Innovation is the lifeblood of SMEs and market growth alike, and these businesses, with their agility and talent for innovation, contribute disproportionately to this growth.
SMEs accounted for 22% of the value sales from innovation in the past 12 months to June, despite holding only 15% of the market share.
As a result SME fmcg manufacturers are outperforming the market, increasing their share and contributing to overall growth, even as value sales growth slows due to decreasing inflation.
But while they excel in innovation, they also face a significant challenge with product delisting. Although they hold 15% of the market value, their products account for 27% of delisted items over the past year. This imbalance, like a leaky bucket, highlights the unsustainable cycle of growing through innovation, only to lose out due to poor distribution retention. Given the challenges SMEs face with growth strategies like sales promotions, distribution retention becomes crucial.
Distribution retention is low-cost, unlike sales promotion which can reduce profit margins. While displays can help offset promotion losses, large manufacturers have an advantage with their high sales volumes, scale, and bigger budgets to secure prime off-shelf display spots.
Big manufacturers also have a clear advantage in distribution retention, as shown by their performance. They hold 49% of the market value, yet their delisted products account for only 8.5% of the total delisted value over the past year.
The difference in distribution retention between SMEs and large manufacturers is striking. Big manufacturers succeed by effectively driving engagement with retailer customers during the range review and refresh process, and by leveraging data to support and influence decisions. This strategic use of data helps them secure and retain product distribution, often at the expense of other competitor products.
Today, retailers and manufacturers use advanced analytics to optimise product ranges, but the key factor for choosing products is still their rate of sale, with decisions often made on a one-in, one-out basis.
For SMEs, simply understanding the market rate of sale for their products and those of their big manufacturer competitors is crucial. Using robust data to support their case with retailer customers can help them retain listings, helping to plug the leaky bucket, build economies of scale and sustain growth.
Closing the distribution retention gap with bigger players is more achievable than other growth strategies like sales promotions. The key is accessing market sales performance data, which many SMEs lack but is essential for long-term growth.
The main obstacle for SMEs is often the cost, as many lack the budget for market sales performance data. However, with the emergence of affordable self-serve online data portals offering detailed SKU-level reports, SMEs now have a chance to compete with larger counterparts.
If data scarcity is hindering SME growth, this new opportunity can help them plug the gaps and thrive.
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