In Jakarta alone traditional trade accounts for 70% of FMCG sales

M A XIMISING TR A DITIONSTHE SHOP. SHOPPER. SHOPKEEPEROCTOBER 2015

THE M ANY FACES OFTRADITIONAL TRADE

IN SOUTHE AST ASIA . . . . .

mom-and-pop stores

sar i-sar i stores

杂货店

cửa hàng tạp hóachap foh t im

kedai runcitcorner grocer y store

杂货店

Smal l shop round the corner

Tu-ra-ki j -ka-pleek-bab - dang- derm

chap foh t im

sar i-sar i stores

杂货店

kedai runcit

corner grocer y store

kedai runcitchap foh t im

Smal l shop round the corner

WARUNG

WARUNG

sar i-sar i storeskedai runcitWARUNG杂

货店cửa hàng tạp hóa

chap foh t im

ran-show-huay

ran-show-huay

DO YOU UNDERSTAND THE

CHARACTERISTICSOF THESE SHOPS?

DO YOU KNOWHOW SHOPPERS

BROWSE AND BUY?

DO YOU KNOWHOW THESHOPKEEPER THINKS AND WHAT MAKESHIM TICK?

IV MA XIMISING TRADITIONS | THE SHOP. SHOPPER. SHOPKEEPER | OCTOBER 2015

Samuel1, a sales leader of a major FMCG manufacturer in

Vietnam, was faced with a challenge: servicing Vietnam’s slew

of traditional trade stores with limited resources. In order to

prioritise the multitude of traditional grocery stores scattered

across the country, he ordered a store segmentation project

which enabled him to group outlets based on claimed sales

performance. Based on the store segmentation result, his sales

force was directed to stores representing the biggest sales

potential. But Samuel was dissatisfied with the outcome; the

classification of outlets appeared inaccurate, and staff lacked

insight into which products they should push in each store.

1Real case, but name has been changed

Samuel’s dilemma is not unique. In fact, it’s a fairly common

challenge. Many FMCG sales teams lack fundamental knowledge

on the traditional trade landscape, such as the location (where) of

the stores which represent the biggest opportunity, products (what)

which offer the largest potential, and promotional activities (how)

which will yield the maximum conversion.

Such insights are critical to developing a comprehensive sales

strategy which takes local market nuances into account. Due to the

sheer diversity of Southeast Asia’s retail sector, a one-size-fits-all

approach is rarely sufficient.

Indeed, brand building and sales development can be achieved by

combining shop, shopper and shopkeeper insights into an effective

segmentation to truly drive activation across the various shopper

touchpoints along their path to purchase. A multi-lens view approach

is required in order to win the hearts of both the shoppers and the

shopkeepers.

HOW SHOPKEEPER

WHAT SHOPPER

WHERE SHOP

1Copyright © 2015 The Nielsen Company

TRADITIONAL VS. MODERN TRADE IN ASIA

2012

8.4%

14.9%

4.1%

16.8%

4.9%

48.6%1.7%

MAT 2014

9.3%

14.4%

4.2%

17.2%

5.3%

47.9%1.8%

DRUGSTORESOTHERS

2013

CONVENIENCE STORESTRADITIONAL TRADE

SUPERMARKETS

MINIMARKETS

HYPERMARKETS8.9%

14.6%

4.2%

16.9%

5.2%

48.2%1.8%

RETAIL CHANNEL SHARES IN ASIA (INCLUDING INDIA) WEIGHTED SHARE OF TRADE

Source: Nielsen Retail Index 2014 – shares based on weighting of country importance

THE FRAGMENTED WORLD OF TRADITIONAL TRADEIn Southeast Asia, traditional grocery is the largest channel both in

terms of store numbers and sales contribution, and in major cities

like Ho Chi Minh City or Jakarta, traditional trade accounts for more

than 70% of FMCG sales.

2 MA XIMISING TRADITIONS | THE SHOP. SHOPPER. SHOPKEEPER | OCTOBER 2015

PLANNED OR IMPULSE PURCHASES, GROCERY STORES AREA BIG PART OF TRADITIONAL TRADE

Source: Nielsen Home Panel Data – FMCG 78 Categories | % Spending | Indonesia Urban +

Java Rural | MAT 2015 we 14 June

By and large, shoppers visit traditional trade stores due the proximity

to their homes, and a large proportion of purchases in traditional

grocery stores are planned, from catering to ‘everyday needs’ to top-

up shopping and even main shopping.

The planned shoppers regard their local grocery store as a pantry

extension, buying their daily cooking, homecare or personal care

needs. Such purchases are planned in advance and the majority of

shoppers have already made their brand choice before they enter the

store. Importantly, planned shopping implies the potential for bigger

basket size or offering new pack formats within the repertoire of

regularly shopped brands.

Yet, having elements of both impulse and planned in traditional trade

stores can open up immense opportunities. Modern trade has an

edge over traditional trade on variety, selection, promotional activity

and high quality premium products. Traditional trade can replicate

these by more frequent rotation of new products, adding variety

within impulse categories, or having promotions by day of week to

entice shoppers.

TRADITIONALTRADE

SUPERMARKET

IMMEDIATE CONSUMPTIONWINDOW SHOPPING

MINIMARKET

TOP UP

MEAL FOR TODAY

MAIN SHOPPING

HYPERMARKET

30%

5%

25%

39%

12%

13%

35%

35%

3%

7%

35%

33%

18%

5%

7%

45%

28%

12%

5%

TRADITIONAL TRADE FOR DAILY MEAL SHOPPINGWHILE MODERN TRADE IS MORE FOR PLANNED MONTHLY TOP UPS


Source: Nielsen Retail Establishment Survey 2015

A SHOP, ITS WARES AND SHOPPERS

TRADITIONAL TRADE GROCERY STORE COUNT

AVERAGE CATEGORIES PER STORE

AVERAGE CUSTOMERS PER DAY

AVERAGE STORE SIZE (SQUARE METRE)

AVERAGE SPEND PER TRIP

AVERAGE TRIPS PER WEEK

MALAYSIA

33,082

30

7

VIETNAM

621,786

12

6

33

INDONESIA

3,064,353

25

15

0.7%

57

12 SQM

US$0.88(11,842 IDR)

4.5 Xs

PHILIPPINES

1,081,839

16

US$0.85(38.75 PHP)

10 Xs

THAILAND

426,405

56

48

US$3.32(113 THB)

1.6 Xs

AVERAGE FOOD CATEGORIES PER STORE

32

STORE GROWTH (%)

1.0% 1.1%-10%

6 SQM

-0.2%

51SQM19 SQM

25

~ 25

79SQM

US$1.80(39,300 VND)

4.1 Xs

~

~

Notes on Traditional Trade Grocery def initions by market:

In general, Nielsen defines Traditional Trade Grocery as off-premise stores selling FMCG food or non-food items, and excludes household stores selling building material, electronics, or household items, as well as excludes any on-premise channels or drug stores. This definition might vary by market, and a more detailed definition by market are as follows:

• Indonesia: Includes Provision, Semi-Permanent Stores, Gerombong, Pasar, Semi-Retailer FMCG, Semi-Retailer (Food and Snack)

• Malaysia: Includes Provision, Chinese Medical Hall, Sundry

• Philippines: Includes Sari-Sari Stores, Market Stalls

• Thailand: Includes Provision

• Vietnam: Includes Traditional Grocery Stores, Market Stalls, Cigarette Kiosks, Soft Drinks/Ice Cream Outlets, Dairy Shop, Milk/Biscuits/Spirit Shop, Biscuits/Confectionery Store, Semi-Retailer (Urban)


WHAT SHOPPERS BUY IN TRADITIONAL GROCERY STORES IN INDONESIA

Source: Nielsen Shopper Trends 2013/2014

MOST COMMON ITEMS PURCHASED (%)

BRANDED COFFEE POWDER

READY-TO-DRINK TEA

BISCUITS

SOY SAUCE

INSECTICIDES

MAKEUP DECORATIVE

READY-TO-DRINK MILK

VITAMINS

BRANDED COOKING OIL

MILK POWDER

BABY CARE PRODUCTS

LIQUID SOAP

BODY LOTION

50

47

45

45

32

30

24

20

18

13

13

11

11


WHAT SHOPPERS BUY IN TRADITIONAL GROCERY STORES IN THE PHILIPPINES


COFFEE

LAUNDRY PRODUCTS

LIQUID SHAMPOO

BISCUITS

CARBONATED SOFT DRINKS

INSTANT NOODLES

CHOCO-FLAVOURED DRINKS

DISPOSABLE DIAPERS

MILK POWDER

POWDERED CONCENTRATES

TOILET SOAP

FABRIC CONDITIONER

PACKAGED WATER

32

19

19

19

17

17

14

11

11

9

9

9

4



WHAT SHOPPERS BUY IN TRADITIONAL GROCERY STORES IN VIETNAM


CARBONATED SOFT DRINKS

SNACKS AND CONFECTIONARY

PERSONAL CARE

HOUSEHOLD PRODUCTS

PAPER PRODUCTS

CANNED AND PACKAGED

NON-ALCOHOLIC BEVERAGES

DAIRY PRODUCTS

ALCOHOLIC BEVERAGES

STAPLE FOODS

BABY FOOD

FROZEN AND CHILLED FOODS

PREPARED MEALS

87

85

84

81

81

78

77

76

56

46

37

30

11PET FOOD

24

3



HOW MANY SKUs CAN YOU PACK IN A 19 SQUARE METRE STORE?

NUMBER OF SKUs HANDLED PER CATEGORY

COOKING OIL: 6 BEER: 3

LAUNDRY POWDER: 9

NOODLES: 15 CARBONATED SOFT DRINKS: 11

The typical traditional trade store offers limited space.For example, the average selling area of a traditional store in Vietnam is 19 square metres. Hence, manufacturers often

jostle for shelf presence and share of voice.

Source: Nielsen Annual Census, Retail Audit Data, 2014

In many cases shoppers are unable to enter the store or prefer to stay

on their motorcycle to save time, making it necessary to voice their

product requests to the store owner. As a result, shopkeepers have a

significant inf luence on product selection.


WINNING STRATEGIES FOR STORE SEGMENTATIONFMCG manufacturers have long been segmenting consumers

and shoppers into homogeneous groups, and developing specific

products to appeal to specific segments has helped manufacturers to

achieve new levels of performance. In the same way, manufacturers

now realise the same principles of segmentation can be applied to

retail stores to help their sales teams to be more successful.

There are three typical approaches used to group and prioritise

stores – using location attributes, performance attributes, and a

combination of store performance and physical attributes. Each

approach has its benefits and limitations, and ideally an approach

should be selected based on budget, resources and level of

sophistication of the sales organisation.

LOCATION ATTRIBUTESDividing stores into regions or areas by store density, GDP,

population density, economic class or income level enables efficient

planning of sales force numbers by region and provides guidance

on brands/SKUs to be pushed in each region. For example, a strong

GDP per capita makes a market attractive for companies to push

mass premium ranges.

Modelling across multiple data sources will help identify high

potential provinces/districts that would help realise potential with

lower cost of reach.

PLATINUM GOLD SILVER BRONZEDISTRICTS

Source: Nielsen District Level Distribution Prioritisation, Illustration

IDENTIFY HIGH POTENTIAL DISTRICTS FOR HIGHER REACH AND LOWER COST


PERFORMANCE ATTRIBUTESWhether at total store level or individual category level, performance

attributes provide a clear focus for store visits to the most

potential stores and sales territories can be allocated based on

the store performance profile. It is complex and cost-intensive for

manufacturers to reach all the category stores. Understanding how

your distribution is built can help identify and quantify distribution

opportunities.

QUANTIFY DISTRIBUTION EFFICIENCY AND OPPORTUNITY

Source: Nielsen Distribution Solutions Concentration Curve, Illustration

CONCENTRATION CURVE ANALYSIS

100%

80%

60%

40%

20%

0%

NUMBER OF STORES

0 250 500 750 1000

SALESDEMAND

NUMBEROF STORES

TOP 50%

NEXT30%LOW20%

20%

30%

50%

TARGET

CONCENTRATION CURVE APPLICATION

VALUE CONTRIBUTION %


HAS COOLERS/CHILLERS

3 READY-TO-EATCATEGORIES

STOCKS WATER

STOCKS BUTTER

Source: Nielsen Store Targeting Analysis, Illustration

COMBINED ACTUAL STORE PERFORMANCE ANDPHYSICAL ATTRIBUTESDefining store tiers based on actual performance together with

tangible store attributes, such as presence of defined POS material,

brands, variants, local vs. multinational manufacturer products,

enables us to target the right store tier. Based on those tiers, the

entire store universe can be segmented.

EFFECTIVELY REACH CATEGORY STORES THAT MEET YOUR NEEDS


BRINGING THE SHOPPER AND THE SHOPKEEPER INTO THE SEGMENTATION SOLUTIONEfficient sales outreach which both drives sales and contributes to

brand building can only occur when sales forces are equipped with

actionable knowledge to implement effective in-store strategies. While

traditional segmentation such as location and physical attributes

provide helpful insight, actionable knowledge requires segmentation

analysis which encompasses multiple dimensions on attributes

around the shopper and the shopkeeper.

WHAT’S ON THEIR MINDS?

WHO

WHY/ WHERE/ WHEN

WHAT

HOW

PROFILE

MISSIONS

PRODUC TNEEDS

IN-STOREBEHAVIOUR

PROFILE

HISTORY

BUSINESSNEEDS

STOREOPER ATIONS

SHOPPER SHOPKEEPER


Sufficient shopper insight helps to drive brand, pricing and in-

store promotional activities efficiently. Shopper profiles based on

demographics, behaviours, needs and psychographics, provide key

indicators of the products to be placed and the promotions that

should be implemented, as well as the price strategy to apply given

shoppers’ price sensitivity. Understanding missions and store choice

helps to identify the right categories and pack sizes to focus on.

Further, understanding what shoppers are buying based on their

mission type assists in defining product placement, and providing

insight, while shoppers’ conversion triggers provide invaluable

insight for brand and supporting point-of-sale material visibility.

Conversely, building a greater understanding of shopkeepers helps

to win their hearts by providing value not only to their business,

but also to their personal situation. The profile of the shopkeeper,

based on the same four areas, can be indicative of the type of sales

call needed and which personal incentives will be most impactful.

Meanwhile, understanding the business needs of traditional grocery

shopkeepers and owners, which often gravitate around efficiency,

longevity, differentiation and community, is a strong indicator for

choice of products and in-store activities to be implemented. And

understanding how the operations are being run helps to identify

value-add activities that reduce operation time and costs incurred by

the shopkeeper.


“My wife encountered a windfall, and this was the suggested business. The suppliers should help with consignments, and it’s also a big help if they can provide POS material. Branded signage is OK, preferably of key brands that sell.”– Medium size traditional grocery retailer, Philippines

“I opened a store because it was needed by everybody. It allows me to help the people around. But age is becoming a problem. I would love suppliers to treat general stores the same as a modern store, supporting with modern shelves just like in a supermarket. So my store will look nicer and attract more people.”– Large size traditional grocery retailer, Indonesia

Source: Retailer depth interviews with medium and large grocery retailers in Indonesia, Thailand, the Philippines and Vietnam

Ensuring a good reach to both the shopper and the shopkeeper

and developing messages and solutions which resonate and drive

product support are the in-store executional drivers that make a store

segmentation and prioritisation truly effective.

In any of the solutions, attributes used to identify the segments

should be easy and practical enough to be gathered by a sales rep for

any store in the universe. Once able to understand the segment, the

sales team can work on the strategic priorities and related tactical

plans required within that segment.

SHOPKEEPERS SAY HOW MANUFACTURERS CAN HELP

Pilfering is a barrier to encouraging shoppers to browse in-store

They need greater support such as flexibility in payment terms for slow moving items

They want to grow but are frustrated by the size of their stores

Customers are becoming more conscious of quality and increasingly look at expiration dates

XX.XX.XX

Small retailers design their own promotions based on giveaways and promotional items from company salesmen to attract customers or push slow moving items

Retailers are skeptical of visible point-of-sales (POS) material and prefer branded shelf displays and coolers for the added advantage of storage

Review packaging, provide mockups, position products either near shopkeeper or front-of-store

Adapt payment schemes by sales rotation

Expand product range beyond physical store, leverage mobile and online technology

Develop a scheme to identify, sell-out or retrieval of perishable items

Provide more autonomy to shopkeepers in the mechanic and timing of promotions

Provide POS material that also provides solutions to store operations


MAXIMISING TRADITIONS IN SOUTHEAST ASIAAchieving productive store visits is a priority for sales force leaders

across the world, and especially so in countries which are still

dominated by traditional trade, and where there is an enormous

number of stores in the universe.

Efficiency can only be obtained through a rigorous approach that

involves a prioritisation of outlets, and a focused approach to

ranging and promotional activities within those outlets.

Too often, sales force knowledge is limited to store size, location and

performance when creating store clusters. While these attributes

are effective in directing sales efforts toward the right stores, they

provide limited insight into which strategic objective should be

reached in each cluster.

To develop and implement thorough, impactful strategies, it is

critical to incorporate shopper and shopkeeper dimensions into

segmentation parameters, either sequentially or simultaneously.

Traditional trade is a complex and highly competitive channel that is

here to stay for the foreseeable future. Understanding the dynamics

across the three critical pillars of shop, shopper and shopkeeper is

critical for manufacturers to become dominant market leaders.

2020

2012

1999

MODERN TRADEDEVELOPING MARKETS (ASIA)

TRADITIONAL TRADEDEVELOPING MARKETS (ASIA)

57%44%

27%

56%73%

43%

Source: Nielsen Retail Index, Share of Packaged FMCG Sales

TRADITIONAL TRADE IS HERE TO STAY


ABOUT NIELSEN

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Copyright © 2015 The Nielsen Company. All rights reserved. Nielsen and

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A B O U T T HE AU T H O R

CONNIE CHENG

EXECUTIVE DIRECTOR, SHOPPER SOLUTIONS,

SOUTHEAST ASIA, NORTH ASIA AND PACIFIC

NIELSEN

Connie helms Nielsen’s Shopper Solutions in Southeast Asia,

North Asia and Pacific. Based in Nielsen’s regional headquarters in

Singapore, Connie is responsible for growing the Shopper business

regionally–delivering insights and capabilities to help clients

successfully convert consumers into shoppers.

http://www.nielsen.com/apac