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Store Closures, Shrinking Shelf Space and Low-Cost Competition. Oh my!

Topics: Finance, Optimization, Predictive Analytics

According to Business Insider, Target has announced that it will be closing twelve stores nationwide. However, this not unusual. Due to increasing ecommerce shopping habits among other factors, brick and mortar stores find themselves struggling to compete against their digital counterparts. This, coupled with consumers’ loss of attention to the center-store shelves, over proliferated distribution and favor towards low-cost, limited option stores like Aldi and Lidl, means that companies will need to not only adjust to shrinking shelf space, but also figure out how to regain consumer interest and increase performance.AdobeStock_14587204.jpeg

Financially, this affects the way that CPG manufacturers will budget and forecast volume. Without a strategy that can keep up with rapidly changing consumer habits and digitalization, finance teams will find themselves struggling to put out a fire with a squirt bottle. With trade and sales teams relying on finance guidance, it becomes difficult to assess and monitor the health and effectiveness of trade promotions while anticipating the influence of these disruptions. However, there is hope despite these looming issues and it lies in advanced predictive analytics.

"Companies need to not only adjust to shrinking shelf space, but also figure out how to regain consumer interest and increase performance."

Predictive analytics capabilities, like that of a Trade Promotion Optimization solution, means that planning can be adjusted to more accurately analyze future volume and profit in anticipation of disruption. With not only a historical view to plan off of, but the ability to model the future baseline to reflect a planned loss of distribution with closing stores, companies can plan more accurately and successfully in account of these changes. In turn, this leads to better forecasting and strategic planning in the future to meet organizational and retailer goals.

Furthermore, more accurate future trend analysis means that finance teams can maximize their limited center-store attention as well as their shelf space if it shrinks. Manufacturers who have this future information can approach retailers with analytically-backed proof on why they are a better shelf space investment than competitors.

"There is hope despite looming issues and it lies in advanced predictive analytics."

Without predictive analytics capabilities, an accurate view of business health and financial trajectory become hard to reach. Manufacturers who do not utilize future trends in addition to historical ones risk having a skewed view of promotional performance that can place them behind competition and maybe even cost them crucial shelf space. However, those who do utilize the tools of the future will find that, despite industry-rocking events such as store closures, they can thrive and flourish amongst the ever-increasing competition.

 What to read next: 2018 won’t be the year that you cut trade investment, but it can be the year you start believing in it


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