P&G's Logistics Revolution: Co-creating Value

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P&G's Logistics Revolution: Co-creating Value

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increased market complexities. Many new retail formats like – hypermarkets, shopping malls, discount stores and category killers – were developed. Discount retailers like Wal-Mart, for instance, revolutionised retail trade with rockbottomprices, additional services and preferred credit terms.Wal-Mart eliminated intermediaries and transacted directly with the manufacturers through its customised Electronic Data Interchange (EDI) technology and bar code systems. Its high volumes and successful growth forced manufacturers to come to terms with Wal-Mart, which accounts for substantial part of their sales. Thus, power shifted from manufacturers to retailers, who predominantly ruled the consumer markets. They even attacked manufacturers' prowess by forming alliances, mergers and acquisitions, developing private label brands, etc. Concurrent global economic boom brought significant changes in the consumers' lifestyle and income levels, which in turn broadened their choice of products and services. They looked for new and innovative products in attractive packaging offered at convenient locations at affordable prices.

Retailers leveraged on this consumer boom by offering a wide range of products in their stores and only a handful of retailers controlled this huge consumer traffic. Thus, the increase in store traffic intensified manufacturers' battle for shelf space.

Whilemanufacturers like P&GandUnilevermet the diverse consumer needs through constant product andmarketing innovations, retail pressures were eased by establishing direct links with the customers either through Internet or mail order; some even set up their own stores. The players even indulged in aggressive price war to lure customers. In due course, as the markets in developed countries began to mature, manufacturers sought growth in emerging markets of Latin America and Asia.

However, both manufacturers and retailers faced a number of complexities while exporting success strategies from developed to developing countries. Unlike developed countries, emerging markets were highly dominated by a large number of small players. Consumers, in developing countries, seek lower prices without compromising on quality. Thereby, simultaneously catering to value-driven high-income consumers of the developed countries as well as quality-driven yet price-sensitive and low-income segments of the developing countries remained a tough challenge. Further, the players were also confronted with problems like difficulty in obtaining reliable data on customers' tastes and buying behaviour (which was rather easy in developed economies), cultural barriers to market research, inefficient logistics and transportation infrastructure, vast and complex distribution systems, low income levels, etc.

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