The Goods, the Bad and the Ugly
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The consumer goods industry is currently undergoing a digital transformation. The impact of this transformation is already visible across all stages of the industry’s value chain — from manufacturing to marketing to last mile delivery. It is only a matter of a few years before home appliances such as refrigerators will be automatically ordering consumer goods, which will be produced by robots and 3D printers. Then, tose orders will be delivered to the end customers using autonomous vehicles such as drones and driverless vehicles. This entire scenario may sound like a Hollywood film, but not anymore. Recent developments in digital technologies such as as AI, robotics, and autonomous vehicles all point towards the digital future described above.
Owing to these technological developments, the consumer goods industry is going to fundamentally change. If companies don’t adapt to the changing dynamics of the industry, they risk extinction. Therefore, companies need to adopt new technological trends and innovate their business models continuously.
Below are the 4 trends that companies need to watch out for in the consumer goods industry.
Trend 1: Embrace change and unlock billions of dollars in value
According to a June 2017 report by Accenture, thanks to digital technologies, in the coming 10 years the retail and consumer goods industries are going to change more than they have in the past 40 years. By 2025, the digital transformation is going to add $2.95 trillion of value to both companies and consumers in these industries. Companies who seek to unlock billions of dollars in value should start embracing digital change across all stages of their value chain and put themselves on a path to a digital future in order to maximize their profits. Those who don’t embrace digital and incorporate it into their operations and decision making, stand to lose billions of dollars and risk their very survival.
Trend 2: Customer is king – this time for real!
Advancements in digital technologies and platforms such as social media, e-commerce, and online reviews are empowering customers. They hold the power to influence many decisions within the established companies. They want to have a say in what, how, and when a product is produced and delivered. There is a huge shift towards e Commerce (51% American prefer to shop online), especially among millennials who prefer to discover and buy goods online. E-commerce penetration in retail and consumer goods industries will reach 40% by 2026. According to the World Economic Forum report on the consumer goods industry, the next decade will be the golden decade for consumers who demand personalized products and services that are in line with their needs and taste.
Consumers are increasingly aware of their influence on companies’ decisions. Therefore, it is imperative for consumer goods companies to launch innovative business models to connect with empowered consumers. Hyperconnected consumers have access to a staggering 1 billion different consumer products from different suppliers globally! In such a competitive market, only the companies who cater to changing needs of consumers through continuous innovation and disruption will survive.
Image source: shutterstock.com
Trend 3: Digital technology is everywhere
Digital technologies are already disrupting and transforming the consumer goods industry. Their impact will be more pronounced in the coming years. These technologies can help consumer goods companies in catering to the needs of consumers and provide them with an inspirational shopping experience. The following 5 technologies are disrupting different stages of the value chain – from manufacturing to last-mile delivery. These technologies are:
- Internet of Things
- Artificial Intelligence/Machine Learning
- Digital Traceability
- Augmented Reality/Virtual Reality
The table below shows their application across different stages of the value chain. If companies seek to stay competitive, they will have to adopt these technologies.
Trend 4: Innovative business models are the future
The changing dynamics of the consumer goods industry require that companies integrate digital technologies and consumer expectations into their decision-making processes and operations. Therefore, there is a need to continuously innovate business models that cater to the changing needs of consumers and the market. Below are the 4 innovative business models that can help companies capture value in this new era of digital disruption.
Model 1 – Sharing Economy: In this business model, multiple customers will rent products instead of buying them. An Accenture report shows 52% of consumers surveyed showed interest in this type of business model.
Model 2 – Personalization Economy: According to this model, customers get personalized products that cater to their taste and shopping history using advanced digital tools such as AI. 48% of consumers showed their willingness to try it.
Model 3 – On-demand Economy: As per this model, products that are used daily such as groceries are automatically delivered to customers. 63% of people showed interest in getting such products delivered automatically.
Model 4 – Services Economy: In this model, consumers outsources their routine tasks such as laundry for a price. 50% consumers are interested in using this model.
Summary: What to do
Digital technologies are changing the rules of business in the consumer goods industry for good. The sooner companies embrace this reality, the better it is. In this era of digital transformation, companies need to continuously innovate — both in terms of new technologies and business models. It’s not just about gaining a competitive edge, it’s a matter of survival!
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