30 Sep

Retailers are Putting the Squeeze on Shelf Space—Is Online an Answer?

Category: Retail Channel | Post by: mark

A recent report from the Willard Bishop retail consultancy highlights a major challenge for CPG brands—retailers are dramatically reducing the CPG sku assortment they stock on their shelves in order to reduce costs and maximize their own margins. According to the report, the reduction will be so great that CPG manufacturers will likely lose entire brand lines (coverage at MediaPost here).

This is shaping up to be a huge issue for CPG, and the rise of retailer private label goods means it is likely to get worse as retailers clear out more real estate for their own growing product lines. It appears to be a symptom of the increasingly dysfunctional relationship between CPG manufacturers and their retail channels.

Question: How will CPG manufacturers respond?

One potential option for manufacturers facing reduced distribution through traditional retail is to expand their online direct sales efforts. This is a major trend in non-CPG markets. For example, Internet Retailer recently announced that manufacturers selling direct to consumer is the fastest growing online retail category in its Top 500 Guide. Will CPG manufacturers follow this trend? It seems to be one viable means to gain some control over their distribution to consumers.  Are there other options available?  With billions of dollars at stake, this will be interesting to watch.

Posted Wednesday, September 30th, 2009 at 8:23 pm
Filed Under Category: Retail Channel
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Responses to “Retailers are Putting the Squeeze on Shelf Space—Is Online an Answer?”

Keith
October 1st, 2009 at 8:16 pm

I’d also add the diminishing opportunities for off-shelf promotions at many large-scale retailers to your list of challenging trends for CPG firms. Style guides and clean store policies are making it more difficult for many brands to maintain (or grow) their equity at retail, broadly speaking.

Many of the large brands I work with are exploring non-retail growth platforms, including all kinds of direct-to-consumer models–licensing agreements, kiosks, ecommerce, their own brand stores (e.g. Apple, Microsoft, etc.). It seems the last 12-18 months have opened a lot of minds; will definitely be interesting to watch.

mark
October 5th, 2009 at 7:10 pm

Thanks Keith. I totally agree. I’m heading down to the In-Store Marketing Conference in Chicago later this week. Will be interesting to see whether this topic is covered.

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