The consumer-packaged-goods (CPG) industry trends and challenges

The need for supporting the availability of consumer goods and retail products is becoming a new constant. This stands true for the modern business world that wants to thwart any unwanted hurdles.

The hurdles we are talking about comprise of

• change in traditional consumer behavior
• faster availability of products online
• various offers and discounts offered by multiple retailers and e-commerce websites
• add-on services run under loyalty programs

The US online CPG sales grew 35.4% in 2018, representing an 11% market share! — Digital Commerce 360

The market is different from a decade ago. And it will not remain the same in the next five years or so! We are implying that with every technological innovation, the market responds with various trends and challenges.

This article will also help you become digitally sound and create countermeasures for thwarting any unnecessary revenue generation roadblocks. After all, that’s the artery that keeps your business’s heart pumping!

How has the CPG and retail landscape changed?

E-commerce in 2020 reached levels not previously forecasted to hit until 2024 — Adobe

Data and technology will be structural integrations for the future of the food and beverage industry merged in data and technology. Simultaneously, e-commerce provides CPG and retail businesses to test the innovative technological capabilities in a much faster and lower risk environment than brick-and-mortar.

Take PepsiCo as an example. For the past several years, it has been fast-tracking its tech capabilities while heavily redefining the meaning of being a consumer-packaged-goods (CPG) company with the help of accelerated digital transformation.

Key influencers that are redefining the consumer goods and retail landscape

• Ever-changing customer expectations
• Concern of sustainability
• A global pandemic
• The need of staying ahead of the curve
• The fear of missing out on better market opportunities

Let us talk about the trends and challenges of CPG and the retail industry. Even though many businesses were looking to adopt digital innovation, the pandemic helped fast track the adoption.

New consumer behavior accelerated with shopping options like

• BOPIS
• Mobile e-commerce
• Last-mile delivery
• Digital shelves
• Curbside pickup
• Geo-fencing

We would also like to add that CPG as a retail segment and retail as a whole is undergoing a massive transformation.

Plus, there is a massive shift in customer expectations and preferences. These two go way beyond a simple understanding of their needs and wants. It means businesses now must make the best use of their collected data and form a centralized library. This data library must be easier to access for adjusting to the constant shift in consumer behavior and preference.

The brick-and-mortar phase is far from being over. But there is a significant hint in online consumer behavior. More customers love the comfort of their home and feel enthralled with at-home shopping.

The trends in CPG and retail industry

Now that we have highlighted the change occurring in the CPG and retail landscape let’s see the trends that will shape the industry in 2021.

1. CPG and retail brands will have to push through for winning digital shelves

E-commerce sales were forecasted to achieve 36% extra margin in 2020 — eMarketer

The pandemic kept many customers away from visiting the brick-and-mortar outlets for their holiday shopping. So, CPG brands started looking forward to the new audiences online. This highlights consumers’ willingness to try something new, especially when the demand is high in the holiday season. Many CPG companies still need to create a more robust plan for personalization and promotions even after this. This is the best way to set up themselves in contrast to the already crowded digital shelf.

2. Direct to consumer CPG brands are worth a look

When talking in the traditional sense, the CPG landscape was heavily dependent on scaling up. The smaller, customer-centric, digital-native brands have turned the traditional CPG growth model on its head.

For instance, direct-to-consumer CPG brands like the Dollar Shave Club doubled their online sales compared to Gillette’s in just three years, changing the way CPG brands operate in the modern business.

The new and hungry breed of DTC (direct-to-consumer) CPG brands even inspired major CPG brands like the 106-year-old company like Clorox to

• Build their in-house DTC capabilities
• Test their DTC brands
• Learn from the results
• Gather plenty of customer data

Major CPG brands like Colgate, Nestle, Nike, and Ocean Spray are using direct-to-consumer to stay competitive in the market. A market that is seeing a continuous boom in online shopping.

3. More focus on inventory and delivery management

As we mentioned above, the current market is seeing a rise in delivery options such as

• At-home delivery
• BOPIS
• Curb-side pickup
• Last-mile delivery

Every CPG company must digitally transform itself for surviving and becoming profitable in the “new normal.” This new normal is here to stay for some time now.

More than 50% of consumers reported spending more on convenience to get what they need, often defined by contactless shopping, on-demand fulfillment, delivery app usage, and BOPIS adoption. — Deloitte

This rise and change in the expectation of consumer convenience will not disappear anytime soon.

4. Customer experience will stay at the center of all strategies

The CPG industry is primarily about products. The recent boom experienced by e-commerce and CPG brands is enhancing their users’ online customer experience.

For providing a better online customer experience, even the established brands need to disrupt their customer experience strategies. Hence, they will be

• moving from the shelf optimization towards setting up contact centers
• working towards their understanding of the entire customer journey with big data and BI tools
• Enhancing their UX designs for supplying a friction-free shopping experience

5. Omnichannel engagement with users

With the influx of chatbots, advanced chat features, and various other platforms, consumers’ convenience level has gone up tenfold.

Modern consumers can now get online and do relevant research regarding brands and their offerings. This has presented CPG and the entire retail industry with new challenges and opportunities.

To be more precise, convenience and safety are the two significant factors affecting customer loyalty for any brand. CPG firms and retailers must pay heed to such factors. They also must make all the required information available online for their current customer base and new users.

Technology has paved the way for new entrants in the CPG industry to connect with new consumers easily. The only thing they need is to pass the convenience and safety test put forth by them.

Businesses like meal preparation services and food delivery are gaining more traction. This is a direct challenge to CPG businesses that solely depend on selling ingredients directly to consumers.

On the logistics front, big bulls must heavily invest in rapid delivery services. This can be achieved through membership networks such as Amazon Prime, Walmart+, and various other private labels.

The price-sensitive and convenience-seeking consumers are readily switching their buying habits by putting their shopping habits on autopilot mode.

6. Hyper personalization is the key to success

The most discussed topic related to consumers has been personalization. However, it is not a new concept. Though personalization in the modern scenario and technological fusions have become a fierce battlefield for FMCG, retail, and e-commerce industries.

Achieving hyper-personalization is a tough ask for businesses that are just starting to bloom in the CPG market. For offering effective and personalized CPG products, companies need:

• Complete understanding of their shoppers’ needs
• Bring products to the forefront that match consumers needs or fulfill their requirements
• Scale the production of those personalized products
• Create profit even at high manufacturing costs

Although the above points sound tough and tricky, businesses can take help from various tools for understanding the same, such as

• online surveys
• review forums
• machine learning
• big data analytics

Machine learning is a great tool for suggesting personalized products to individual shoppers. Simultaneously, automated factories, connected devices, and digital shelves must be merged for supporting the flow of personalized products.

When retailers develop their new CPG-centric strategy, they can build their customer loyalty by focusing on supplying world-class customer service and being more responsive to customer queries. They can also start capitalizing on the e-commerce boom by creating a thorough omnichannel service. However, there is no final or correct answer to counter the sudden surge in the CPG industry. Based on the type of product and service you deal in; you must tread the new waters tactfully.

Conclusion: Going digital is not enough anymore; going the extra mile is!

We hope that this article enabled you to think from a consumer-centric perspective in the new normal. Again, we don’t deny that many businesses have already taken the digital wagon to transform their business.

Let’s talk about non-food items such as personal care and home care products. They are the top-selling CPGs online.

As the data above shows, the CPG industry is on the verge to invest more in 2021 and beyond. This also shows that the CPG industry leaders know that they need to stay visible to their current and prospective customer pool. For doing that, they need to regroup and strategize.

For successful implementation of the newly adjusted strategy or building your CPG business from scratch, you can reach out to Rapidops that has been working with Fortune 5000 companies and various retail giants. Rapidops has helped them disrupt their operations and make a mark for themselves in their respective fields.

Rapidops has spent the last 12 years with 220+ experts, having launched more than 140 digital products? Want to book a consultation with us? Then let us have a chat!