2021 has been a challenging year for everyone, yet it has been full of opportunity for the retail and consumer goods industry.
Here, we look at some of the 2021 industry developments at a glance:
1. Supply chain delays driving streamlined operation
From bottlenecks in cargo ports and limited factory labor to a shortage of truck drivers and automobile microchips, these issues have caused shipping delays across supply chains globally.
These disruptions have been forcing consumer goods (CG) organizations to look into bringing the supply chain closer to home, looking for locally sourced partners to eliminate the long-haul shipping delays. This also has the nice side effect of making the supply chain potentially greener and increasing the product traceability and provenance for value-conscious consumers.
CG executives have also been looking to improve inventory visibility by using real-time data on demand, planning, improving forecasting and optimizing assortments using AI technologies so that they can plan with more precision and allow efficient lead time.
These developments have created an opportunity for CG organizations to align their front and back-office teams and connect their planning and execution cycles.
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2. Labor shortage driving focus on employee experience
Labor shortage has been a major issue impacting almost all aspects of the supply chain lifecycle. Low vaccination rates in the developing world and key manufacturing hubs such as India, Mexico and Vietnam have caused reduced factory capacity and production delays. In the UK, the labor shortage issue was heightened even further as a result of Brexit. On top of that, in response to the global pandemic, some CG companies implemented hiring freezes and mass layoffs during 2021.
This shortage in labor has been forcing CG organizations to prioritize an enhanced employee experience. For example, improving employee wellness, implementing flexible/remote working, investing in compensation and benefits and providing consumer-graded experiences to help employees do more with less. And more importantly, investing in employees’ careers and personal growth by providing the right coaching and development support.
3. Consumer spending looking healthy, despite inflation
Interestingly, consumers have been well aware of supply chain challenges. Many had already started Christmas shopping by November and Black Friday deals were being advertised as early as October.
Despite the global pandemic and financial inflation, consumer spending remained healthy. According to NRF, consumers continued spending in November this year, building on the momentum from strong early holiday shopping in October and setting the stage for a bright holiday shopping season, as demonstrated by a 14% percent increase in sales year-over-year.
This was also the case last year when retail sales during 2020’s November/December holiday season grew by an unexpectedly high 8.3% over the same period in 2019.
This consistently healthy consumer spending has created an extra layer of focus for CG organizations, encouraging them to invest further in precision revenue growth management, adapting advanced data and analytics solutions to predict optimal assortment, pricing and promotion at granular and seasonal level.
4. B2B businesses rapidly adopting omnichannel sales model
This year we saw an accelerated move away from visit-only strategies to contact strategies, combining face-to-face visits with remote and digital contact – a paradigm that McKinsey is calling “the rule of thirds”. According to their survey, B2B customers now regularly use 10 or more channels to engage with suppliers (up from just five in 2016).
Today, 94% of B2B decision-makers say the new omnichannel sales model is as effective or more so than the sales model they used before the pandemic.
This number was 65% in April 2020. A truly accelerated shift!
A true multichannel sales strategy empowers sales reps to continue deepening their relationships with retailers in between face-to-face visits (see our blog for more information).
5. Partnership with digital natives driving new revenue streams
To improve last-mile delivery and provide a positive consumer experience, we’ve seen CG companies across all verticals adopting new routes to market by partnering with digital native brands.
These partnerships enable joint success where both CG organizations and digital natives can open doors for one another to create unique value propositions. It’s not just about collaboration on a product, but also establishing new business models that move forward with greater customer engagement and loyalty.
As examples, we saw so many food and beverage manufacturers partnering with UberEats and Deliveroo to bundle food and drink deliveries directly to consumers. Ultra Beauty teamed up with DoorDash to bring same-day delivery to consumers, and so on.
Reckitt Benckiser launched a subscription model with AirBnB to allow hosts to order welcome and turnover bundles. Later in the year, they successfully repeated a similar model with British Airways.
The amazing benefits of these partnerships include getting CG companies closer to consumers and providing access to insights into consumers’ behaviors and demands. In turn, they can bake into execution strategies helping them to maintain relevance.
TikTok’s recent announcement has been my favorite, where it is preparing to launch a new service that will turn its viral food videos into meals that consumers can actually order and enjoy. Now imagine the wealth of consumer information that this is going to deliver!
6. Conscious buying creating new innovation and marketing opportunities
The global pandemic has raised awareness globally about the importance of living a healthy lifestyle. We can see a general trend of consumers shopping more consciously and their shopping is majorly centered around basic needs and buying locally.
Consumers are actively looking for healthier products with balanced nutrients that can also boost immunity.
Last year, Unilever reported a spike in sales for drinks containing vitamin C and zinc whilst rolling these products out globally.
Additionally, there has been greater demand for cumulative wellness and products that can enhance positive overall body and mind wellness. Kraft Heinz has been prioritizing the innovation of products such as sauces and side dishes that make home cooking fast.
This has led marketeers to relaunch some of the most established drinks and food products with brand messaging that promotes better health and enhanced cognitive performance. This is a wonderful opportunity for CG organizations’ sales and marketing teams to work hand in hand to re-educate customers and consumers on their new brand messages.
Social values have been equally important. In the recent Hotwire survey, more than 47% of consumers stated that they would switch products if a brand went against their personal, social and environmental values. This year, CPG brands had to put even more emphasis on using recycled materials and adapting technology and AR solutions to provide greater provenance and traceability of their products to their end consumers.
7. Economic inflation fueling growth of private labels and discounters
This year we saw an accelerated shift to discounters and private labels by consumers. Generally, the growth of private labels has consistently remained stable, despite stagnation in 2020 due to supply chain issues. We saw discounters such as Aldi and Lidl rapidly opening branches in affluent neighborhoods of the UK and US.
Consumers typically associate private labels with price differentiators.
However, McKinsey has predicted a fourth wave for private labels where retailers and grocers can address changing consumer expectations with distinctive high-quality products. Tesco’s “Finest” range, Sainsbury’s “Taste the Difference” range, and Migros and Carrefour’s sustainability-focused range are great examples of private labels targeting health and value-conscious consumers and offering a broad spectrum of products at a reasonable price.
In order to stay in the game, consumer goods organizations need to increase brand investment to drive trust and deliver on innovation. In addition, they need to leverage analytics and AI capabilities to achieve the right mix of packet size, price and promotion to capture price-conscious consumers across all channels.
The impact of the global pandemic has not slowed consumer spending overall, rather the opposite. The above mentioned shifts and developments have led calls for streamlined operations with a local focus. Now, having fewer employees means that companies appreciate the ones they have even more, and invest in their long-term development. While we move towards a more B2C-focused buying experience, in the B2B industries alike, thanks to omnichannel avenues, this drives an improved customer experience.
For the coming year and the imminent future, I expect such developments to continue to drive improvements in the consumer goods industry. Watch this space.