Examining innovation vs. new products
BOSTON — Attendees of the “Innovative vs. New” Insight Session at NACDS Total Store Expo Sunday morning were given a preview of a white paper — to be published later this year by the NACDS Retail Advisory Board and Nielsen — on the role innovation plays in driving sales across the front end, and how better strategic collaboration around new product launches can drive mutual benefits for both suppliers and retailers.
“Are new items really the lifeblood of our industry?” asked Alex Yakulis, EVP business development at Crossmark, who opened the Insight Session. “One of the things [the Retail Advisory Board] talked about is whether [new product launches] really drive category sales.” With the amount of product churn within any given category, and the investment retailers and suppliers make into discovering and presenting new items, respectively, do new products actually move the growth needle?
To find out, the NACDS Retail Advisory Board partnered with Nielsen to better understand the contribution new products make to any given category, and how retailers and suppliers can connect on greater category growth through collaboration.
According to a survey by Nielsen, every single executive in the industry responded “yes” when asked if new items were the “lifeblood” of the retail industry. Yet, new product launches account for between 5% and 10% of total revenue in any given year, according to Nielsen’s John Lavelle, director product leadership. “[And] revenue from new items has been declining in recent years, down 15% from 2012 to 2015,” he said.
Lavelle defined four tiers of innovation. The first, “market growers,” represent actual incremental gains with the possible creation of a new category — many Rx-to-OTC switches may fall into this bucket. Second, there are “share expanders” that are incremental to the supplier, but don’t necessarily add growth to the category. Third, there are “sustainers” whose core purpose in launching is to protect marketshare, which creates incremental sales as compared with doing nothing. And finally, there is “strategic” innovation that serves a retailer need over a consumer need. “These need to be dealt with differently than tiers one through three,” Lavelle said, as they are often targeted launches and account specific.