This article is divided into two parts. The first explores how the economic environment impacts the purchasing decision of the trade with the consumer goods industry. The second part analyzes the implications of changes in the competitive environment in terms of the needs of supermarkets, as well as the performance and quality of the distribution service practiced by the industry.
The analyzes that follow are based on the results of the Benchmark Survey – Distribution Service, conducted periodically since 1994.
General information
The Benchmark Survey – Distribution Service, carried out periodically since 1994 by the Center for Studies in Logistics and later by the ILOS, has been sponsored by leading industrial companies in their respective sectors.
The research scope considers about 600 interviews, carried out in five Brazilian capitals (São Paulo, Rio de Janeiro, Curitiba, Belo Horizonte and Recife), considering three categories of products: perishable food, non-perishable food and hygiene and cleaning.
The methodology evaluates eight dimensions (operationalized through their respective distribution service attributes): Product Availability, Order Cycle Time, Delivery Time Consistency, Delivery Frequency, Delivery System Flexibility, Failure Remediation System, Support Information System and Physical Delivery Support.
THE ECONOMIC ENVIRONMENT
The year 2008 represented the end of a five-year cycle of expressive economic growth, which had an average annual increase in the Brazilian GDP of approximately 4,7% per year. This was undoubtedly the longest period of sustained economic development in the country since 1994 – the beginning of the historical series for this research, which coincided with the implementation of the economic stabilization plan, which reduced inflation to reasonable levels. However, in view of the current global crisis, the country has experienced an adverse situation, which has implied a reduction in its economic activity since the last quarter of 2008, with potentially negative impacts on agents belonging to the supply chains of consumer goods.
Between 2004 and 2008, as shown in Tables 1 and 2, the country's economy grew by around 26%, the wage bill increased by 55% and supermarket sales grew by 17% over the period. The virtuous cycle of this period transmitted positive signals along the consumer goods supply chain. The growth of the economy generated wealth for the consumer, which in turn boosted supermarket sales, which consequently boosted industrial production.
However, despite the current global economic crisis, there were no impacts as negative as expected on the consumer goods supply chain in 2009, as shown in Table 1. Despite the stagnation in economic growth as a whole, it is observed that supermarket sales increased by approximately 5,5% in 2009. This certainly occurred due to the expansion of Bolsa Família, the increase in the minimum wage by 12% and the wage bill by approximately 2,5%, as well as by the consumption incentives that the Government implemented throughout 2009.
That is, government policies to face the crisis have had positive results for the consumer goods supply chain. However, with the reduction in the growth rate of workers' income over the last three years and a negative situation in other areas of the economy, a change in the consumer's purchasing profile is expected, which would be giving preference to more affordable products in terms of price.
It is up to industries to reflect in order to better position themselves in the market due to the dynamics of the country's economic situation and its impacts on commercial relations in the supply chain.
Table 1 - Evolution of rates¹ Brazilian GDP growth rate, exchange rate, average real income of employed persons, INPC and real supermarket sales
*Forecast
Table 2 - Evolution of monthly supermarket sales³
Figure 1 presents the logic of the physical flow of goods between the industry and the consumer, which can be done directly, through a wholesaler or through a retail chain. This last case is the focus of the research carried out. This section will address the impacts of changes in the economic environment on commercial relations between participants in the supply chain of consumer goods, as illustrated in Figure 1.
Figure 1 – The consumer goods supply chain
Figure 2 shows how the relative importance of the purchasing decision variables² of the retailers with the industry was changing over the period considered by the research.
Figure 2 - Evolution of the purchasing decision process from commerce to industry
It can be seen that in the last two years there has been a recovery in the importance of the distribution service in the retailers' purchasing decision process, matching the Promotion and Advertising variable. It is worth mentioning, in Figure 2, that the purchase decision is centered around 60% on the Price and Product variables, the lowest historical relationship with the other variables, Distribution Service and Promotion and Advertising.
The growing importance of the distribution service, between 2006 and 2008, can be understood insofar as the increase in the purchasing power of the population (from 8,1% in 2007 to 3,4% in 2008 – see Table 2), when translating into greater consumption, made the trade place greater emphasis on the effort to replenish stocks by the industry to its shelves, concomitantly with a more efficient service in terms of consistency, with lower costs.
Given the changes in the economic situation, it is expected that, at the end of 2009, the price will gain strength to the detriment of the product, as occurred in the period between 2001 and 2003.
This could occur in response to changes in the pattern of consumer demand, by opting for more affordable products, considering moderate expectations in terms of their family budget. It is also likely that the distribution service will gain ground as a result of greater demand from the supermarket trade to reduce industry costs.
Conclusions
As noted in previous editions, the economic environment has a strong infl uence on trade relations between supermarkets and consumer goods industries. Therefore, it is important for industries to realize how the current global economic crisis has brought significant impacts to the market, requiring executives to adopt creative approaches to mitigate negative consequences on business.
The credit reduction in 2009 has put the relations between supply chain agents in check, due to the risk of disruption in the flow of products and services. This is perhaps a very propitious moment to evaluate the introduction of collaborative initiatives to minimize the negative effects of a market in crisis.
The current picture, in economic terms, has pointed to an improvement in consumer purchasing power in 2009, contrary to what was expected at the beginning of this year. This has certainly resulted in a positive link in trade relations between the consumer goods industry and the supermarket sector, which has resulted in a substantial increase in retail sales.
However, the reduction in the rate of increase in purchasing power observed since 2007 (see Table 1) will inevitably imply changes in the pattern of consumer demand, tending to prioritize products with more affordable prices. For its part, commerce will not only have to adapt its purchases from industry, but will also tend to demand a more efficient distribution service from industry, in an attempt to compensate for a probable reduction in its results.
It is important to point out that the distribution service provided by the industry represents an opportunity to differentiate itself from the competition. This observation is consistent with the observed increase in the relative importance of the distribution service in the retail purchasing decision process.
BIBLIOGRAPHY
Fleury, PF; Lavalle, CR. Evaluation of the physical distribution service: the relationship between the consumer goods industry and the wholesale and retail trade. Management and Production, vol. 4, nº 2, August 1997.
Christopher, M.. Logistics and Supply Chain Management: strategies for reducing costs and improving service. Prentice Hall, 1998.
Bowersox, DJ; Closs, DJ. Business Logistics: the supply chain integration process. Atlas publishing house, 2001.
¹Source: Economic Conjuncture, IBGE, RAIS/MTE and ABRAS
²Interviewees were asked to distribute one hundred points among the four purchasing decision variables considered (product, price, physical distribution service, promotion and advertising). A higher score indicates greater relevance. The result indicates the relative weight of these variables in the decision-making process for trade purchases with the industry. In order to maintain data compatibility, the analysis that follows only considers São Paulo and Rio de Janeiro, as these
they are the only markets that were the object of research during the 12 stages of the same, between 1994 and 2006. The markets of Recife, Curitiba and Belo Horizonte were added in the second, third and fourth phase of the research, respectively.
³Source: ABRAS
