Perhaps not the sexiest part of selling private brands, but the consultancy Solutions for Retail Brands, which goes by S4RB, found that retailers without updated SAP technology in their supply chains or master data management systems for private brands could cost the retailers millions of dollars.
S4RB, which is made up of British and American tech consultants, found that a 10% loss of productivity from not having proper systems in place across private brand teams could cost more than $5 million annually. And the number doesn’t factor in the increased risk of failed product development, longer time to shelf, and the compliance and product safety risks directly associated with an inefficient system in place between retail teams and private brand suppliers.
S4RB recently rolled out a new way to benchmark private brand performance with its Consumer Experience Score, looking at packaging, taste, sustainability and more.
“The major grocers [who] are great at developing their private brand strategy and availability issues in the current crisis have brought millions of new customers to private brands,” said James Butcher, S4RB CEO. “Many retailers have seen unprecedented sales growth. But with that also unprecedented costs. The real challenge is getting the new systems, new processes and new management structures to operate effectively, and this is costing them huge amounts of money.”
The S4RB insights stem from a recent case study on a U.K. grocer with a large own brand portfolio. The retailer needed to upgrade its master data management system and how it communicated with its suppliers systematically.
S4RB works with such retailers as Asda, Walgreens Boots Alliance, Walmart, Wakefern, Waitrose, John Lewis and the Co-Op. The consultancy said Lidl’s abandoning of its $540 million attempt to implement an SAP technology across its supply chain in 2018 cost it millions of dollars and warns that retailers could do the same, especially during the pandemic where social distancing and lockdown demand an even more efficient and in sync communication.
“Every retailer is currently restructuring their commercial and private brand teams and the pressure is on to deliver on this investment,” Butcher said. “Private brands are increasingly where retailers are doing battle. Implementation projects range from Master Data Management (MDM) system to brand compliance in addition to change projects and continuing to maintain supply during challenging times.”
The case study from S4RB said that it’s common for spec systems to only have 10-20% accurate data in them.
“The most important part of a successful implementation or change projects such as nutritional improvement or packaging reduction is engaging with suppliers and this is where many retailers are falling behind,” Butcher said. “The key is to create greater accountability and ownership on engagement with suppliers to create a leaner own brand operation using the right supplier engagement tools to deliver this engagement at scale.”
He continued: “Most retailers cannot physically cut anyone else from their commercial and own brand teams so a failure to deliver on own brand strategies could put senior management in the firing line.”