Walmart’s Acquisition of Jet.com: What Does It Mean for CPGs?

Walmart, the world’s largest brick-and-mortar retailer, recently purchased e-commerce site Jet.com for $3.3 billion. The deal expands Walmart’s online presence and marks the largest e-commerce acquisition in U.S. history.

Both Walmart and Jet have struggled to compete with Amazon, even as retailers’ online sales continue to grow exponentially. By acquiring Jet, Walmart gains access to the young company’s customer base, sleek portal and sophisticated pricing algorithms. The move is just one of Walmart’s initiatives aimed at boosting its e-commerce sales.

The trend
So why should this acquisition matter to consumer packaged goods (CPG) companies? Simply put, because it’s an inflection point. It’s noteworthy when the world’s largest retailer invests billions in a new online platform while also closing hundreds of physical stores.

In 2013, online purchases accounted for just 1% of CPGs’ total sales for packaged foods and 3% for non-food items. Future estimates skyrocket: online sales are estimated to comprise up to 30% of total CPG sales growth in the next five years, as millennials and mobile devices continue to fuel e-commerce sales.

CPGs must take note and proactively get ahead of this trend.

The warning
As the shift to online purchasing accelerates, now is the time to act. History shows that companies that fail to recognize and adapt to new trends lose out big to their nimbler competitors.

Consider Microsoft’s late arrival to the mobile space. Apple launched the iPhone in 2007; Google launched its Android handset in 2008. Five years later Microsoft finally joined the mobile revolution by purchasing Nokia for $7.2 billion. Investors roundly – and rightly – criticized the move as being too late. Unable to gain market share, Microsoft cut over 30,000 employees from its mobile teams over the ensuing years, effectively shuttering the division. The company’s failed attempt to catch up cost billions of dollars outright and likely billions more in missed opportunities.

While CPGs operate in a different industry, the warning is the same. Failing to quickly recognize and capitalize on changing trends can have devastating consequences.

What now?
Successful CPGs recognize the evolving landscape and are leveraging direct-to-consumer e-commerce channels. With Jet no longer a standalone alternative to Walmart and Amazon (and their draconian pricing agreements), here are six key questions for CPGs to ask:

1. What is Walmart’s next move with its changing e-commerce platform?
2. Should we deepen our partnerships with Amazon and Walmart to expand our online reach, with smaller profit margins as the trade-off?
3. Or should we double-down on partnerships with smaller retailers, where pricing is more favorable?
4. Which CPG company will make the next e-commerce move? What will it look like?
5. How will we sell directly to consumers online – through a homegrown sales platform or through a third-party portal?
6. How will we attract more millennials to our products and online portal?

As you ponder these questions and refine your e-commerce strategy, consider the following recommendations to boost online success:

1. Build strong account management teams for top online partners.
Industry-leading CPGs are four times more likely to create dedicated account management teams for their top online partners. So look to establish account teams in the cities where your key partners are based. This lets you strengthen relationships, respond quickly and coordinate strategic planning.

2. Create next-generation e-category management.
Top CPGs are revisiting how they manage online categories, with a keen focus on product assortment, pricing strategies and online marketing.

To deepen relationships, consider offering exclusive items only available via a partner’s website. For better promotion, press online partners to add your products to “favorites” lists, bundled deals and personalized landing pages influenced by the customer’s unique search and purchase histories. Also consider multi-channel marketing campaigns that include social media monitoring to glean insights about consumers’ preferences.

3. Establish a high digital quotient (DQ).
Fostering a high digital quotient takes effort and planning. Over 90% of online leaders fully integrate digital initiatives into their business strategy, and for good reason: companies with high DQ scores averaged a 42% total return to shareholders over the past five years, versus 16% for low-DQ companies.

If you haven’t done so already, ensure that your digital teams have the necessary budget, staffing and executive support to achieve your e-commerce strategy. Also emulate top tech companies by fostering a culture of thinking big, moving fast and being fearless when it comes to new ideas.

As the e-commerce space grows even more competitive, CPG companies cannot afford to be behind the curve. Gathering solid competitive intelligence can help you understand the landscape, find effective online sales channels and maximize your long-term success. In sum, these proactive efforts can help you get – and stay – Out in Front® of your competition.

REFERENCES

Alldredge, Kari; Newaskar, Puneet; Ungerman, Kelly (2015). The Digital Future of Consumer Packaged Goods Companies. McKinsey & Company.
http://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/the-digital-future-of-consumer-packaged-goods-companies

King, Hope (2016). Microsoft’s Costly Bet on Nokia Will Mean More Job Losses Than Previously Expected. CNN Money.
http://money.cnn.com/2016/07/29/technology/microsoft-layoffs-july-jobs/

Peterson, Hayley (2016). See if Your Local Walmart is Shutting Down. Business Insider.
http://www.businessinsider.com/list-of-walmart-stores-closing-2016-1

Walmart.com (2016). Walmart Agrees to Acquire Jet.com, One of the Fastest Growing e-Commerce Companies in the U.S.
https://corporate.walmart.com/newsroom/2016/08/08/walmart-agrees-to-acquire-jet-com-one-of-the-fastest-growing-e-commerce-companies-in-the-u-s

Managing Expectation Series: 5 Tips to Improve Client Understanding (Tip #5)

It’s our final post of the series! If you haven’t already, be sure to read our first, second, third and fourth posts post in the series for more tips.

Tip #5: PROFILE KEY CLIENTS TO ADAPT TO THEIR COMMUNICATION STYLES

It’s important to get to know your clients, particularly their communication styles. There are four basic styles: analytical, driver, amiable, and expressive. Use the table to profile your clients’ primary and secondary styles of communicating – and profile yourself. This will go a long way toward being able to better manage client expectations and promote good communication. It will also allow you to flex your own style and method to make the client feel comfortable and help both of you foster a deeper, mutually beneficial relationship.

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If you have any feedback on this series, be sure to leave us a comment or send us an email. And, don’t hesitate to reach out if we can be of any assistance to you or your business!

Managing Expectation Series: 5 Tips to Improve Client Understanding (Tip #4)

We’re nearing the end of our five-part series. There’s no need to go in order, but be sure to get caught up with our first, second and third posts in the series for more information.

Tip #4: AGREE ON REALISTIC DEADLINES, AND COMMUNICATE REGULARLY

Timing is (almost!) everything. It’s vital to agree on realistic time frames for completing a project. This is true in most fields, but particularly so in CI, which depends so heavily on human source availability (primary sources).

Most of the information your team obtains is not sitting out there on the internet – it’s just not available from secondary research sources. Primary source research is what distinguishes CI from standard market research and information monitoring. Key sources have travel schedules, meetings, vacations, and other factors that may not make them available on your project’s timeline.

For example, workers in parts of Europe take longer holidays than U.S. workers typically do. There are some times of the year when it can literally take 4 weeks for sources to return a call. If your client wants work to be completed in 3 days and your team says it needs 5 days, ask for the 2 extra days. CI directors need to explain to clients that if they must have the information in the shorter time frame, they may have less than optimum quality in results (see our second post in the series for more information).

Educate the client that having 3 days to complete a project does not translate into having 3 full days to conduct research and prepare analysis. A timeline must include time for your team to strategize, conduct baseline secondary source research, engage in primary source research with sources that are available, analyze the findings, synthesize the results and implications, and write the report.

CI directors: Don’t bite off more than you can chew. If you notice your team is taking in more work than it can deliver while maintaining a high quality level, first, recognize that this is a good thing. Second, get outside help. Third, delay start dates and/or extend deadlines. It’s better to be open with clients that your team is currently swamped or over-capacity, than to take something on and not deliver.

To avoid taking shortcuts in your research process or compromising quality of results, ensure a realistic deadline for completion.

But it’s not enough to clarify deadlines: you have to let your clients know you are meeting them. Clients get edgy and nervous if they don’t see the status of a project. That’s human nature. Communication throughout a project helps set the level of expectations upon delivery of the final report.

Don’t let clients feel ignored. Some of the best advice I’ve ever received was, “Call the client before she calls you.” Give updates. Share preliminary findings, noting that it is subject to change and should not necessarily be disseminated yet.

If it looks like you won’t be able to obtain certain information, that’s okay – but be sure to let the client know early enough, not the day before the project is due.

If, during the course of the project, the client wants to change the scope (“scope creep”), then determine how far you are willing to go to meet the request, and discuss it with the client. If necessary, develop a formal change order to confirm expectations. Scope creep can happen when a client says, “While you have your sources on the phone, can you also ask them about …?” Inform them that this may be possible. But, along with any changes, the client should be made aware that the fees and timing could be affected depending on what exactly is modified in the project scope.

Our final post in the five-part series will launch next week, so be sure to check our blog then!

Pharma CI Recap: “Building Strategic Intelligence for Emerging Markets: Best Practices and Lessons Learned in Latin America”

By Aaron Derdowski, Ph.D., Associate Engagement Manager

While several important sessions were offered at Pharma CI, the collaborative presentation from Darien Kadens of Lupin Pharmaceuticals and Paul Kavanaugh of ShiftCentral was of particular interest.

The Pharmaceutical Industry has shown an increased interest in emerging markets of late, and Latin America is an example of a dynamic, diverse, and unique example. Lupin Pharmaceuticals, a top generics player globally, recently established a Market Intelligence (MI) program in the region and shared the example as a Case Study in best practices.

The presenters laid out a roadmap of these best practices. Here are the highlights:

1. Begin with what type of MI organization you seek to establish. Preclinical? Pipeline? Sales? Business Development? Benchmarking? Choosing one as an anchor point will define clear expectations while still allowing for growth in the future.

2. Establish your plan, and update frequently. What is your mix of primary, secondary, communication? What is your budget? Who are your stakeholders?

3. Seek buy in from leadership. Set expectations, update leadership regularly, and communicate frequently in both directions.

4. Establish a foundation of strategic intelligence. This includes a focus on only most relevant and actionable information, empowering stakeholders, and knowing your audience.

5. Define how intelligence will be gathered. Human selected, automated, curated?

6. Define preferences for how intelligence will be delivered, including timing and channel preferences for stakeholders.

Several lessons were learned while establishing a MI platform in an emerging market, including:

• Think regionally, connect locally
• Timing differences are more impactful than time differences
• Lean on secondary intelligence to corroborate primary intelligence
• Build a network of MI partners that are well-connected in all the countries in your emerging market of interest

In summary, having a well thought out, structured plan is key to establishing a Market Intelligence or Competitive Intelligence program in an emerging market. It is important to take into account both language and cultural challenges, and leveraging local partners to overcome challenges is imperative.

Pharma CI Recap: “Understanding Laboratory Testing and the Laboratory Landscape for Targeted Therapy Launches”

By Travis Smith, Ph.D., Associate Engagement Manager

Pharma CI is jam packed with sessions and information. The most interesting session I’ve attended focused on the rising importance of biomarker testing for new therapies, and was presented by Mark Reis from the Diaceutics group.

Here are a few key points and my personal takeaways from the presentation:

  • According to Reis, around 75% of the current pipeline across pharma consists of targeted therapies – all of which will require some type of specialized assay for determining which patients will benefit from a drug. This clearly will increase the importance of these assays in terms of cost, efficiency, and accuracy; but will also dramatically increase the importance of external laboratory testing for many providers.
  • For pharmaceutical stakeholders, understanding how laboratory testing and diagnostic assay development and actual day-to-day use in laboratories will work for any therapeutic agent will be critical to driving and sustaining uptake. Even for a very effective therapeutic agent, requiring prescribers and laboratories to rely on tests that are too costly, too difficult, or take too long to perform will negatively impact both perception and actual use.
  • Cost pressures often drive laboratories to develop “laboratory developed tests” that are homebrew versions of commercially available diagnostic tests. These tests, which vary from testing laboratory to testing laboratory; introduce confusion and inconsistency into the prescriber-patient-laboratory relationship – and make it very difficult to compare assays for the same condition across different testing laboratories. However, to maintain a profitable operation structure laboratories often have no choice, as payers reimburse at a price point below the cost of commercially available tests.

In summary, there are two important trends that are moving the industry toward a dangerous situation: more and more new drugs will require accurate, timely, consistent, and cost-effective testing while price and personnel pressures on laboratories are driving them to use non-standardized assays that vary from laboratory to laboratory. For pharma companies it will become critical to fully integrate and plan for these realities as they bring new targeted therapies to market. Availability of cost-effective, standard, easy-to-use diagnostic assays supporting new targeted therapies will likely serve as a competitive differentiator as more specialized agents come to market.

Managing Expectation Series: 5 Tips to Improve Client Understanding (Tip #3)

We’re in part three of a five-part series. Be sure to read our first and second posts to get caught up!

Tip #3: DEVELOP A SPECIFIC PROJECT SCOPE – AND DISCUSS PROJECT FEASIBILITY

Try to avoid projects where the scope is to “get me whatever you can.” Get as detailed a definition of the scope as you can. What is the problem the client is trying to solve? It’s your job to understand why the project is necessary. This is particularly important when working with senior executives. Take a more consultative approach, and ask questions like these:

  • What decisions will be affected by possessing the information you seek?
  • Will the results, directly or indirectly, help save or make the company money or save the company time?
  • What do you need to know, vs. what would you like to know?
  • What is driving the need for this particular project at this particular time?

As in golf, you have to see the shot to make the shot. Even if you do see the shot you won’t always make it – but it sure increases your odds. Likewise, intelligence providers must understand the objective so they can ensure that the right questions are being asked and the right analytical framework is being used.

Another important factor in managing client expectations is to assess whether the project can even be completed. Not every question about the competition or industry can be answered. If it could be, your professional services likely would not be needed.

Be forthright: If you don’t think you can get an answer or valid perspective, say so. This is particularly true when you are working with a senior executive. Although there might be some disappointment from the client when told that what is desired cannot be obtained, disappointment is better at the start of a project than at the end.

However, you can significantly minimize the frustration clients might feel when told what they want cannot be obtained, by immediately sharing that some alternative and equally valuable insight can be acquired or developed.

Later this week we’ll share our fourth tip on deadlines and communication, so be sure to check our blog for an update.

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