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Thriving in the Flux: Digital Opportunities in an Agile RCPG Ecosystem

Thriving in the Flux: Digital Opportunities in an Agile RCPG Ecosystem
July 03, 2019

Years have passed since ‘going digital’ was considered a passing fad. Since then, digital transformation has proven itself to be a key priority for businesses across industries. According to IDG’s State of Digital Business Transformation white paper, 89% of businesses have either adopted or are planning to adopt a digital-first strategy. Such digital disruption has driven enterprises to evolve new business models with digital solutions that are agile and offer a unique value in the rapidly changing marketplace.

The Retail and Consumer Packaging Goods (RCPG) industry is no different. For retailers everywhere, digital disruption is the new frontier where the battle for competitive advantage is being waged. However, not all retailers have been quick on this up-take. The $2 trillion retailing industry has been varied in its adaptation, with traditionally larger players being slower to change. In the meanwhile, smaller brands have been able to adapt to this new landscape and adapted to changing consumer behavior, shifting value chains, and the emergence of new trade channels. As a result, traditional retailers have lost more than $17 billion in sales to these small, tenacious brands since 2013.

For retailers everywhere, digital is the new frontier where the battle for competitive advantage is being waged.

Enterprises in the RCPG industry have attempted to catch up by adopting the ways of digital and embracing digital transformation faster than ever before. And while innovations such as automated delivery drones and AI-enabled chatbot customer service systems are beginning to emerge in the digital infrastructure, the fundamentals haven’t changed. Brick-and-mortar retailers are still an entrenched segment of retail and they’re turning to digital solutions to enhance their digital and analogue operations with improved customer experience (CX), integrated supply chains and omni-channel marketing strategies.

Going the Omnichannel Way

According to IRI Research, the online sales of CPG increased by over 35% in 2018 totaling nearly $59 billion in the United States. This rise is even more impressive, when we realize that digital sales are now out-pacing offline sales as they represented 64% of the growth in total U.S. CPG sales. And a major reason for this has been the emergence of startup disruptors in the online space.

A prominent example is the Dollar Shave Club, an online direct-to-consumer grooming company that started operations in 2011. The subscription service model surprised entrenched market leaders and the company’s online sales spiked, doubling those of Gillette’s online sales in merely five years. Another trend that upturned market expectations and accelerated online sales was the emergence of grocery retail. According to the Food Marketing Institute (FMI), online grocery sales are rising and are expected to make up 20% of all grocery sales, going on to become a $100 billion market by 2022. The same study revealed that 49% of consumers in the US shop for CPG products online, a number that is likely to increase in the years to come.

Next-Gen Consumer Engagement

In this era of digital disruption surrounded by mobile apps and social media, the new peer-to-peer consumer network has shaped the consumer-to-consumer marketplace leading to the demand for more personalized shopping experiences that convey an authenticity traditionally not projected by large corporate brands.

Rapid data capturing technologies along with analysis of algorithms are emerging as a vital tool in connecting brands with every single consumer and offering them a positive CX. Companies such as L’Oreal and bareMinerals have made massive strides in adapting machine vision and AI to provide custom-made solutions to every customer.

Digital disruption has also paved the way for automated self-checkouts to redefine the user experience (UX) and enhance consumer engagement.

In general, the proliferation of data-driven retail technologies can offer a number of benefits, as it allows businesses to:

  • Collate offline customer data digitally and create omnichannel consumer profiles for better personalization.
  • Localize their inventory better by knowing their customers’ shopping practices in detail and improve efficiencies across the supply chain.
  • Make offline shopping more accessible by setting up points-of-sale in public places such as transport hubs and introduce new customer experiences using technologies like augmented reality.
  • Reduce overhead costs by optimizing their workforce and introducing technology solutions, thereby improving CX and leveraging higher value outcomes from their staff such as engaging in interactive customer service.

For retailers, digital transformation is all about being customer-centric, which means everything, from processes to data, needs to focus on user experience (UX).

Shaping the Future of Retail with Digital

The RCPG industry is now poised to kick-off a major revolution in the retail space. By tying physical experience into the digital infrastructure, the brick-and-mortar stores can eliminate all that is inconvenient to the customer.

Making use of digital opportunities will enable RCPG companies to combine products with real time personalization for a greater CX and UX across the board. Fostering this transformation with digital solutions will play a critical role in helping the RCPG industry speed up its product cycles and optimize its operations - transformation is the constant hereon!