The Retail/CPG Alliance – Five Key Attributes of Version 2.0

Some 18 to 24 months ago, various visionaries began proclaiming an imminent and fundamental reshaping of the retail world and its integrated supplier partnerships. With almost Nostradamus-like precision, experts predicted that phone-based payment methods would soon supplant credit cards. Online auctions, Amazon and Alibaba, meanwhile, would turn shopping malls into monuments of nostalgia.

While things haven’t quite worked out that way, it’s hard to argue against the notion that the retail sector is experiencing transformation. Today, the reality of retail is increasingly characterized by an Omnichannel-connected customer, one with direct and easy access to his or preferred brand of clothing, music, home furnishing and snack food. All in the appropriate size, color and style.

This transformation has been driven to a large degree by a longstanding symbiotic relationship between the retail and Consumer Packaged Goods (CPG) sectors.  The roots of the largely accidental partnership trace back 20 years and more, when retail behemoths like Walmart and CPG innovators like Nike pushed, respectively, for supplier integration, common technology platforms, streamlined inventory management and seamless supply chains. Technology providers responded with smart, specialized and innovative applications and integration standards. The incentive for investing in these capabilities, initially the promise of a competitive edge, has gradually evolved to an imperative of competitive survival.

Building on this foundation of process integration and connectivity throughout the supply chain, the game-changing triumvirate of analytics, social and mobile are today converging to enable true connection and delivery of a unique customer experience.  The industry is achieving direct-to-consumer interaction, characterized by the ability to engage and connect, to deliver the exact product the customer wants, at the right time and place and at the lowest cost/highest margin.

The reality of the connected customer in no way suggests, however, that the retail/CPG alliance has arrived at its destination. To assume so would be a huge mistake. Indeed, the work is just beginning and the pace of change moving forward will only continue to accelerate.  The connected customer requires ongoing engagement and continual monitoring and management.  Winners will be those who most effectively and efficiently manage the digital conversation with the connected customer in terms of collecting, analyzing and acting on data. How can the retailers, CPG manufacturers and their respective suppliers most effectively collaborate to keep up with and optimize this snowball effect?

Five key capabilities are outlined below

  1. Capitalizing on existing technology investment, particularly in infrastructure. Retailers and CPG firms that failed to invest in technology platforms and supply chain integration 20 years ago will find themselves increasingly farther behind the digital strategy curve.
  2. Customer-based data collection and analysis. Tools exist for gathering more and more data directly from consumers’ purchasing patterns, preferences and habits; analyzing such data can extract greater value. Group surveys, focus groups and third-party research will take a backseat to first-hand insight into what customers do and what they want.
  3. Widgets and beacons. These low-cost ticklers and technology are essential to executing retail strategies as well as collecting more data to feed the analytics beast that enables the connected customer.
  4. Integrating virtual reality. Consider shopping for a new car, selecting a vacation destination or choosing a set of hiking boots. Virtual reality can transform the experience by allowing you to sit in the driver’s seat, stroll through a city center or enjoy the view from a mountain peak.
  5. Leveraging the Internet of Everything (IOE). The smart phone has transformed the shopping experience. Consider that innovators are now developing “smart shoes” that integrate with mapping tools and sensors to instruct wearers when to turn right or left. Such capabilities will continue to redefine the in-store and remote shopping experience.

To achieve and deploy these capabilities, continued Retail/CPG collaboration is imperative. A successful integration strategy will focus on leveraging ongoing advances in analytics, social and mobile technology. The focus will be on driving a continuous feedback loop of data collection, analysis and precision in customer insight that drives continuous improvement of the connected customer experience.