Maximizing Speed to Market

When My Grandma's of New England creates a new coffee cake, Bruce Mills knows some retailers will have it on shelves within weeks and others will drag the process out for months. Mills, executive vice president of the Hyde Park, Mass.-based commercial baker, says it's a mystery to him why some stores move quickly and others dawdle.

"If I'm dealing with Roche Bros. (an 18-store chain based in Wellesley, Mass.), it's a quick process. If they like something...they beat the competition with the new product," Mills says. On the other hand, some large stores can take many months to get a new coffee cake in the store: "They don't care if it's the new fountain of youth coffee cake and you eat one bite and live an extra 12 years. They still can't get it on the shelves quickly."

Getting products in stores quickly is evidently more urgent to some retailers than to others, but the basics apply to them all: A rapid speed-to-market equates to happier customers, a better competitive position and more sales.

"Speed to market is crucial. With consumer tastes changing rapidly, the idea of annual planning cycles is going away," says Todd Rovak, managing partner of Fahrenheit 212, an innovation consulting firm based in New York. "What we're really talking about is, how do we get from an unmet consumer need to a product as quickly as possible."

ROI OF SPEED

Retailers who get new products onto their shelves quickly sell more of those products, even after other stores add them, a 2007 study by Edgewood Consulting Group revealed. The study, which focused on gum and mints, classified "Best Practice Retailers" as those that had products on their shelves nine weeks after the products were launched, compared to an industry average of 17 weeks and a rate of 22 weeks for "Opportunity Retailers" (the slowest).

According to the study, the Best Practice Retailers sell 63 percent more of the new product over the first two years after launch than the Opportunity Retailers. Being able to take full advantage of the early marketing efforts of the manufacturer probably accounts for the increased sales, the study noted.

"There's a tremendous financial ROI to be fast to market that's well documented," says Israel Rodriguez, principal partner of Edgewood Consulting Group, who was involved in the study. "There is also a huge benefit of banner equity to shoppers."

"Banner equity" refers to shoppers' impressions of the retailer. For example, the fastest-to-market retailers ranked 85 out of a possible 100 points on the characteristic "has exciting new items," compared to 19 points for the slowest retailers. Similarly, the fast retailers scored 81 out of 100 for the characteristic "has everything I want," compared to 25 for the slowest.

"Retailers have become very competitive about speed-to-market," Rodriguez says. "It's become a point of pride."

WHERE SPEED BEGINS

So what do retailers do to decrease the delay between product launch and products on the shelf? There are a number of issues involved, but the process begins during the product development phase. When retailers and CPG manufacturers work together to develop products that they both feel consumers will buy, the speed at which the products actually reach the shelves increases.

"There are a lot of new product introductions, thousands and thousands of them, but only a very small percentage succeed," says Joachim Pinhammer, research director of retail technology for research firm Planet Retail. "Both suppliers and retailers are trying to maximize the success of new product introductions. For this they are using more and more data to support their decisions."

For example, some retailers are sharing information from their social media efforts to help manufacturers get a handle on what consumers are seeking. The insights gleaned from mining the data on Facebook, Twitter and other platforms can tell savvy companies what product needs consumers are expressing and how competing products fare.

"Consumers are increasingly part of the collaboration process through social media," Pinhammer explains. "They are asked for their opinions, and sometimes they proactively ask for a new product. More and more crowd-sourced data is being introduced into new product development."

However, there is still a lot of room for growth in the use of social media as a new product development tool. A study at Stanford University's Rock Center for Corporate Governance in 2012 discovered that only about 30 percent of corporations use social media to research new products and services.

"There are several companies that are making good progress in this space, including P&G, but it is still an underused input," notes Cort Jacoby, partner in the product development and sourcing practice of consulting firm Kurt Salmon. "Over the next three to five years, I would expect to see a greatly enhanced capability led primarily by top CPG companies."

Store-level data, such as from POS systems and consumer loyalty cards, plays a large role in product development, too. Category management, including new product development, would be much less informed were it not for data about what people are currently buying.

"That retailer data can be extremely valuable for manufacturers," Pinhammer says. "Often manufacturers even have to pay for that data."

When data points to a distinct consumer need, some retailers go directly to the manufacturers and ask for new products.

"The retailer has a lot of power, and is able to go up the chain and say, 'Look, we see growth in this category and therefore we'd like to see an offering from you in this space,'" Rovak explains.

Naturally, when a CPG manufacturer listens to retailers in this regard, and introduces products that match the retailers' perceived needs, the chance of quickly finding shelf space is improved.

TIMING IS CRUCIAL

Sharing data during the product development phase is important, but when it comes to speed-to-market, collaboration about timing plays an even larger role.

For example, when a product introduction coincides with a retailer's reset, the product finds shelf space weeks sooner than it would otherwise, according to the Edgewood Consulting Group study. The study evaluated 40 new product launches at 50 retailers with different reset cycles, and determined that when a launch aligns with a reset, stores that were traditionally slow in getting new products on shelves improved their on-shelf speed by about eight weeks. Retailers classified as Best Practice Retailers, which already were speedy, improved their speed by an average of 1.9 weeks.

Ironically, prudent long-range planning by retailers can reduce flexibility in the short term. "Since large retailers often plan months in advance, they might say, 'Yeah, we want this product but the next time period we have is Spring 2015,'" explains Mills from My Grandma's of New England. "They frequently don't have a mechanism to put products on the shelf quicker."

In contrast, Mills cites smaller retailers like Gelson's, which operates 18 stores in Southern California. "If Gelson's decides they want a flavor [of our coffee cake] they haven't had before, it's a matter of weeks," Mills says. "And within a few days of their order it's on the shelves."

MAKING ROOM

Another element in the speed-to-market equation is the availability of shelf space. Naturally, stores that are able to move delisted products off the shelves quickly have more room for new things.

The Edgewood Consulting Group study notes: "One of the key insights and common themes in our Best Practice principles is that faster retailers do a much better job of identifying products they are delisting in order to make way for new items on the shelf. They identify them earlier, notify their stores earlier, and implement programs to begin working down inventories earlier."

CPG manufacturers can play a role in clearing shelf space by suggesting what older products should be moved when a new product is announced, Rodriguez says.

"If you're not recommending what should come off the shelf when you make a new launch, you're just dumping more work on the retailer," he says. "Give them a full solution."

IMPLEMENTATION AT THE STORE

Collaboration, timing, open shelf space and shipping are all crucial to speed-to-market, but in the end, the people on the front lines have to execute. If the 16-year-old stock boy spends an hour texting his girlfriend instead of putting the hot new breakfast cereal on the shelf the day before the advertising campaign launches, all of the groundwork laid months in advance is for naught.

"The supply chain doesn't stop artificially at the store," Rodriguez says. "How does the product get from the back room to the shelves? It's traveled thousands of miles, but the last 30 feet can be the longest part of the trip."

The Edgewood Consulting Group study included recommendations to help stores implement new product launches, to prevent hiccups in that last 30 feet of the supply chain. Among them are easy-to-use plan-o-grams, periodic audits and incentives that reach all the way down to front-line workers.

Considering the tens of thousands of new CPGs introduced each year that retailers have to evaluate, select and get into stores, they're not doing too badly, says John Ferramosca, another partner in Edgewood Consulting Group.

"Given the complexity of the supply chain and the size of it, it's phenomenal that retailers can get these products to market as quickly as they do," he says.

Ed Avis is a freelance writer and editor in Chicago. He has written for Crain's Chicago Business, the Chicago Tribune, Specialty Coffee Retailer, Tea Magazine, and many other consumer and trade publications.