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Trends Driving CPG Commerce Growth

In this three-part series, “Trends driving CPG Commerce Growth,” I will discuss the trends driving competitive consumer packaged goods (CPG) industry growth and how CPG brands can overcome the challenges they face. First, let’s explore how CPG marketers can focus on commerce, particularly selling direct and collaborating with retailers, to develop and engage customers.

In today’s world, customers want control and choices when interacting with your brand. You need consistency between how you communicate your brand and how your customers experience your brand. This requires optimizing all the primary functions that influence the customer experience, including commerce. For the highly competitive CPG market, marketers need to focus on commerce to develop and better engage their customers.

“Without Commerce efforts, CPG marketers have limited ability to develop direct relationships with customers, drive loyalty and advocacy, or collect immediate insights. Spending on Commerce gives CPG marketers the building blocks to complement their indirect channel strategies with direct-to-consumer (D2C) engagement.”
Source: McKinsey Study, 2016

Sell direct to customers, with or without retail partners

Fear of disintermediation is being replaced by collaboration. In the past, many CPG brands were so concerned with maintaining their relationships with big-box retailers, that they lacked a Direct-to-Consumer (D2C) strategy. But customers want relationships with their favorite brands. Customers expect convenience, personalization, accessibility and next-level digital experiences. On top of that, they expect brands to talk directly to them, in their preferred tone of voice.

CPG multinationals face ever-growing pressure to counteract the success of direct-to-consumer CPG brands, such as Dollar Shave Club and Harry's. Take the example of Procter & Gamble, which launched an online, D2C, subscription business for Tide Pods in 2016. While the “Tide Pod Challenge” illustrates the threats and opportunities that come with e-commerce disruptions, e-commerce is now a $3 billion annual business for P&G.

Break down barriers to collaborate with retailers and technology partners

Since retailers are often still involved in fulfilling D2C campaigns, CPG brands needs stronger collaboration to gain additional shopper data. CPG companies have to constantly monitor their product performance, draw new insights and test variations of their offerings, all while keeping an eye on the competition. Regular access to shopper data across key retailer websites is challenging and can require a combination of methods.

Rich data helps brands draw relevant insights about their offerings and thus understand which products and programs drive incremental sales. Since this data lies with retailers, CPG companies need to build relationships. One way is to invest in online e-commerce specialists who work closely with online retailers or are even based in the same location. Leading data-driven companies, like Epsilon, package data in more sophisticated ways to help brands overcome inherent data gaps to get closer to their ideal consumer. By using Sitecore Experience Commerce™ for more consumer and transactional data, and creatively using second- and third-party data with existing first-party data, brands can now drive insights and deepen consumer understanding and ultimately revenue.

Increase access to data to optimize e-commerce

According to McKinsey, CPG e-commerce winners applied 2.4 times more resources to working with online retailers in 2016 than those who were not as successful. By coordinating with retailers, CPG companies run more effective promotions online and can tailor offerings to different consumer segments. For example, CPG brands and retailers can collaborate on push notifications to consumers on the retailer’s website (based on cart contents and shopping history) to drive sales of related products.

But it is not just data from the retailers that makes winners. Partnering with technology companies that leverage modern web technologies is another way to access significant data across retailer websites. Business intelligence on product findability, product content quality, out of stock products, competitive pricing, and best-selling products is as valuable as gold for companies that are ready to act.

Since the majority of CPG sales still come via retailers, pushing the boundaries of “perfect product pages” across retailer websites should be a top priority. Modern consumers expect to be “wowed,” which requires rich product content with high-quality product images and videos, product comparisons and consumer reviews, as well as unique guided selling processes.

CPG companies should not forget about creating a buzz and driving discoverability. Social media and commerce presence is key. Winning e-commerce requires prime digital space on retailers' websites, especially the homepage. Whether it’s recommendations to consumers for the next-best purchase, inclusion in favorites lists or in bundled deals, CPGs should tirelessly negotiate to push their products.

As Forbes noted in 2017, traditionally, CPG has lagged behind other industries in the jump to e-commerce. However, with advancements in supply chain management, mobile technology, and personalization, selling CPG direct-to-consumer (D2C) is now a reality.

Trends Driving CPG Commerce Growth: Part 2

Welcome to the second post in the series, “Trends driving CPG commerce growth.” As we found last week, when it comes to purchasing products, consumers expect convenience, personalization, accessibility, and next-level digital experiences. On top of that, they expect brands to not only know what they want, but speak with them directly in their preferred tone of voice. Customers want to have individual relationships with their preferred brands and are getting more and more demanding.

To meet these increased expectations, we discussed last week how Consumer Packaged Goods (CPG) brands can sell direct and collaborate with retailers.

To pick up where we left off, let’s now discuss the second trend behind how pioneering brands are meeting customers’ needs in order to drive CPG growth over the next several years.

Trend 2: Exploit new models of selling depending on the market

Online marketplaces such as Amazon, eBay, Jet.com and Alibaba continue to be key channels driving CPG growth in 2018 and beyond. As of 2017, more than 50% of all units on Amazon’s marketplace were sold by independent vendors. Consumers prefer online marketplaces where they can seamlessly shop multiple vendors, finding almost everything they want in one place. Plus, marketplaces offer convenient delivery options and high-end customer service, creating customer happiness and loyalty to the marketplace brand. So it’s no surprise that traditional retailers like Tesco, Marks & Spencer, Walmart, and Target want to expand their long-tail product range to become marketplaces. CPG brands that offer their own subscription services like Amazon does could potentially form a closer relationship with their customers, building a lifelong relationship, with the potential to upsell more premium products.

Understand the regional customer journey

With these new selling models, marketers need to have a global approach as strategies differ in emerging markets. For example, the Total Cost of Ownership (TCO) for launching a robust commerce platform may not make sense in emerging markets where digital marketplaces dominate. Plus, customer buying varies from country to country. For example, some cultures often buy in large quantities, while others like to gather opinions and browse with friends and family before purchasing. Marketers need to first understand the customer buying journey based on locale, then tailor a brand or system for a particular country or region.

Five considerations for selling in local markets

We see five different principles that should be addressed in any globalization strategy when entering those markets from a selling perspective:

Market selection: Select pilot countries for migration based on commerce requirements, geography, digital readiness, legal and regulatory complexity, economic relevance, and customer relevance.
Localization: Consider presentation design, local content, local commerce, workflow processes, information architecture, legal / regulatory implications, and language translation.
Internationalization: Consider application functionality, content types, meta-data strategy,
infrastructure, application architecture, brand, and enterprise content.
Cost / benefit analysis: Evaluate costs and benefits for implementation, maintenance, training, skills readiness, and business process changes.
Commerce requirements: Identify requirements for core commerce, merchandising, product information, order management, fulfillment, payment processing, customer service, and analytics.

There is no priority order in addressing these five principles; all need to be addressed equally. Otherwise, CPG brands will not be consistently addressing what their customers want. With careful implementation, a nuanced global commerce strategy can offer enormous potential for growth.

Trends Driving CPG Commerce Growth: Part 3

In this three-part series, we’ve been discussing how Consumer Packaged Goods (CPG) companies can drive growth. In the first two posts, I addressed two trends: selling direct and exploiting new models of selling for local markets. Our final trend is about leveraging digital innovation to create brand experiences.

Trend 3: Create brand experiences, don’t just sell products

By powering the physical product with smart technology, CPG brands can unlock new value throughout the entire product lifecycle, using real-time data to build an Internet of Things (IoT) ecosystem around it — powering applications that transform everything from supply chains to sales; from marketing to customer relationships. CPG companies already use IoT to streamline manufacturing, but some are also using IoT to deliver better customer experiences, whether by incorporating it into their products or by collaborating with other brands who offer IoT products.

McKinsey & Company, a global management firm specializing in CPG, believes that as much as 30%, or $50 billion, of the CPG industry’s sales growth in the next five years will come from online. And The Economist notes: “Now you see CRM methodology in places where it had not been applied before … [makers of packaged goods] can establish direct relationships.”

Using real-time IoT applications and interactive media experiences, CPG product manufacturers can generate new revenues through marketing and service innovations as well as cost savings through smarter supply-chain operations.

Leverage IoT and supply chain data for improved customer experience

To succeed, you need to build a personalized digital relationship with end-consumers. A way to do this is by applying real-time tracking intelligence to make logistics more efficient: You need to be able to query your supply chain in real time to know where your products are, how they are being used, or whether they’ve been tampered with.

An example is cheap sensors on perishable goods that measure temperature and placement and send a warning if the products are not being stored correctly. With sensors on supermarket shelves or the product itself, companies can identify if products are correctly placed, or how they move around the store to find the best placement.

When IoT data is combined with other data such as product, customer, or location data for a better understanding of how products are being used, you pave the way for an improved customer experience. To generate revenue, you need to turn products into a direct channel for e-commerce and use this data to boost the effectiveness of all marketing channels.

It also goes beyond IoT to create these unique experiences with the customer base. Brand loyalty in the CPG industry has always been a challenge, but with great brand experiences you can convert customers into brand advocates. For example, Nestle’s Nespresso brand takes an entirely new approach to brand-building using lifestyle marketing. The company creates an elegant universe that turns coffee drinking into a lifestyle - makes the brand competitive with not just coffee and coffee machine manufacturers, but also with coffee shops. I personally fell hook, line and sinker a few years ago, with one whole cabinet in my kitchen dedicated to their coffee pods. Nespresso’s gain is Starbuck’s loss!

To wrap up this blog series, as Forbes noted in 2017, traditionally CPG has lagged behind other industries in the jump to e-commerce. However, with advancements in supply chain management, mobile technology, and personalization, selling CPG direct-to-consumer (D2C) is now a reality. The CPG trendsetters are creating new models to do just that, but these brands need to ensure they think through how to attack each regional market appropriately as they expand globally. And, last but not least, don’t just focus on the selling, but create engaging brand experiences that turn customers into loyal brand advocates.

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View original content: Part 2
View original content: Part 3