Retail Universe

Among the various classes of goods, Fast Moving Consumer Goods (FMCG) stands out as the most complex in terms of distribution. At the broadest level, as shown in Exhibit 29.5, FMCG distribution can be categorized as the upper trade and the lower trade.

The upper trade, which refers to the organized sector or modern trade, comprises store formats such as supermarkets like Walmart, Tesco and Carrefour; convenience stores like 7-Eleven, Circle K and Lawson; and personal care and health outlets like Boots, Walgreens and Watsons.

On the other hand, the lower trade consists of a diverse array of traditional, independent stores, including provision stores and sundry kiosks.

Notably, despite representing a mere 1.6% of the total number of stores in Asia based on Nielsen’s estimates, the upper trade accounts for a significant 53% of total FMCG sales in terms of value. In the more developed markets of Europe, North America and the Pacific, the contribution of the upper trade to overall FMCG sales is substantially larger.

Tracking FMCG products presents various challenges. Accessing certain locations, including schools, offices, tourist destinations, hotels, bars, construction sites, army camps, and transient hawkers, can be difficult for the service provider. Moreover, there may be instances where chain stores decline to participate in the tracking service. In large countries like China (as shown in Exhibit 29.6), the cost of covering the entire geographic area can be prohibitively high, resulting in the exclusion of less densely populated provinces and villages from the service coverage.

The retail universe is therefore a subset of the real world and should be clearly defined by the service provider. This definition typically provides an outline of the channels and geographical areas that are covered as well as those that are excluded.

The shortfall in the retail index sales estimate for a product is the called the coverage gap (refer to Exhibit 29.7). It is usually represented as a ratio — i.e., the measured purchase volume as a proportion of the firm’s total shipments within the market.

The shortfall is due to two factors:

• The difference in the product’s sales area and the agency’s universe, and
• The difference between agency’s sales estimate and the brand’s shipments to the agency’s universe. The ratio, agency’s sales estimate/ shipments to universe, is referred to as pick-up.

Analysis of coverage is covered in detail with some case examples, in Section Coverage Analysis.