A Recipe for Shelf Space Competition
Mix two years of the global pandemic with constant supply chain disruptions. Then add a dash of one thriving ecommerce marketplace and a sprinkle of skyrocketing demand for consumer-packaged goods. Lastly, stir in retail buyers and compliance programs until fully combined. The result? The greatest opportunity to capture and expand retail shelf space in CPG history.
Not only does this complicated concoction make it difficult for brands to get their product in stores on time, but it’s also costing retailers big money. Recent data from the National Bureau of Economic Research reported stockouts reached up to 20 percent last year, compared to an average rate of 8 percent pre-pandemic. That totaled to $82 billion in missed CPG sales during 2021. Sheesh.
Brace yourself for more bad news: customer loyalty can no longer be relied upon as a fallback here. Believe it or not, 79 percent of consumers reported they have tried new brands because their preferred brand was out of stock. At Zipline, we call this involuntary sampling: a phenomenon that can be extremely detrimental to CPG brands.
For retailers, losing both loyal customers and their dollars calls for drastic measures.
Retailers have increased their expectations of brands’ delivery performance to combat stockouts, slamming late arrivals with fines to improve on-time and in-full delivery. Fees piling up aren’t the only problem brands face when they can’t meet expectations. One retail buyer told us, “If a supplier is out of product, it will be replaced with a competing brand.”
For more takeaways revealed by our buyer survey for which Zipline Logistics worked with 900+ retail buyers, read on.
2022 Retail Buyer Insights
To better understand why certain products get on shelves over others and how CPG brands can stand out in the competitive market, we asked the people who make that decision daily: retail buyers. Our connections belong to some of the biggest retailers and distributors in the game: UNFI, Costco, KeHe, Giant Eagle, and Target, to name a few.
Importance of Communication and Meeting On-Time Delivery
Communication and reliable fulfillment: without these two things, most buyers are saying “see ya.” In fact, 90 percent say a supplier’s ability to deliver product on time impacts their purchasing behavior of that brand and 66 percent have ended relationships with suppliers over delivery issues.
Delays are inevitable in logistics, but how you communicate and work through them is make or break. Retailers want to work with the brands who give them the most visibility and transparency. Ninety three percent of buyers report having anywhere from 4 to 20 product choices within a given category – so there’s nothing keeping them from booting a brand that doesn’t offer this.
Impact of COVID-19
We asked our buyer network about any changes in their category out-of-stock rates, which already account for stocking alternative brands to fill empty shelf space. Seventy-six percent of buyers reported that out-of-stocks in their category increased because of the pandemic. Historically, most retail buyers were seeing average out-of-stock rates below 6 percent, but more than half of our network saw this rate jump up to 11 percent or higher throughout the pandemic.
Over half also said it impacted the number of competing brands in a category. “Out-of-stocks have pushed more variety per category which forces more competition and more congestion,” one buyer said.
The big themes reported in this year’s survey remain consistent with what we’ve seen in years past, but the aforementioned challenges brewing in the market have only made on-time delivery and communication that much more essential to win shelf space.
Secure Shelf Space with a Trusted Logistics Partner
Although the market is whipping up severe competition, it smells of opportunity. That is, if you understand how optimized supply chains create value. Successful CPG brands are those that invest in logistics and find partners that can execute against strict retail compliance requirements. Zipline Logistics has all the ingredients to help your brand meet on-time delivery, stay on retail buyers’ good side, and get your product on the shelf.
Zipline Logistics is the Official Shipping Partner of the SFA. Our uniquely qualified carrier network, world-class team of retail transportation experts, and state-of-the-art shipper intelligence tools maximize revenue and gross margin for consumer brands by eliminating out-of-stocks through optimized, on-time in-full performance.
We tailor strategies to reduce overall transportation spend, optimize retail performance, and beat out the competition for shelf space. Ninety-seven percent of our orders end up on the shelves of retailers and distributors such as Walmart, Costco, UNFI, KeHE, and Kroger.
Andrew Lynch is President and co-founder of Zipline Logistics, an award-winning North American 3PL that specializes exclusively in the transportation of retail consumer goods. He works alongside clients ranging from some of the largest food and beverage businesses in the world to the brightest up-and-coming CPG brands in North America. Lynch and his team leverage data intelligence and strong industry relationships to help clients uncover transportation savings, build scalable supply chain strategies, and ace retailer compliance programs. Starting his career in carrier procurement and management within a Fortune 100 logistics company, Lynch has held positions of responsibility in all areas of third party logistics.