When disruption is the new normal and the retail landscape is evolving faster than ever, the pressure to keep up and stay relevant is at an all-time high. Competition from Amazon and direct-to-consumer startups can leave CPG brands and retailers feeling less than confident about their next move—and yet it’s not just Amazon that’s producing challenges for the brick and mortar set. Changes in policy, such as more transparent nutrition labels on packaged goods, and the consumer trend toward natural, organic and cruelty-free products has meant the industry as a whole is feeling pressure from all sides.
It doesn’t have to mean doom and gloom for the industry though. In fact, today’s retail challenges are actually providing valuable opportunities to innovate and gain a competitive edge. It’s all about taking what can be conceived as negatives, and creating positive solutions.
The Challenge: Food Label Transparency
Take, for example, the recent push toward more consumer-friendly nutrition labels. When the FDA first announced that labels would soon need to show calories in larger fonts, and provide more accurate serving sizes, most CPG companies initially balked. Not only could these provisions turn shoppers away from buying certain products, it would also be costly and time-consuming to implement.
According to a label transparency study by Label Insight, 94% of consumers said they are likely to be loyal to a brand that offers complete transparency, and almost three in four consumers said they would be willing to pay more for a product that offers complete transparency in all attributes.
This shows that changing nutrition labels to become more transparent can actually allow shoppers and consumer to build back brand trust. It’s true that implementing such a large change takes time and resources. However, VR solutions can help when it comes to moving faster and saving money.
Companies can use virtual simulations to test how products with the new labels will resonate with shoppers, before making any real changes in-store. They can learn if the changes cause shoppers to buy more or less, and they can rearrange the shelves and the product facing to determine which arrangements might hurt, and which might help, sales. Testing how new packaging and nutrition labels affect customer perception is a perfect way to move forward with confidence before risking anything in the real world.
The Challenge: ROI
Along with creating loyal customers, stores and brands also want to see return on investment. So when something doesn’t seem to be selling at the same rate anymore, or when aisles are in need of new displays and signage, companies hope the changes they make will move the needle when it comes to penetration and sales. Yet, many changes are made on gut instinct, and can actually be detrimental to that goal.
Here’s a few go-to stats that we regularly talk about when it comes to moving the needle: according to a 2015 study by Willard Bishop, stores spend around $20,000 to $50,000 in annual shelf-execution labor. Yet the impact of those changes results in 85% having either no category change, or even negative growth. That means millions of dollars are being spent on changes will not have any measurable impact, and $17,000 to $40,000 of shelf-labor expense is wasted per store, per year, by retailers and manufacturers making blind changes for the sake of change.
This means there’s a huge opportunity to save money. What if, before making any in-store changes, you could learn that what you thought would initially move the needle would instead cause a drop in sales? Or maybe you determine that rearranging the shelves would produce no impact either way?
Virtual testing allows you to learn those things before creating anything in the real world. Sure, testing just to learn that your new ideas make no difference at the shelf can be discouraging, but you save yourself the time and cost of doing a reset or changing out products just to learn there's no measurable impact on sales.
The Challenge: Technology Overload
Innovation is not just a buzzword in retail; it has truly become the key to staying afloat. But innovation means a lot of things, and for retailers and manufacturers who are bombarded by the pressures to have an online presence, launch new apps, add sensors and beacons, and use automation in-store, they can feel predictably overwhelmed.
Technology doesn’t just have to mean implementing the latest gadget to draw in customers. When it comes to our VR platform at InContext, we are talking about innovation as an enterprise solution. Virtual reality allows companies to change their long-standing, and, frankly, outdated ways of going to market, and embrace technology as a way to work faster and smarter while saving money. And as a result, they are then looked at as forward-thinking organizations in the space. It’s a game-changing way to do business, not simply a one-off attempt at remaining relevant.
The retail and CPG industry may be in a state of flux right now, but looking at the glass as half full instead of half empty goes a long way when it comes to paving the way to a successful future.