Retailers push data into a new ‘ice age’

By withdrawing its scanning data from the Nielsen Retail Index (MW last week), Safeway has not just dealt a potentially fatal blow to the market researcher’s retail audits. It has also triggered a train of events which could alter the entire shape of the market for information on consumer spending. Retailers may soon be going their own way and total market tracking could be obsolete.

Nielsen can no longer include scanning-based data from Safeway in its weekly, monthly, bi-monthly or quarterly retail tracking services – the retail audits that were once its core business. The two disagreed over the value of the information. Nielsen sought to cut the fee it pays to Safeway by 50 per cent, claiming that retailers are artificially hiking the price of their data and that the market can no longer sustain such payments.

Nielsen complains that the fees it pays retailers have soared so much that they now absorb 40 per cent of the income it generates from its tracking services. Once retail audits were its core business – now they make a loss. To secure the business’s long-term future, costs must be cut, the company argues.

The supermarket chain disagrees and so apparently does Nielsen rival IRI Infoscan which is continuing to use and pay for the Safeway data.

The breakdown in the relationship comes just two months after Safeway announced the creation of its own data company, Safeway Information Management Company (Simco) which sells data from its 365 outlets directly to suppliers.

Safeway denies that the two moves are connected. However, Nielsen’s data is severely weakened by the absence of Safeway from its Retail Index and Safeway could be accelerating a trend, that will end syndicated data as supermarkets sell their scanning information directly to suppliers. Roger Wright, managing director of Simco, says:

“We are at the birth of a new data revolution.”

Nielsen is playing down the implications of the split. Safeway data can be modelled, and Homescan panel data (a survey of 7,000 consumers’ shopping habits) could soon be integrated into its Retail Index, it says. An internal briefing document reassures Nielsen staff that the other big retailers will not follow in Safeway’s footsteps despite its determination not to change its price-cutting negotiating stance. “We have excellent relationships with the other retailers,” it says.

But Safeway is the UK’s third major supermarket retailer – after Asda and Somerfield – to offer named account data. Only Tesco and Sainsbury’s remain entirely loyal and many observers believe it is only a matter of time before they too jump ship. The knock-on effects of recent events could be far-reaching. One could be to give IRI a much-needed boost.

Some observers have alleged that Nielsen originally drove up the price of retail audit data to freeze IRI out of the market. These allegations of anti-competitive behaviour are now the subject of an investigation by the European Commis sion’s competition watchdog DG4.

But now that Nielsen has changed its pricing policy, IRI could be the beneficiary. It has already grabbed exclusive deals with Boots and Superdrug and can boast that it alone includes Safeway scanning data in its audits.

Nielsen, for its part, argues that the price IRI is paying for these advantages is so high that it cannot be sustained. “The one thing we want to do is to offer a viable, long-term service, and if costs keep escalating that can’t survive,” warns Nielsen spokeswoman Fiona Holdsworth.

Nielsen’s attempts to cut the price of retail scanning information is likely to accelerate the trend among retailers to sell named account data through their own brokers. Proliferation of such information will in turn precipitate a change in the way scanning data is used. “Before, the focus was on marketing, research, and long-range planning. Now manufacturers need information for streetfighting, defending against delisting and negotiating,” says Simco’s Wright.

Safeway’s move has not gone unnoticed at Sainsbury’s. Observers believe Sainsbury’s may withdraw from the retail index market altogether because it fears that rivals will use the increasing access to named account data to divine details of its deteriorating performance.

With Safeway, Asda and Somerfield already offering named account information, all it needs is for Tesco to follow suit – a move now widely expected – to leave Sainsbury’s data very exposed. Over the summer, Sainsbury’s forced Nielsen and IRI to redefine data categories, causing widespread disruption. Many now expect it to withdraw access to its data from April.

If Sainsbury’s joins Safeway, Marks & Spencer, Waitrose, Northern chain Morrison’s, Kwik Save, Aldi and other Nielsen non-col laborators, nearly half the market will be closed to brand marketers. Meaning manufacturers will be forced to rethink their approach to the acquisition of consumer data from scratch.

Simco’s Wright predicts that if the existing total market audit dies, a substitute will be available – albeit in the new form of a “data dealer” within three months. He sees its job as merging different named accounts to create total market pictures while Nielsen and IRI will still offer manufacturers sophisticated modelling and analysis.

But his optimism is not shared by most manufacturers. “The UK is becoming the Jurassic Park of research,” complains Paul Freeman head of market modelling at Kraft Foods International and chairman of Incorporated Society of British Advertisers’ market research committee.

“Seven years ago we led Europe in scanning data. Now we are going backwards. The way it’s being handled, the data landscape is be-coming similar to Eastern Europe’s,” he adds.

Despite retailers’ assurances, manufacturers fear they’ll be trapped in a situation where each retailer makes its named account data the currency of negotiations. Its purchase would then become the effective entry price to talks – a retailer tax on suppliers.

Even without this “tax”, manufacturers worry about retailers’ growing control over the release of the data, its form, and its price. “Any data that is highly dependent upon the retailers will be a problem,” says Ann Murray, director of research at L’Oreal, and also chairman of the AGB Superpanel users’ group. Freeman echoes Murray’s concern. “We have to find ways of doing it that don’t involve funding going back to retailers.”

One alternative is to beef up consumer panels. Tony Cowling, chief executive of Taylor Nelson AGB, believes manufacturers should go further by creating their own extended consumer panels with exclusive data that they would own.

“They [the manufacturers] keep being picked off one by one,” says Cowling. “They should hunt more in a pack.” The repercussions following Safeway’s decision will be the first real test of whether a pack mentality is developing.