CPG manufacturers, retailers tackle labor and other challenges in shifting market

Labor challenges are having an in-store impact on consumer packaged goods (CPG) manufacturers and retailers, according to the August 2023 Manufacturer & Retailer Survey by sales and marketing firm Advantage Solutions.

Seventy-three percent of retailers polled said they plan to increase self-checkout lanes over the next six to 12 months, with 19% expecting a significant expansion of self-checkout and 54% anticipating a small addition of self-serve lanes, Irvine, California-based Advantage said in its report, produced in collaboration with NielsenIQ. Meanwhile, 24% aren’t planning any changes in their self-checkout lanes.

When asked why self-checkout lanes are being added, retailers cited shopper preference (46%) as the chief reason, but nearly the same percentage named labor availability (23%) and cost-effectiveness (19%). Twenty-three percent indicated that self-serve lanes will speed checkout time.

Retailers indicated they also plan to address labor availability and costs by reducing in-store labor, with 52% expecting to do so, Advantage’s report said. Other strategies include raising store hours per associate (21%), decreasing store operating hours (17%) and de-emphasizing their focus on shelf status (9%).

Source: Advantage Solutions August 2023 Manufacturer & Retailer Survey

On the manufacturer side, companies surveyed pointed to a lack of in-store labor as a big hurdle in maintaining in-stocks, with 69% citing that situation as a key problem. Not far behind as an obstacle in on-shelf availability was a lack of planogram oversight and execution, named as an issue by 59% of manufacturers. Other stumbling blocks cited included supply shortfalls (34%), retailer warehouse inventory (30%), poor forecasting (42%) and little notice on short days of supply (33%).

Advantage’s study noted that short-supply notice from retailers is a sticking point among manufacturers. Sixty-three percent of manufacturers polled named retailer warehouse and store inventory fluctuations as the main factor behind forecasting inaccuracies. Other causes cited included promotional or everyday price elasticities (57%), channel shifting (44%), system and technology challeges (41%), macro changes such as SNAP (40%) and lack of people resources (39%).

The majority of retailer respondents said they are indeed decreasing their days of supply versus a year ago, with 20% doing so significantly and 43% by a little, while 23% have made no change.

“Manufacturers and retailers are looking to do more with less in today’s operating environment while holding fast on price and ensuring product availability,” Jill Blanchard, president of enterprise client solutions at Advantage Solutions, said in a statement.

Source: Advantage Solutions August 2023 Manufacturer & Retailer Survey

A key macro change involves a decreased benefit payout for the Supplemental Nutrition Assistance Program (SNAP) that went into effect earlier this year, and retailers and manufacturers appear misaligned on this issue.

A plurality of retailers have seen a net sales impact of 3% to 5% in the last three months, and expect the same in the next six months, from SNAP benefits adjustments. Yet most manufacturers don’t plan any changes in response in terms of lower price-point products, more resources for lower priced retailers, temporary price reductions, everyday low pricing, a greater value brand focus or forecast adjustments, Advantage reported.

To drive more sales overall, however, 50% of manufacturers plan to boost promotions in the next six months, with other strategies including more brand marketing (cited by 41%), new product launches (38%), in-store retail merchandising investments (28%), increased in-store marketing (21%), shopper analytics investments (10%) and everyday price reductions (5%).

Source: Advantage Solutions August 2023 Manufacturer & Retailer Survey

And it appears they’re on target with what retailers are seeking. Those polled by Advantage said that, over the next six months, they would like to see more promotions (79%), in-store retail (32%), partner promotions (29%), display vehicles (21%) and in-store marketing (18%) from manufacturers to help improve the shopper experience.

Seventy-two percent of retailers also are expecting more innovation from manufacturers over the next six months. And manufacturers are obliging. Ninety-eight percent aim to usher in innovations at premium (56%) and mainstream (42%) price points, with a small percentage (2%) eyeing the value tier. Top areas of focus for innovations include health/wellness and indulgence/luxury offerings, as well as sustainable, convenience, natural/organic, multicultural and value items.

“Manufacturers are revamping their offerings with a focus on premium products,” Blanchard observed, “and retailers are ready to embrace a wave of innovation to meet evolving consumer demand and convert shoppers into buyers.”