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Digital Shelf Life: CPG at the Tipping Point


What the consumer goods industry’s massive restructuring means for your organization — and what you can do about it.

The center store is disappearing much faster than you think. 

While today’s online sales of middle-store staples such as laundry soap and snack foods represent a scant 5% of consumer packaged goods (CPG) companies’ books of business, the number is expected to swell to 40% by 2025 as more consumers turn to digital shelves for the stock items they once plucked from center aisles.

How will your company stay on the consumer’s shopping list as the routes to market become increasingly digital? What will your strategy be when stores’ focus is experience rather than product distribution? 

The answer is to rethink brand value, the shelf and fulfillment. For our special report, The Road to 2025: CPG at the Tipping Point: How Brands Can Win in the New Routes to Market,” we examine how CPG companies can execute restructuring the digital shelf demands in these three areas.

Brand Value: Transparency is Critical 

To consumers, brand value is the result of not just the product, but also the convenience it offers and, increasingly, the product’s story. Once an option, product openness is now a must. Price transparency was only the start. Consumers want products that improve their lives, through environmentally friendly ingredients and processes as well as through personal, emotional connections. 

Transparency — and the sense of belonging it creates — is how CPG companies achieve brand preference. Yet until now brands have never been required to engage one-to-one with consumers. Most know only the basics about their customers and how they shop. They typically have little visibility into in-store information such as footfall and sales. E-commerce sales, however, are a different story. In the digital realm, brands can view an array of consumer behaviors, from click-throughs to navigation paths. They can know precisely what’s going on.

Knowing consumers and engaging with them one-on-one represents power for brands. But it requires processes that support consumer involvement in everything from ideation to rollout. Innovation platforms will serve as the heart of the new model, relying on open APIs, ecosystems, and plug-and-play capabilities, as well as social listening capabilities that make the correlations among data sets.


Demand Shaping: Reimagine the Shelf

Brands have always defined their value and telegraphed messages to consumers. The difference today? Consumers don’t come to brands. Brands must go to consumers. 

The extent of the shift can’t be overstated. In addition to being everywhere consumers are online, brands need to be everywhere they are offline as well. We call these potential points of intersection “need moments.” They’re about engaging with and serving consumers in whatever way needed, whether it’s an impulse buy or a conversion that takes several encounters. 

Replenishment brands have to be ready for need moments, and the always-on shopping platform provides them with a path. It consists of five elements. Explore the interactive figure below to learn more: 

Figure 1

Getting replenishment and planning right at local levels will be a must in the shrinking middle space. Yet most CPG companies manage at regional or national customer levels. As space planning becomes a balancing act — with brands reducing physical space to reflect the lower levels of foot traffic, but not so far that consumers can’t find them — merchandising and demand planning will move to finer levels of granularity. CPG companies will need to incorporate shelf-level economics into their thinking: How will their innovations improve retailers’ sales versus a private label SKU? 

Rethink Fulfillment: Network-Based Supply Chains

Demand shaping is closely tied to fulfillment; you can’t have one without the other. But demand shaping can change in an instant when it’s digital. 

In 2025, fulfillment will require moving from the push model to responding to individual intent and demand signals. 

Getting there is no small feat. After decades of loading pallets and shipping them to retailers, CPG organizations now face the task of fulfilling online orders picked and packed as “eaches,” that is, single boxes with individual items routed to customers’ homes.

To make that happen, brands will have to rethink manufacturing and distribution, and create fulfillment systems that can use predictive signals, such as digital couponing and point of purchase (POP), to respond to individual intent.

Blockchain will help bring it all together for CPG companies: It can affect transparency, trade spend, media buy and, on the back end, provenance. Blockchain is also secure and versatile in ways that have important implications for the supply chain. This decentralized software mechanism functions as a public, distributed ledger. Because all parties to the ledger have copies of transactions, blockchain brings clarity to often opaque supply chains. It can streamline and secure interactions among manufacturers, retailers and financial institutions. (For more details, read our report, “How Blockchain Can Help Retailers Fight Fraud, Boost Margins and Build Brands.”)

To learn more, read our full report, The Road to 2025: CPG at the Tipping Point: How Brands Can Win in the New Routes to Market,” visit our Consumer Goods Practice or contact us.

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