By Indy Sawhney, director strategic accounts at Mindtree Ltd.
A number of factors are shaping the retailing of consumer packaged goods (CPG) organisations worldwide. Some of the key trends worth mentioning are – strong competition from private labels, retail excellence, mobile technology adoption, increased demand for brand engagement, real-time consumer advocacy, collaboration with customers, insourcing core and outsourcing non-core activities, and finally predictive analytics and data driven insights for optimisation.
Here is a quick look at these key trends and also the threats and resulting implications in retailing consumer packaged goods:
Strong competition from private labels
Retailers continue to put a dent in consumer packaged goods margins and profitability by continuing to introduce their private label brands. However, CPG firms are benefiting from engaging in multi-point data analytics and insights to justify category assortment (and price points) across their retail partners, in each geographic region. Visibility to shelf (point of sale), data driven channel / item rationalisation and category margin focus are also warranted to ward-off the threat from private labels.
Mobile technology adoption
Mobile commerce, payments and wallets are increasingly being adopted by consumers worldwide. Key reasons supporting this trend are that mobile devices present an omnipresent connectivity, equivalent to a real-time purchase-point decision making and buying experience. Industry veterans are predicting retail commerce to grow by 8.5 per cent by 2016.
Strong push towards retail excellence
Leading CPG firms are collaborating extensively with their retail partners in all aspects of retail planning such as promotions, inventory, planogram designs as well as automatic invoicing and automatic dispatching to enable fast and effective shelf turnaround. This results in increased volume, margins and profitability for both the CPG and retail firms, bringing about a win-win scenario for both parties.
Collaborate with customer
CPG firms and their customers, both large retail and trade channel partners, have long enjoyed a cordial relationship which can be best described as an arm’s length transactional relationship. Each stakeholder has focused inwardly towards doing their own thing – IT strategy, supply chain strategy, inventory strategy and so on.
CPG industry veterans and management consultants predict tremendous opportunities for improvement in the value chain by encouraging closed loop collaboration amongst these stakeholders in areas like trade promotion, retail excellence and visibility to shelf.
Predictive analytics and data driven insights for optimisation
Leading CPG firms are learning to be more agile. This involves working with managed data analytical service groups, which work effectively with huge volume of data and can leverage techniques like exploratory data analysis, statistical data analysis and push mapped data into preconfigured industry standard data models. This helps to yield valuable predictive analytics and Just in Time actionable insights.
Real-time consumer advocacy
Social advocacy on Facebook and Twitter, the trusted personal networks, have become the preferred point of engagement for almost every purchase decision, from toothpaste to exclusive cruise holidays. In retail outlets it is not uncommon to spot consumers reading product reviews in real time – on their mobile devices – to help then make last minute buy or pass decisions.
Increase demand for brand engagement
With the ever-growing reach of social media, the industry is now transitioning to a multi-point customer engagement strategy that begins with opening the box and loops all the way into a repurchase decision. The new engagement model is continuous in nature, to maintain customer loyalty and to avoid defecting to alternate brands.
In sourcing core and outsourcing non-core activities
Given the current economic trends and global advancement in IT strategies and solutions, it is imperative more than ever for the CPG firms to choose their focus areas for investment, while outsourcing all other activities to value providers who can map their processes and bring best practice industry solutions to their advantage. BPaaS (Business Process as a Service) and Vertical BPO offerings are a low risk, high value add option for firms to consider today.
About the author
Indy Sawhney has helped various clients with conceptualising and delivering game changing strategic solutions spanning retail, enterprise digital strategy, integrated supply chain, trade promotions management/analytics. Indy is an engineering graduate and a post-graduate in management from Kellogg School of Business, Northwestern University, Illinois