Bain and Company, a well-known authority on the consumer goods market in the USA has published in its monthly ‘Bain Brief’ the results of its 3rd annual research into what digital means for consumer goods companies. It’s conclusion: – “In recent years, most consumer goods companies have exponentially grown their digital agendas, typically resulting in higher costs of time, energy and money. Yet for many, top-line growth remains elusive and proﬁts are under pressure.”
Here are some other interesting views from that report: – “There’s no arguing with the need for a digital transformation. According to Pew Research Center, consumers globally are shifting media consumption to digital channels at a staggering pace, with 55% of people in the US watching video online every day and nearly 1.86 billion monthly active Facebook users exposed to ads when they log in. In many categories and countries, e-commerce channels will contribute the majority of industry growth.
Digital operations have generated great beneﬁts, boosting stock accuracy by 18% or reducing forecast errors by 35%, for example. And the emergence of a new type of competitor—innovative, digital-ﬁrst insurgents like Three Squirrels, The Honest Company and snack company Graze with healthy access to venture capital, little initial reliance on physical retail channels and no need for scale traditional advertising budgets—puts the pressure on incumbent brands to respond or fall behind.
The challenges go beyond spending more on digital initiatives without seeing improved results. [Bain] also learned that the gaps between leaders and laggards are getting bigger. The nature of digital gives trailblazers an advantage, and the less digitally mature companies will ﬁnd it increasingly difﬁcult to catch up. E-commerce search algorithms favor brands with better historical digital sales, for example. Meanwhile, targeting digital marketing to consumers in turn creates more digital engagement, which then delivers better data to target with. Digital talent and agile culture beget better talent and culture. The list goes on.
While some players have emerged as digital leaders and provide critical lessons, no single company has ﬁgured everything out. Insurgent brands start with digital fully embedded in their organizations, while most scale consumer products companies still rely on pockets of digital activity or are in relatively early stages of acting on their strategies in one or more aspects of digital. However, smart choices and nimble ways of working can accelerate progress and set new standards for the industry.
The majority of future growth for many brands will come from digital commerce, in particular online and mobile channels. Online grocery penetration alone is expected to grow by 15% annually through 2025. That’s why leaders are gearing up to partner with the top digital retailers, optimizing web search and honing online product assortments. Some are also selectively experimenting with direct-to-consumer models.
But while digital commerce is an important path to growth and many company executives readily admit that their millennial consumers prefer buying online rather than in stores, there’s a paradox: Most traditional companies, especially food and beverage players, are moving cautiously to manage channel conﬂict and profitability. Some companies fail to think through the right assortments or pack sizes for digital. For example, it may be cost-effective to ship bulk packs of shampoo, but do consumers really want to purchase 24 bottles at once?
Food and beverage players say online retailers are top-priority customers, yet too few assemble the required cross-functional “A” teams to turn those accounts into growth stories. Many also haven’t developed new capabilities to serve different business models and unique needs. A simple example: a supply chain built to ship pallets is not well-suited to direct-to-consumer models that ship smaller volumes or individual packs.”
Read the whole ‘Bain Brief’ here: http://www.bain.com/publications/articles/deconstructing-the-digital-agenda-in-consumer-products.aspx