How Amazon, Stonewall Kitchen & Chewy Are Blending B2B with B2C for Deeper Customer Connections

Once upon a time there were B2B relationships and there were B2C relationships, and businesses could easily stay successful by keeping to one lane. Times, of course, have changed, and that was before the health crisis went ahead and placed all business strategies into the proverbial blender. In “Global Consumer Goods Leaders on the Battle for B2B and B2C Relationships,” we explore how companies like Amazon, Stonewall Kitchen and Chewy are leveraging technology to stay connected throughout their customer journeys, while scaling their teams’ expertise to blend their B2B and B2C capabilities. With so much at stake, fewer companies are relying on retail execution to secure consumer loyalty. Read on for an edited transcript and all of the presentation slides, which includes exclusive research from Salesforce surveying 500 global consumer goods leaders. Lisa Johnston: Welcome to “Global Consumer Goods Leaders on the Battle for B2B and B2C Relationships,” part of the Talking Tech series that’s hosted by RIS News and CGT. I'm Lisa Johnston, managing editor of CGT and RIS, and I want to thank you for joining us today. This is the next episode in our webinar series that's presented in collaboration with Salesforce, and so with me today to share how CG brands can remain relevant, competitive and future-proof are Molly Mecham, industry go-to-market, consumer goods, and Ann Marie Aviles, senior manager, industry strategy and insights. So let's get going and jump into the conversation. Molly, Ann Marie, do you want to get us started? Ann Marie Aviles: Thanks for that intro, Lisa. So as mentioned, I'm Ann Marie Aviles and I'm on Salesforce's Industry Insights team. So what we do is we look at platform and survey data to tease out some of the most important stories for retail and CG companies. So today I'm pretty excited to talk to you about some of the key findings from our latest CG research report. And to add a little more color to all the stats and the data I'm joined by my wonderful colleague, Molly Mecham, to talk about some of the highlights from her conversations with our customers. So Molly, I don't know if you want to quickly introduce yourself. Molly Mecham: Sure, thanks Ann Marie, great to be here. So as the ladies said, I sit on our consumer goods, go-to-market team here at Salesforce. So I spend a lot of time in the field with our customers, hear what's top of mind and how we can continue to help them kind of balance both those B2B and B2C relationship across all of their different partners. Aviles: So we recognize that there's a major need for CG companies to improve their relationships with channel partners and an equally huge opportunity to connect directly with consumers and, in many cases, for the first time right now. And both are critical to succeed in this environment that's evolving so rapidly. So we set out and surveyed about 500 global CG leaders to get a better sense of what their priorities are and what their challenges are. And so we've categorized these findings into four parts. So for this webinar, we're going to talk about evolving customer expectations, the challenges CG faces when it comes to that traditional CPG model of selling it to channel partners, and why leaders are prioritizing B2C relationships. And finally, we're going to wrap that up by talking about what the industry needs to do in order to future-proof itself and ensure success in this environment. So of course we can't start this presentation without acknowledging the elephant in the room and by elephant, I mean Amazon, because again, we can't talk about transformation in the industry without addressing how Amazon is changing the ways consumers shop. So from our research, we found that nearly eight in 10 CG leaders say that Amazon has raised the stakes for consumer expectations. Sixty-eight percent say the consumers are more loyal to Amazon than individual brands. And just over half of leaders say that Amazon's marketplace is a critical threat to their business. So these numbers put a quantitative spin on the impact that Amazon has had on CG leaders. And let's be real, Amazon is dominant. They've got the distribution, they have the online catalog, and they have the agility to respond to the market and really adapt their strategy on a dime. So Molly, I don't know if there's any added color you want to put here. Mecham: Yeah, I think your note there about that agility on just responding basically almost in real time to market changes is really interesting. So we saw last year that Amazon introduced Amazon Professional and their beauty store for professional stylists, salon owners and the like and that has been really interesting. We think of Amazon as the marketplace for B2C, but I think again, responding to the needs of all the stylists and the wants of having a B2B experience that is tailored like a B2C experience has really been one of the big projects Amazon has undertaken. We've seen it in other areas as well, but I think definitely hits home on their ability to really respond and adapt to the market needs. Aviles: Yeah, totally. And I'm glad that you mentioned how those business or B2B buyers are increasingly craving that consumer experience because that's something that we really saw pop in our research numbers. So as we talked with B2B and those B2C customers, we found that their expectations are really converging here. So if you take a look at the light blue that represents B2C customers, or B2B rather, and then the dark blue are those B2C. And so if you focus on that middle column, you'll see that 70% of customers say that the processes and systems being connected is incredibly important to them. So it's all about leveraging your systems and data in a more integrated way to enable those personalized experiences that we see 78% of customers crave. And we saw this whole consumerization of experiences of B2B experiences in another recent survey by McKinsey that reported that live chat is the most beneficial channel for researching suppliers on both the SMB and enterprise side. And not only that, there were huge gains in demand for social media, text and mobile apps to help support that B2B experiences. So those B2B buyers want what they can get as consumers. And so talking about those experiences, let's address the traditional CPG model and how brands are prioritizing those in-store executions. So we know today that in the U.S. alone trade spend for in-store merchandising and marketing was $200 billion. And our CG leaders in our survey said that 52% found that their merchandising and marketing plans weren't executed as intended. So what do I mean by that? Retailers are messing it up. The promos aren't on brand, the products aren't making it to the right shelf where they're belong. And if you do the math between those two numbers, we found that it means $104 billion is spent every year to poor in-store execution. And that has really long-term repercussions. So in that same study by McKinsey, we found that 40% of consumers tried new brands or made purchases with a brand new retailer between the months of March and June alone. And the reason that I'm mentioning this is because the top two reasons to switch loyalty were one, price — no surprise there. But two, product availability. And so 76% of those shoppers that switched brands or retailers said that they intended to continue using that new brand. So the economic impact of those poor retailer and CG relationships is really huge. Mecham: And you nailed it Ann Marie. This is a really big challenge for the industry, especially given that kind of traditional go-to-market model that most CG companies are kind of utilizing today. We've seen a ton of the growth come from e-commerce, especially during these last six months in every sector from grocery to apparel to appliances. But we also know that that traditional route to market with retailers is not obsolete. And we've been talking with customers about this very thing all of the time and really kind of that opportunity is to really digitally transform that route to market in partnership with retailers and distributors. So we see kind of both sides of this here. On one side, we have our kind of established consumer goods brands that are really asking us to help them digitize that route to market. How do they get that right assortment to the right retailer at the right time to deliver upon that consumer's expectations by being in stock, by being there when they need it. And we're also working with those digital native brands that now are looking to expand their reach and start to partner with retailers. One of those brands is Reversal; it's a skincare brand based out of Canada. And I just talked with that team the last couple of weeks, and really what they have focused on is understanding their consumers and, as they built up the D2C channel, they saw the need that the majority of kind of beauty and skincare purchases are still made through retailer partners. And so Reversal partnered with Salesforce to really focus on kind of that agility in expanding their distribution and adopting that new channel of sales for them to, again, drive awareness but also grow that overall revenue. And by doing that, they're really increasing their awareness that their distribution, but also their consumer relationship. Aviles: Thanks, Molly. And that's a big reason why we wanted to understand which parts of those channel partner relationships are the most challenging. So moving to the next slide, by far, the most challenging aspect for CG leaders right now is prioritizing and getting the right SKUs into stores. And a lot of retailers are downsizing their assortments, something that we've been hearing across earnings reports lately. And to put some numbers to that statement, only 55% of CG leaders were satisfied with our inventory visibility. And that, of course, wasn't the only challenge that they were having. They also had challenges with selling new SKUs and taking action on those analytics and all the data that they've been collecting. And so all in all about 42% of these CG leaders said that the problems or the challenges that brick and mortar retailers are facing are also negatively impacting their own businesses. So there's clearly a lot of room for improvement here. Mecham: I definitely agree, Ann Marie. That opportunity here is definitely something we've been talking about with our customers and it really starts with focusing on the basics. So everything from the planning of what products and the timing based on that retailer or that partner needs their customer base, but then delivering upon that execution. So exactly what you talked about, people are buying what's in front of them, what's available, people are trying new brands. So by delivering that careful planning upfront and then supporting that execution is something we've really helped our customers do during this time. And it's really why we launched Consumer Goods Cloud in the last couple of years. It's not only a complete CRM for consumer goods customers and a very custom data model, but it's also out of the box capabilities that really help kind of tackle some of these challenges, again, all the way from planning through execution and delivering that full end-to-end experience on a single platform. Aviles: Definitely. And, of course, so Amazon and those poor in-store execution examples, they're not the only problems here. And I promise this first half has been a bit of a downer, but we'll get to those solutions soon. So you might be thinking, Ann Marie, this sounds like a rough road. So how can we build a strategy to get out of this hole that we've been describing? So I wanted to start pointing out solutions where CG leaders are seeing actual transformation. So very first up is the potential massive financial impact of going D2C. So despite online sales only comprising about 5% of the total FMCG market, those online sales account for over 40% of the growth. And that's a number that's only climbed during this pandemic. So about 5% of sales, as you could see at the top, account for a disproportionate amount of growth and CG leaders are definitely listening up. So in our survey, we found that 99% of these leaders are investing in D2C operations and 99% is a number that you never see in surveys. I mean, that is truly colossal, which is showing us that they still have a lot of potential and a ton of opportunity to rev up that D2C engine. And so despite all of those inherent challenges in selling D2C, most CG leaders are optimistic about the results of their legwork. So 54%, as you can see in that bar right in the middle, view their D2C strategy is on par with the industry and 36% rate it as best in class, which is pretty favorable. On the bottom, we see that 11% say that their D2C strategy is either non-existent or below industry standards. So for those 11% that mandate to improve D2C operations is clear and it's pressing. But that also applies to the 54% of leaders who say, they're just average, too. I mean, CG companies are battling for sales against marketplace, budget-friendly private labels, and those digital natives that Molly mentioned. So an average performance is not an indicator of future success today. So what's the secret sauce? Selling marketing and consumer goods requires both B2B and B2C relationships. It's really critical to balance both as you can see at that headline up there. So CG leaders continue to optimize their traditional retail and channel partner relationships, but it's also important to do it while adopting those D2C strategies. So mapping the right people and the right technology to each relationship, I'm talking B2B and B2C, is absolutely mission critical. And so bringing us home, let's talk about the tech advancements that are going to bring about the most change that you should pay attention to. CG leaders are rating e-commerce, online marketplaces, IoT, and voice assistants as a technology that have already transformed their industry. And one that's gaining some serious traction right now, which should be no surprise, is that last-mile delivery innovation. I know there's a huge crunch to figure out logistics ahead of the holiday surge. And within five years, if we look further afield, about one in three say that AI will emerge as the key transformation in connecting shoppers with the right products with predictive sort, etc. And 22% say that AI will be the key transformer in just two years. And I bet if we were to repeat this question in about three months, that timeline would be shortened even more because if COVID has taught us anything, it's that every digital transformation initiative has been hyper accelerated. So Molly, I would love to hear, based on your conversations with customers, what could AI powered opportunities look like for consumer goods companies? Mecham: I think this is one of the biggest conversations we've been having lately Ann Marie, from automating the supply chain of, again, managing kind of that demand planning, getting the right products to the right partners. But also we're seeing the use of AI in around-the-clock customer service. So outside of working hours, work Monday through Friday, chatbots have really come in to help kind of deliver that customer service, answer questions and help both customers and consumers. And we really see the potential in AI to give leaders at these different companies that intelligence, where they maybe have lacked that data or that insight or the ability to connect the dots. So, for example, we work with Stonewall Kitchen, which is a specialty guests brand, and they are using AI to fill in gaps in their customer journey that maybe they had never seen before, or again, weren't connected. And so by using kind of the AI and some best practices, they're really able to scale their team's expertise on both the B2B and B2C side of the house. Aviles: Awesome. That is a wonderful addition of color and a good way to wrap us up. So I don't know if we have any seed questions coming in, but it would be great to see what our audience has top of mind. Johnston: Okay, great. Well, thank you, Molly, thank you, Ann Marie. Thank you for sharing all of that with us. I'm actually going to jump the line a bit on questions. So you talked about how an AI-powered future translates to CG. And I was looking at the chart just now with the other emerging technologies, and I was hoping you could share some insight about one of the other advancements, and that was subscription models. I'm curious to hear how you think this may or may not tie in with the growth of these B2C relationships. Aviles: I'm happy to take this one. And this is a super hot topic for retailers and consumer hoods. So I'll give you two examples of where subscriptions really work out. So the first subscriptions are incredibly compelling for commoditized goods like pet food or pet goods, because they're pretty low risk category to experiment a little bit with your subscription offering. So one example that I love is Chewy, the pet food retailer, and they sell tons of brands and have arguably the most successful subscription service in e-commerce. So I think it's about 70% of their sales come from their subscriptions. And the reason why they leaned in, I think Diana Solazzo, their director of consumer insights, spoke about this recently. She said, "It's to access that first-party data and really forge that direct relationship with consumers to really understand them on a more personal level." So blending the B2B and B2C, and it allows them to better personalize their offers, tailor their assortments, and frankly, to combat Amazon's convenience, who is a huge competitor of theirs. And another place or business high-bar subscriptions are really strong and will help with these B2C relationships are with higher ticket items. Like Simple Human, the brand, they create home goods like garbage cans and the like. So they typically rely on partners for initial sales of their goods, but they have a huge business in selling those ancillary items like garbage bags, purpose-built for their trash cans. And that's really wonderful for them and should inspire more CG companies because it opens up opportunities to sell across different product categories and most importantly, encourages more frequent touch points with customers to continue again growing those B2C relationships. So those are two areas where subscriptions are really taking off and have a lot more potential to grow. Johnston: It looks like we have time for one more question. In your view, has the pandemic accelerated some of the challenges that are already stressing B2B relationships or is it making companies more willing to partner and look for new creative solutions? What's been your experience so far? Mecham: I'll jump in here and that's a great question. And I'm going to say it's both. The pandemic has kind of highlighted those pain points that breakdown in communication or highlighted some of the challenges brands have in working with retailers. But I think a lot of the brands that we've worked with are seeing that opportunity and showcasing maybe new ways of working, thinking about things differently, making the most of those limited face-to-face meetings, bringing in some of those digital tools, be it AI or a platform that's connecting sales and service. I think we've really seen kind of the turbocharge of how everyone is being agile in this time and really innovating on how they are partnering across, again, the supply chain from the manufacturers all the way through the retailers and where the companies are really, as Ann Marie said, kind of leaning into some of these opportunities, trying new things, working in new ways. Both the brands and the retailers are seeing the success and truly kind of partnering, sharing that information and really delivering on those consumer expectations. Johnston: Great, thank you. All very well said. We want to thank everyone for listening. Thank you Molly and Ann Marie for speaking, and thank you Salesforce for partnering with us.

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