Digital Delivery: How CPG Companies Can Entice E-Consumers
Consumer packaged goods (CPG) companies are under intense pressure to transform their digital platforms to satisfy rapidly changing consumer preferences and demands. Some are doing this via dedicated e-commerce retailers, while others are increasingly going direct to consumer. Whichever approach is taken, the key to success will be delivering flexible fulfillment, a highly-personalized service, and a seamless transition between the physical and digital world.
The rewards for CPG companies that can meet these demands are tantalizing: according to market research firm Kantar Worldpanel, e-commerce will account for 5.2 percent of global sales of fast moving consumer goods by 2016, or $53 billion. This is up from 3.7 percent today, or $36 billion.1 Many CPG businesses are spotting the opportunity. They realize that e-commerce can offer direct contact with consumers and can open up new sales channels, helping to broaden market share, increase sales and deepen their understanding of peoples’ preferences. However, only tentative progress has been made so far, and business models are changing at such pace that late adopters may be too far behind to catch up by the time they realize the impact.
The ‘push’ to ‘pull’ shift
Several drivers have brought us to this point. Consumers in both emerging and mature markets are demanding goods tailored to their local tastes and needs. New demographic groups such as millennials are used to turning to social media for product guidance, recommendations and affirmation; they use their smartphones to make impulse purchases; and they expect anytime-anywhere shopping. These expectations are increasingly the reality that CPG companies are increasingly having to confront.
In short, consumers now expect highly-personalized interactions. A shift to ‘pull’ — as opposed to the traditional focus on product ‘push’ — means that CPG businesses must develop digital channels with content and processes tailored to engage consumers. These might be typical examples of personalized product recommendations, or even anticipatory shipping concepts, which some online retailers are now experimenting with. Leading retailers have shown that e-commerce sites can become more than simple portals; rather, they are personal assistants and trusted advisors. The same applies for direct-to-consumer goods, as illustrated by the ability for consumers to tailor their Nike trainers using the NikeID service.
CPG companies who wish to keep pace with these changes and position themselves for the opportunities ahead will need to create a compelling case for online consumers by reassessing their strategy, tactics and operations. One key consideration will be deciding whether to go it alone, partner with others or support the digital efforts of retailers. Upmarket brands will stand the best chance of standalone success, but lower-priced goods that are bought in bundles, such as food and beverages, will be better positioned on retailer portals. Branding, market segmentation, user experience and the capture of consumer insights will all be key considerations. As CPG companies aim to develop and refine their approach to e-commerce, they should pay particular attention to the following:
In a world where customers increasingly find themselves waking to yet another e-commerce delivery, CPG companies able to offer flexibility, a unique and personal experience, and increased convenience that will be best placed to unpack the rich opportunities ahead.
1. “Global FMCG ecommerce will grow by $17 billion by 2016”, Kantar Worldpanel, 16 June 2014
Authors: Mohammed Hajibashi is managing director in Accenture’s Consumer Goods & Services Practice and Ashish Jandial is managing director within Accenture’s Digital Practice.
Copyright © 2014 Accenture. All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. This document is produced by consultants at Accenture as general guidance. It is not intended to provide specific advice on your circumstances. If you require advice or further details on any matters referred to, please contact your Accenture representative.
The rewards for CPG companies that can meet these demands are tantalizing: according to market research firm Kantar Worldpanel, e-commerce will account for 5.2 percent of global sales of fast moving consumer goods by 2016, or $53 billion. This is up from 3.7 percent today, or $36 billion.1 Many CPG businesses are spotting the opportunity. They realize that e-commerce can offer direct contact with consumers and can open up new sales channels, helping to broaden market share, increase sales and deepen their understanding of peoples’ preferences. However, only tentative progress has been made so far, and business models are changing at such pace that late adopters may be too far behind to catch up by the time they realize the impact.
The ‘push’ to ‘pull’ shift
Several drivers have brought us to this point. Consumers in both emerging and mature markets are demanding goods tailored to their local tastes and needs. New demographic groups such as millennials are used to turning to social media for product guidance, recommendations and affirmation; they use their smartphones to make impulse purchases; and they expect anytime-anywhere shopping. These expectations are increasingly the reality that CPG companies are increasingly having to confront.
In short, consumers now expect highly-personalized interactions. A shift to ‘pull’ — as opposed to the traditional focus on product ‘push’ — means that CPG businesses must develop digital channels with content and processes tailored to engage consumers. These might be typical examples of personalized product recommendations, or even anticipatory shipping concepts, which some online retailers are now experimenting with. Leading retailers have shown that e-commerce sites can become more than simple portals; rather, they are personal assistants and trusted advisors. The same applies for direct-to-consumer goods, as illustrated by the ability for consumers to tailor their Nike trainers using the NikeID service.
CPG companies who wish to keep pace with these changes and position themselves for the opportunities ahead will need to create a compelling case for online consumers by reassessing their strategy, tactics and operations. One key consideration will be deciding whether to go it alone, partner with others or support the digital efforts of retailers. Upmarket brands will stand the best chance of standalone success, but lower-priced goods that are bought in bundles, such as food and beverages, will be better positioned on retailer portals. Branding, market segmentation, user experience and the capture of consumer insights will all be key considerations. As CPG companies aim to develop and refine their approach to e-commerce, they should pay particular attention to the following:
- Focus on flexibility — The move to integrated and scalable e-commerce technology will require greater organizational flexibility across fulfillment, returns and promotions. CPG companies will need to support demand for new distribution channels, such as in-store pick up from an online order, same-day delivery, and other options, meaning that physical transport networks will have to be reconfigured, allowing delivery of hand-picked fast moving goods directly to consumers. For example, British supermarket chain Asda now offers click-and-collect services from London Underground station car parks, prompting other rivals to follow suit. At the same time, CPG companies should consider the challenges of receiving and processing returns, inspections and refunds across all channels. This is an area where even pure-play e-commerce leaders struggle with the high costs for returns processing. Firms will also need to consider agile promotions, sometimes run hourly or less, to target tightly segmented or even individualized consumers.
- Tailor your service — The rise of e-commerce is synonymous with the proliferation of personalized interaction, and there will be considerable emphasis on providing a unique and personal experience. With consumers used to being targeted based on their search history and email content, they now have similar expectations when interacting with CPG brands, either directly or via a third party. To compete, CPG firms need to ensure that they constantly reappraise their product category mix, and strengthen their product content management. Others will create a personalized experience by customizing their products and packaging to individual interests. Furthermore, leading CPG firms are realizing the need to segment markets according to variables significantly different from those typically used. For example, while markets will become broader with the growth of emerging markets, they will also be characterized by more narrowly defined consumer segments. These segments will not always be grouped geographically, but by consumer archetype. For instance, health conscious elderly shoppers in the United Kingdom and South Korea might be targeted with similar offerings, despite being thousands of miles apart.
- Deliver a consistent consumer experience across all channels — Many CPG companies now developing the concept of unified commerce, which seeks to eliminate individual channel silos and offers a seamless transition when alternating between ‘bricks and clicks’ — the mix of websites, mobile apps and physical stores. This also solves the omni-channel integration challenge by making use of a single platform. To deliver on this, product catalogs, as one example, need to be standardized so that the information and images delivered through different channels is consistent. Similarly, merchandising capabilities need to offer maximum, real-time flexibility. Here,automatic or predictive replenishment, or insightful suggestions, can both smooth the consumer journey and increase their spending. In essence, CPG companies must be able to deliver the right message and product, to the right consumer, at the right time, in the right place. All this demands that on the supply chain side, technology platforms and back-end processes must be more scalable to handle cross-channel marketing and selling.
In a world where customers increasingly find themselves waking to yet another e-commerce delivery, CPG companies able to offer flexibility, a unique and personal experience, and increased convenience that will be best placed to unpack the rich opportunities ahead.
1. “Global FMCG ecommerce will grow by $17 billion by 2016”, Kantar Worldpanel, 16 June 2014
Authors: Mohammed Hajibashi is managing director in Accenture’s Consumer Goods & Services Practice and Ashish Jandial is managing director within Accenture’s Digital Practice.
Copyright © 2014 Accenture. All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. This document is produced by consultants at Accenture as general guidance. It is not intended to provide specific advice on your circumstances. If you require advice or further details on any matters referred to, please contact your Accenture representative.