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This data is coming from immature countries like Nigeria, Bangladesh, Thailand and Laos.
What makes this data so complicated consists of many things. Frequency, meaning when they get it varies. Formats, meaning the way they are getting the data. The data types are different. The users are less sophisticated. Retailer sizes are different. The products being sold are different. Shipping procedures and costs are high. The needs of the consumer are different, currency is volatile, and a whole lot of other things make it much different. Just about every aspect of the sales process is different in emerging markets.
They just have completely different dynamics.
Let’s start with the fact that they have a completely different sales model. Let’s go big and compare emerging markets with Walmart in the United States. To most CPG companies, Walmart represents their highest percentage of sales. So if you’re a CPG exec in the US, the very highest level of a report you would have would show overall corporate sales. The next highest level report would likely be showing cross-retailer sales. That’s not to say that all CPG manufacturers have the ability to do this, but for those that do, this would be the next highest level sales report. It would typically be used by management. Now, say you are a category manager, for Walmart. In that case, your highest level report would show you sales at Walmart. But you would then be able to drill down into that report. You might drill down from Walmart U.S. to region, to sales rep, down to the store. You might drill down to Category, Brand, Sub-brand, Item, and even sku. But Walmart is the owner of those stores.
They own over 4200 stores in the US and 6,000 stores across the world. All together Walmart operates over 11,000 retail units under 71 banners in 27 countries. They employ 2.2 million associates around the world and 1.3 million in the U.S. alone.
Now, compare that with emerging markets. Unlike the US and Europe, their retailers tend to be individuals who own individual stores. They rarely even own more than one store.
At the retail level, what we would normally consider to be the very highest level of analysis in the US, is not the case for emerging markets. In emerging markets one owner would only be looking at one store. It’s a very different paradigm.
Modern retailers like Target, Tesco, Ahold, and so on, all own hundreds or thousands of stores. That’s not to say the independent shop owner in the US and Europe don’t exist, they definitely do. But those independent shop owners would typically fall into the “all others” category in a chart showing cross retailer sales. The bulk of sales for a CPG manufacturer are through large chain retailers.
Now let’s look at the POS itself. Most emerging market retailers don’t have cash registers that are uploading sales information to corporate on a nightly basis. Most don’t have cash registers at all. Their way of managing and ordering inventory is via the owner himself. In most cases he is manually counting the items on the shelf. Then placing orders.
Items are not normally being ordered through any sophisticated system. Usually, the proprietor is using an application on their cell phone to place an order back to a distributor. The distributor is often then transmitting or forwarding that order back to the manufacturer. Therefore in most cases, POS data from emerging markets, is not POS data at all. It’s order data or sometimes shipment data. Getting end store information from distributors to integrate with internal data is often even a problem for US based companies.
Another common issue for CPG manufacturers are the vast array of data types. Although many retail owners in the emerging markets are very savvy with their cell phone applications, the applications aren’t always the same. The Datawarehouse Institute, TDWI, shows our customer recommendations that explain how we handle these issues.
Some of these issues are common even with US based retailers. Depending on the data source, it can be coming in a variety of formats also. Even the EDI data, that is supposed to have rules around it and be so consistent, is not consistent. However, the data cleanliness issues with emerging market retailers are not only greater with emerging markets, because they are much more unknown and untested. Our POSmart enterprise demand signal repository is designed to handle these data issues and new data sources that arise in the future. The Datawarehouse Institute, TDWI, shows customer reviews of how Relational Solutions can help you with these issues.
On top of that, emerging markets are embracing e-commerce. According to Goldman Sach’s, online commerce is growing over 27% a year in Asia.
My next blog on emerging markets will discuss how they use mobile devices.
You are also welcome to download our whitepaper. We also invite you to be Relational Solutions guests at the CGT Consumer Goods Emerging Markets Forum #cgem14! on September 17-19th at the Ritz Carlton in Fort Lauderdale. Click below for more information and enter promo code EMRSVIP.