Imagine you're a top executive at a major global consumer company.
You're responsible for one of your firm's top-selling products in two key Asian markets – a chocolate snack…which melts in hot climates. You need to ensure efficient delivery to your retailers –and bolster sales. The first market, Australia, has large, sophisticated retail outlets and easy access to refrigerated trucking fleets. The other, Indonesia, often requires delivery on the back of scooters to thousands of informal stalls across the archipelago.
It's safe to say that few executives would deploy similar commercial capabilities for these two hugely distinct countries, given their differing routes to market and retail channels. Yet, we still see many consumer goods companies organizing their operations geographically and clustering markets based on physical proximity, rather than their actual similarities.
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But an alternative approach is emerging: the grouping of markets by specific archetypes. For example, take Turkey and Brazil. These markets may be thousands of miles apart, but as emerging economic powerhouses, they have much in common in terms of how they are structured and how goods move from creation to consumption.
The reality is there is no one-size-fits-all solution to tackling every type of market, nor is it economically viable to tailor your sales and marketing structures and IT systems for each one. But by transcending geography, it is possible for consumer companies to target different levels of capabilities where they are most needed.
Ripping up the map
In this new era, consumer companies will have to go to market according to the common structures and dynamics of each set of countries they sell into. Here are some examples of these market archetypes:
- Organized – Examples: France, Germany, Japan, U.S., UK.
Markets featuring modern retail and sophisticated physical offerings as well as an advanced range of digital sales tools where mobility is an increasingly important theme.
- Developing – Examples: Brazil and Turkey.
Markets that have been experiencing significant growth, but are still building transportation and retail infrastructures. They have a mixed route to market including both modern and traditional trade.
- Fragmented emerging – Examples: much of South East Asia, sub-Saharan Africa and much of Latin America.
Markets in which CPG companies work through distributors to get their products to a fragmented customer base of small, independent retailers – the "mom and pop shops", where it can be difficult to obtain good visibility of the customer and end consumer.
- The super-digital city – Examples: London, New York; Paris, San Francisco, Shanghai, and Seoul.
Markets in mega-cities where consumers have embraced digital sales channels enthusiastically. Digital is seen in some cases as a lever to effectively and economically share data, drive collaboration and increase goods sold online.
Redrawing the frontiers
Moving away from a geographical approach means changing the way you think about how markets can be grouped and served:
- Cluster markets with a common commercial context.
- Define the capabilities required to deliver against the commercial priorities – for example by using a supply chain with a greater reliance on local distribution partners.
- Define the portfolio of solutions required to deliver on those capabilities.
Getting this approach right can make all the difference. Our analysis shows that poor execution at the point of sale can hit sales by as much as 14 percent based simply on whether goods are in stock and properly merchandised. Consumer companies that reorganize in these alternative ways will have the chance to reach new markets and segments and build new capabilities – and to do so more cost-effectively.
Fabio Vacirca is global managing director and Larry Thomas is managing director at Consumer Goods and Services for Accenture