onto shelves, increase order size for next sales cycle, etc.), leveraging outsourced labor or in-store hardware.
Due to labor shortages faced by retailers, there is a growing trend of transferring more shelving and stocking responsibilities to CPGs. This shift has supported strong demand for insights-driven shelf monitoring.
Supply Chain Disruption
Supply chain issues have resulted in empty shelves and significant revenue losses for retailers and CPG firms. According to Nielsen, the lack of on shelf availability in 2021 led to ~$82B in missed opportunity for retailers, reinforcing the importance of maintaining on-shelf availability and optimizing available inventory.
Data Collection Models
Retailers and CPGs can gather shelf intelligence utilizing a variety of data collection and synthesis models, ranging from fully manual visits with in-house staff to outsourced tech-enabled solutions. Though hardware-enabled solutions have data quality and availability benefits, relative cost has resulted in limited traction to date.
Data Collection and Synthesis
In-house Field Staff
Description:
- Retailers: Full or part-time staff that manage shelf stocking in-store; may or may not leverage software to support the process.
- CPGs: In-house staff (e.g., sales reps) that visit retail locations to confirm product is being displayed appropriately; may or may not leverage software to gather data and report findings.
Pros:
- Staff perceived to be more motivated and effective than that of a third-party.
Cons:
- Firms often not able to afford enough staff to be effective across all locations given cost.
- Difficult to dynamically increase/ decrease labor according to fluctuating needs.
Sales Agencies/Brokerage
Description:
- Third-party firms that deploy staff to retail locations (for retailers or on behalf of CPGs).
- Typically, these employees both identify and fix on-shelf issues in collaboration with the retailer’s dedicated on-site staff but leverage very little technology throughout that process.
Pros:
- Firms are knowledgeable about a CPG’s product/a retailer’s needs.
- Provide dynamic access to labor based on needs but requires advanced notice.
Cons:
- Relatively less trust in the employees vs. in-house staff.
Crowdsourcing
Description:
- Third-party firms provide access to a pool of contracted, part-time workers that provide on-demand services for retailers and CPGs.
- Fill a similar role to a sales agency/brokerage, but leverage technology to ensure jobs are completed accurately.
Pros:
- Highly dynamic, on-demand access to labor.
- Relatively less expensive than alternatives.
- Integrated with technology—insights are easily digestible.
Cons:
- Least amount of workforce trust vs. Alternatives.
Fixed or Moveable Cameras
Description:
- Cameras that are typically attached to the shelf within a retailer that gather real time images that are analyzed by AI, with data provided vi dashboards to management.
- Are implemented by retailers, but CPGs can pay to receive access to data as well.
Pros:
- Relatively inexpensive to operate and not intrusive to the consumer.
- Provides real-time data transfer.
Cons:
- Expensive and difficult to implement; requires retailer buy-in.
- Mixed feedback on camera effectiveness to-date.
Robotics
Description:
- Robots that travel autonomously throughout a retailer, gathering real-time images of store shelves that are analyzed by AI and synthesized into dashboards, similar to those leveraging data from shelf cameras.
- Are implemented by retailers, but CPGs can pay to receive access to data as well.
Pros:
- Cost-effective to maintain over time.
- Provides near real-time data transfer.
Cons:
- Expensive to implement; requires retailer buy-in.
- Can be seen as disruptive to the shopper experience.
- Mixed feedback on camera effectiveness to-date.
Solution Benefits
Retailers and CPGs both derive value from monitoring on-shelf performance and see solutions that enable seamless and accurate data collection as critical to retail execution strategies. Vendors that quantify the ROI of solution adoption are best positioned for success.
Retail
Reduce Labor Requirements
In a tight labor market with rising salary costs, retailers are seeking to reduce in-house labor, outsourcing and/or automating shelf auditing and re-stocking processes where possible.
Reduce Out-of-Stocks
Retailers lose money and cause shopper dissatisfaction when shelves are not stocked appropriately, but out-of-stock items often go unnoticed by personnel. Shelf intelligence solutions ensure that shelves are monitored more regularly to reduce out-of-stocks.
Reduce On-Shelf Errors
Misplaced or displayed items also cause shopper confusion, often resulting in missed sales opportunities, and in some cases broken contracts with CPG companies.
CPG
Planogram Compliance
CPG companies pay retailers for their product to be positioned in a certain location within the store, and use shelf intelligence solutions to monitor placement to detect retailer errors and identify out-of-stock products.
Promotional Compliance
When CPG companies run promotions, firms will check retail stores to ensure displays and pricing are up to date, often leveraging shelf intelligence solutions to optimize that process.
Competitive Intelligence
CPG firms also gain valuable intelligence regarding competitive pricing, assortment, promotions, shelf positioning, etc. through images of competitive products within the same category that are gathered through shelf intelligence tools.
Investment Considerations
The shelf intelligence market is fragmented, with multiple solution providers offering advanced, AI-based solutions. To date, vendors have been challenged to meaningfully differentiate based on the quality of data collection and output; though opportunity exists to drive differentiation via reporting and data synthesis capabilities.
Investment focuses have revolved around current asset capabilities, technical differentiation, and model scalability, such as:
- What is the perceived criticality of shelf intelligence solutions among retailers and brands relative to other components of the software tech stack?
- As a result, how widely adopted are these solutions, and how large is the ICP for shelf intelligence today?
- How does the ongoing shift to online/hybrid shopping impact the perceived need for these solutions? Does that result in broadening of the ICP?
- How can software providers differentiate within the shelf intelligence space?
- Is differentiation more attainable via unique data collection methods vs. data analysis and synthesis (e.g., dashboarding capabilities)?
- What are the primary drivers of growth in the shelf intelligence space (e.g., continued penetration of current customers, new customer acquisition, new product releases, market expansion, etc.)?
Conclusion
When it comes to understanding the viability of a market for investment, Stax is where value is created. Our approach, centered around providing data-driven and actionable insights, enables clients to make informed decisions that lead to providing the most competitive returns. To learn more, visit our website
www.stax.com
or
contact us here.
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