Sharing retail trading data

Retail data sharing in one sentence

In one informal sentence:

Every retailer should share limited but detailed trading data with its suppliers so that each supplier can understand how its actions impact the retailer’s ability to meet shopper expectations and choose to act in their mutual interest.

Many retailers start with an assumption that ‘monetising data’ means selling that data for a fee but should, instead, consider the total value of the data to their value chain; how can suppliers use data to improve their ability to act in the mutual interest of both parties. For a supplier to perform optimally they should be able not only to meet the expressed needs of the retailer - by accepting and fulfilling received orders - but also to advise the retailer on opportunities for improvement through improved distribution, stocking policy, presentation and offer, to the extent that market regulations allow such collaboration.

A more complete but more complex version:

Every retailer should share detailed timestamp/item/location trading data for ‘supplied items’ with every trading partner (supplier) so that each supplier can understand how its actions in respect of pricing, supplying and promoting those items impacts the retailer’s ability to meet the expectations of its shoppers, whilst managing mutual commercial risk; maximising availability and margin, simultaneously minimising working capital and waste.

Retail data sharing in 1,000 words

The case for retailer data sharing is based on the premise that retailers and their suppliers share a mutual interest in meeting the expectations of shoppers. That is, consumers (shoppers) buy products from retailers because it is more convenient for them than dealing directly with producers (suppliers) - and producers supply retailers because it’s more commercially effective than serving consumers directly. This is critical to the existence of every retailer; to operate as a ‘middleman’ you must provide demonstrable value to both buyer and seller.

To justify this position in the market, in the face of increasingly cost-effective direct-to-consumer options enabled by new technologies and business models, retailers need to align their operations with those of their suppliers to ensure that they remain the most effective intermediary, providing the best experience, between consumer and producer.

Those retailers that fail to provide (one of) the most effective experiences for shoppers and/or suppliers will cease to operate.

It follows that retailer and supplier must collaborate to create a shopper experience which allows both retailer and supplier to meet shopper needs in a mutually satisfactory manner; both generating profits, minimising risk and meeting other expected criteria such as ethical norms (e.g. minimising waste), regulatory control (e.g. no price collusion) and safety (e.g. product recall). However, large retailers - in common with dominant players in other markets - have displayed a tendency to take their position in the marketplace for granted, assuming that they can determine unilaterally how they operate with suppliers. Retailer dominance over the majority of their supplier base has resulted in friction, inefficiency and imbalance that has led to regulatory controls in some markets.

Creating a shopper experience where appealing items, priced attractively, with appropriate availability and shelf-life, requires close coordination between retailer and supplier; suggesting the need to share as much appropriate information as possible in order that both parties benefit from ‘just-right’ supply i.e. just enough stock in the right place, at the right time, so as to meet shopper expectations of availability, presentation and usage life without excessive working capital or undue waste (from holding excessive ‘safety stock’) so that both retailer and supplier operate profitably in their relationship.

As a minimum, this requires suppliers to be able to monitor the quantity of every item that they supply (‘supplied items’) to every location (store, depot etc.), and moving between locations (supplier-to-depot, depot-store, store-to-shelf, shelf-to-till etc.) on a regular (e.g. daily) basis. Without this information, suppliers are ‘working blind’ - trusting that the retailer has perfect processes (analysis, decision-making and execution) to optimise for mutual benefit.

Some suppliers do, indeed, believe this of their retailer customers - usually to their detriment, and often to the detriment of shopper experience with resulting impact on brand perception, the quantity of items sold at full price and, hence, profitability of both retailer and supplier.

Enlightened suppliers, however, believe that they should share the responsibility for shopper experience with their retailer customers and they require detailed, accurate, timely data from which to model shopper demand so that they can plan efficient supply and execute effectively.

Specifically, suppliers need to understand actual supply and demand, in a timely manner, as well as retailer predictions about short- and long-term future demand, so that they can plan and execute aligned supply. They need to understand sales, stock and service-level (order-to-supply ratios) data in sufficient detail to develop their own models of demand - across all of the major retail customers in their market - and the impact on demand from both external (weather, seasonality, special events, competitive offers) and internal factors (supply, price, retailer offers). Supplier requirements for timeliness, frequency and time-grain of data will be closely tied to the replenishment frequency of their ‘supplied items’; for fast-moving consumer goods in the grocery sector, hourly data might be ideal to ensure efficient supply, whereas in slow-moving, high-value categories, a weekly cadence may be sufficient.

When retailers limit the ‘supplied item’ data that they provide to their suppliers they impact the efficiency of their own operations. Yet many retailers:

• withhold trading data as proprietary;
• limit the use to their provided reporting and data analysis tools;
• restrict permitted uses of downloaded trading data; and/or,
• charge fees for trading data.

There is a strong argument for retailers to charge their suppliers for insights and trading data beyond ‘supplied items’ - in this regard, the retailer can provide a supplier with a unique picture of the landscape in which its items are purchased. This is an accepted norm in many retail markets where ‘monetising data’ implicitly means charging for data (and derived insights). Suppliers may be extremely interested in the performance of competitor products (‘category’ data) and in the behaviour of shoppers (‘loyalty’ data); paying retailers for this perspective - which the supplier cannot gain without retailer assistance - makes commercial sense for both parties.

However, restricting ‘supplied items’ trading data - on any of the bases described above - reduces the likelihood of supplier and retailer aligning operations, limiting both parties’ ability to derive value from data in pursuit of core operational efficiency.

Furthermore, some limited amount of additional information - for example, pseudonymised sales quantity and discount information for competitor items - enables suppliers to model the impact of competitor offers on ‘supplier item’ demand, helping to avoid overproduction, over-supply and ensuing waste.

Retailers that share rich, detailed, timely, accurate ‘supplied item’ data with their suppliers find that many suppliers are able to:

• increase on-time, in-full (OTIF) deliveries;
• propose stocking policy improvements to optimise stockholding;
• react faster to over- and under-performance - especially important during promotional periods;
• advise on distribution and ranging; and,
• help simultaneously reduce waste and increase availability.

Not all suppliers are able to analyse this data for maximum value but, for those retailers accepting as axiomatic their mutual interest in meeting shopper expectations, sharing ‘supplied item’ data with every supplier is the most effective way to monetise that data.