Till a few years ago, the retail industry operated in a fairly straightforward manner. Consumer packaged goods (CPG) companies manufactured and distributed products and the retail industry finally sold them to end customers. Relationships between consumers and the parties behind the retail industry were nonexistent and whatever the retailers communicated to the users had to be taken at face value.
Things have changed dramatically. Thanks to the consumerization of services and expectations and due to the advent of always-on connectivity in the manufacturing process and supply chain, old boundaries are vanishing. Everyone in the value chain can talk to each other and find ways to save on time and costs. Today, retailers have access to smart manufacturing technologies that enable them to produce and sell their own chain of products on the same shelves as historical products. On the other hand, brands belonging to the CPG industry can just as easily adopt e-commerce technologies and establish their independent online and offline distribution channels to reach users directly.
What does such a scenario imply for the future of the retail industry? More importantly, what does it mean for the modern consumer, who is now spoilt for choice and has an abundance of options to choose from? The subject of consumer behavior, long touted as a religious text for the retail industry, is now in need of a major overhaul as every player is scrambling to capture a diminishing share of the consumer’s attention.
‘Sink or swim:’ the mantra for retailers
Whether a company belonging to the CPG industry or a retailer adopts a new-age model or continues down the existing path of traditional distribution channels, it needs to remember one thing – consumer experience is now the single most important factor determining sales of consumer packaged goods. If a consumer finds a single discrepancy in a product sourced from diverse channels, it can lead to a complete no-confidence vote and dilute the brand value among customers. Finding a replacement brand or product is now easier than ever, so a situation like this inevitably leads to a long-term separation.Whether a CPG company or a retailer adopts a new-age model or continues down the existing path of traditional distribution channels, it needs to remember one thing – consumer experience is now the single most important factor determining sales.Retailers should, thus, be working around the clock to devise innovative means of delivering a unified and seamless consumer experience across all channels – whether at stores, online outlets, or direct-to-home services). To succeed at this, they need information about consumer habits, preferences, and experiences – information that is available across the multiple devices consumers use and consent to share data. Tapping these data sources is more vital than ever and it’s no surprise the most successful retail and CPG industry players are those who understand the importance of data collection and analytics at every step of the buyer’s journey.
This is why the ‘digital transformation’ theme is gaining traction across the retail-CPG ecosystem. It offers a peek into the mindset of a buyer of consumer packaged goods anywhere and at any time, and this is an advantage a seller cannot afford to pass up. For manufacturers, distributors, and retailers in this age of consumerization, digital transformation provides holistic insights into every stage of the value chain, and there are several lessons and best practices companies can leverage on this front.
Thinking big but not acting ‘big time’
Many retailers often make the mistake of either assuming they’re too big to fail or thinking they’ve hit the big stage once they start serving international consumers. Some players forget the essence of their brand, and start homogenizing their offerings to keep up with what others are doing. This can be a costly mistake and lead to a rapid downturn in fortunes if sellers choose models and offerings that are not suited for their business. They should hence think of adopting tailored approaches for each region or demographic, and not choose a ‘one-size-fits-all’ approach that can backfire.
Understanding the local and customized needs of a region was a time-consuming and costly affair in the past and retailers spent a fair amount of time researching such factors and their causes before deciding the way ahead. But now, time is a constraint. So, along with the removal of existing barriers to manufacturing and distribution, retailers need to contend with this hurdle.
Like all other industries, retail is in the throes of a data-driven revolution. Thanks to technological advancements like the Internet of Things (IoT) and smart manufacturing technology, the industry can now reach consumers in previously unimaginable ways. As such, retailers need to change the way they view their consumers and embrace innovative methods to deliver products and experiences just-in- time. The underlying factor here is building intrinsic consumer trust and that is something that cannot be taken lightly.