As we enter the second half of 2021—which has already seen much of the country ease pandemic restrictions—grocery retailers and manufacturers are focused on post-pandemic sales, optimal product pricing and assortment, and digital commerce, according to a new survey by SMARTeam, the consumer goods insights team of Advantage Sales, a division of Advantage Solutions.
The survey, Outlook June 2021, found that product manufacturers and retailers have differing predictions for dollar sales for the remainder of the year and where those sales will come from—online or in-stores—but they do agree on the transformative nature of digital commerce. Read on for these insights and more.
Nearly 6 in 10 manufacturers surveyed expect third- and fourth-quarter dollar sales to be higher than last year’s vs. 1 in 10 retailers. A majority of retailers (72%) expect dollar sales to be lower for the rest of 2021, and 18% says sales will be about the same.
Online vs. In-Store
The SMARTeam survey found manufacturers predict a much greater percentage of their sales moving online over the next few years than retailers do, with37% of manufacturers expecting their online dollar sales to be over 21% by 2025 and only 14% of retailers believing the share of their online sales will be that high.
“This difference may be attributed to manufacturers’ ability to sell their products on numerous online platforms, including Amazon and direct to consumers, and barriers to cleanly identifying and measuring online vs. brick-and-mortar sales,” the report notes. “Better understanding why there’s a difference in perspectives on sales made through digital platforms will identify weaknesses in omnichannel strategies and partnerships. This is an opportunity for brands, who will be more focused on online sales, to leverage their experience in driving e-commerce and help retailers achieve their goals for online growth.”
Cost of Goods
The report indicates that the cost of consumer goods will continue to rise. More than three-fourths of manufacturers have taken price increases this year or plan to in the future, the survey found. When asked what is driving these increases, 96% of manufacturers said increased product material costs, 92% said increased distribution costs and 82% said increased packaging costs. Increased labor production and shifting channel mix rounded out the top five reasons at 62% and 8%, respectively.
COVID-19 had huge implications on grocery demand and out-of-stocks. As a result, 65% of retailers are in the process of reducing SKUs, the survey found. While 15% said they have no plans to change their SKU count and 20% haven’t yet determined their plans, zero retailers indicated they plan to increase SKUs.
“With SKU reductions on the minds of retailers, brand innovation must focus sharply on category incrementality and closely align with shoppers’ new consumption habits and greater interest in a brand’s and product’s values and value equation,” noted the report, which found that 38% of manufacturers plan to turn to innovation and promotions to regain lost distribution, while 25% plan to discontinue items that have lost significant distribution or are being discontinued at retail.
Supply Chain Challenges
Manufacturers are more confident than retailers that supply chain challenges will be resolved in the second half 2021, with 78% of manufacturers expecting theirsupply level to be greater than 90% by the last quarter of thecalendar year vs. 44% of retailers who anticipate fill rates to bethat high.
With the pandemic accelerating the adoption of online grocery shopping and consumers indicating they will continue to shop this way, 89% of both manufacturers and retailers indicate they will incorporate e-commerce into their joint planning sessions with each other by the end of 2021. “Retailers’ expectations are high for next-generation joint business planning that includes digital shelf strategy, and manufacturers should be prepared to talk about investments in retailers’ online platforms and how best to show up online,” the report noted.
Meanwhile, third-party fulfillers such as Instacart and Shipt are rising in importance, with 37% of manufacturers putting them in their top five e-commerce priorities, vs. 43% who say they are somewhat important but not top-five priority and 20% who say they are not at all important.
The Outlook June 2021 report was based on responses by 69 consumer packaged goods manufacturers and 22 grocery retailers to online surveys conducted May 18-27, 2021.