Does retail audit in India face a credibility issue?
December, 10th 2009
Yes: The expanse of the Indian retail trade is vast. Spanning 75 lakh outlets and 47 lakh shops in rural areas makes it even more daunting from a retail audit perspective. AC Nielsen has the experience of handling this, yet from time to time serious questions have been raised over credibility of Nielsen data. There are some fundamental issues that need robust solutions.
The first one is samples, the panel is now 16,700 stores. Nielsen would have us believe that increasing the sample would resolve issues. But past records tell a different story.
Samples were increased in 2006, and yet, reliability of data is no better, and in some cases, even worse. For our Godrej No1 brand, the pick up factors have dropped during this period. In Punjab, where No1 is market leader, the pick up is a dismal 54%! This, for a brand which is the No. 3 national brand in soaps by volumes.
Second, quality of field work indicates that a lot more needs to be done. The pick up of new variants, SKUs and even new prices can take three-six months to get fully reported. Why? If the field is well trained, this should never be an issue. Then, reporting of modern trade data is still not satisfactory, and as this component of trade grows, it will add to the problem. The panel also doesnt cover canteen stores, the countrys largest retailer. There are many similar examples of uncovered channels.
Finally, while Nielsen makes a regular attempt at providing a fix on the universe of stores, it is not computing the increase adequately. The only way forward is for industry and AC Nielsen to agree to a time-bound plan to correct these issues. The dialogue has carried on for too long, its time for some concrete action now.
No: The authenticity of retail audit data is being questioned by companies these days as they do not match their shipment figures. But before we question the credibility of the data, let us put some facts into place. Retail offtake data is normally lower than client shipment data because an audit does not cover all distribution channels, and clients subscribing to the audit data are aware of these limitations.
Currently, The Nielsen Company is the only research agency that conducts retail audits in India. The discrepancies occur when monthly shipments of clients are compared with monthly offtake data obtained by Nielsen as there is a fairly large pipeline in between, which can expand or contract depending on manufacturers schemes, promotions and consumers pull. The best way to look at such data is to compare 12 months moving averages of companies shipments with offtake data. In most cases, these trend lines show a very good fit.
The retail store universe in India consists of approx 7.5 million stores. Nielsen retail audit obtains data from approx 16, 700 stores, covering over 80 categories of consumer packaged goods (CPG) in 605 cities and more than 6,000 villages. Considering the large proportion of traditional trade in India, coverage of 88% of the industry is considered pretty good by global standards.
The data obtained from this vast sample of outlets is then projected to a universe of outlets to obtain national estimates. The universe data is updated periodically to incorporate for any market changes. Global quality standards in terms of data accuracy and the standard error margin are strictly adhered to by Nielsen India.
In most of the key states, the relative standard error for Nielsen data is less than half of the prescribed norms of <10 % and at the country level, the standard error margin in India is less than 1.5% against the norm of <4%. So, theres no room for any doubts about credibility of such studies.