Neill Arnold, Owner & Principal Consultant at Arnold Category Consulting
With the COVID period in the rearview mirror, 2023 has been a year of change and challenges. Recently, we have seen a change of government with new priorities and objectives that will create a different operating landscape in the coming three years. The impacts of the Market Study into Grocery have started to take effect with specified retail channels beginning the implementation phase of the code, and based on initial feedback, not every change that has resulted is positive for suppliers.
Consumers have seen inflation ease, but interest rates rise. Looking for an objective guide, the ANZ-Roy Morgan consumer confidence index has seen steady growth in recent months to 91.9, so whilst subdued compared to pre-COVID, it does show some green shoots, but retailers will have to work hard to engage and delight shoppers to spend, particularly on high-value purchases.
Looking forward to 2024, what key questions am I advising my clients to focus on to win in the market?
Is my business resilient and fit for future growth?
We have seen in 2023 that cash flow must remain the number one focus for businesses, and when the cash runs out, businesses fail. Borrowing looks expensive, so every business needs to ensure its fundamentals are in place and that every business element is optimised for cash efficiency.
Do I understand my costs?
Do my supply partners support my long-term success?
Is my portfolio optimised?
What opportunities am I prepared to invest in for the future?
The response - Focus on your business fundamentals, know your numbers, know your strengths and address your weaknesses. Delaying may have serious consequences, and investing in crucial growth plans remains vital.
How will I deliver sustainable real growth to my retail partners?
With significant price inflation over the last two years creating the impression of accelerated growth for Grocery and many other retailers, some focus has been lost on the underlying health of sales growth. Many categories have seen unit and volume growth decline as consumers have used less and avoided discretionary categories altogether to save money.
As global and local inflationary pressures ease over 2024, our retail partner's attention will quickly focus on those categories and brands where real growth (units/volume) can be achieved through consumption growth. Retailers will continue to understand the power of premiumisation value growth through spending more. However, that growth must be earned, and shoppers will be convinced that you deliver a benefit within the category worth that extra spending.
The response - It will be key to understand your category and your offer's role in future growth and communicate it effectively when you engage with your retail partners. With more formal Category Reviews setting the direction for more banners than ever before, winning in reviews is key.
Have I chosen the correct channel partners?
The New Zealand retail landscape has changed rapidly in the last 3-5 years. Chemist Warehouse has changed the Pharmacy channel forever, proving you can develop a country-wide network and change shoppers' approach to a traditional channel. Bargain Chemist shows that a fast follower can be just as successful in attracting new shoppers. The Warehouse is leveraging its existing retail presence, building its role in Grocery and offering shoppers a real choice to meet their top-up / smaller basket needs. Convenience as a channel is back, established players are enhancing their offer, and new players are emerging. Will the new wholesale access and supply available following the market study create an environment for success?
Suppliers now have genuine choices to make about where and how their offer will be available to shoppers. Winning in Grocery alone is no longer the default channel strategy.
The response – Assess all your choices and understand the full implications of each opportunity. Select your partners with care on a range of criteria. As we have seen, it can be challenging to step back on a decision once made in the current market context in New Zealand.
Am I engaging my shoppers at the correct stage of the shopping journey?
Retail media is a global trend in Marketing and appears to be the number one discussion in all marketing circles about if and how this will integrate into the broader Marketing mix.
As shared in Supermarket News in September, New Zealand has seen a rapid expansion in channels. My hat 2024 promises to see these networks make a real difference in shoppers' behaviours when used effectively.
The challenge of these channels was summed up by Mike Anthony, the leading shopper marketing expert, in a recent article; "Are retail media networks an amazing opportunity to engage with shoppers and build closer relationships with retailers? Or are they another cynical money-grab by retailers under pressure?"
The response – Like channels, you need a well-considered plan; clear objectives and expectations are required for marketing investments. Retail media is no different. Understanding your shopper and the behaviour change you are seeking must come first. The choice of a media channel to deliver this change should become clear, and retail media might be ideally positioned to deliver the outcome. In my view, the additional partnership benefits of retailer media should be the final decision factor, not the first.
Whilst 2024 may continue to feel challenging for suppliers and retailers alike, I believe the time is right to build and execute growth plans once your business fundamentals are secure. Put consumers at their heart, choose retail partners positioned to present your offer effectively and invest in communication that engages and influences your consumers when it matters the most.
See more insights from the 2024 Buyer's Guide below:
