CPG leaders – Retail disruption is not just a sales problem

It is clear to pretty much anyone involved in the consumer goods industry, that retail is being disrupted in possibly the most significant way since chain supermarkets were invented. All this retail disruption has massive implications for consumer goods manufacturers, but too often CPG leaders leave this challenge in the hands of the sales team. This, in my experience, is a fatal flaw. Retail disruption threatens the entire business, challenges the entire business, and requires a business-wide response. Retail disruption isn’t a sales thing. CPG leaders really need to focus on retail disruption in a bigger way

Ecommerce has catalyzed a significant shift in shopping behavior that is creating convulsions across the industry. The pandemic may not have substantially changed the trajectory of this shift, but it has accelerated many of the changes. Established players are struggling. Discounters are thriving. Big store operators are opening small stores and experimenting with new retail models. Offline chains are going online. Online chains are opening offline stores. Brands are experimenting with bypassing retailers completely and going . The scale of change is quite profound and is creating headaches for consumer goods brands sales teams. New customers have new demands and need investment while at the same time legacy customers are also looking for support. The net result is an increased demand for investment, and some tough conversations: but CPG leaders need to recognize that the challenge for consumer goods companies goes way beyond that.

Let’s just think about the implications of these changes, and how they impact the business. Here I am selecting the key elements that we’ve seen on the projects we’ve worked on. There are many more, but hopefully this will be enough to convince you!

CPG Leaders – Retail disruption affects the brand portfolio

If you are involved in brand marketing, innovation, or even acquisition strategies for your company, you need to be on top of retail disruption. Disruptive retailers change the brand landscape massively. Online players such as Amazon give consumers and shoppers access to a far wider selection of brands than ever before. And this gives breathing space (and sales!) to a whole bunch of brands. Offline retailers are working harder to differentiate themselves by offering exclusive products that can’t be bought in their competitors’ stores. This is leading to retailers stocking smaller challenger brands, and continuing to extend private label into private label. With inflation putting pressure on shoppers in many parts of the world, expect value ranges to start taking more shelf space again, too.

On the other hand, some of the other disruptive channels offer much narrower selections. Discounters offer few, if any brands. Likewise convenience stores are booming in many parts of the world. Convenience stores clearly stock fewer brands than a supermarket or superstore. And increasingly, convenience stores are becoming hybrid stores, altering the definition of convenience, and reducing their range of traditional CPG products even further.

Consumer marketers are busy focusing on developing their portfolio to meet consumer needs and wants, and that’s great. But what is the point in having a brand that meets consumers needs, if it isn’t going to be available (or can’t be found) in the environment where those consumers shop? If marketing directors aren’t heavily focused on retail disruption, the future could be really painful. We worked with a CPG leadership team recently and, based on predicted retail trends, their brand was going to effectively disappear from between 15 and 30% of shopping trips based. Imagine what would happen to your brand if 30% of shoppers could no longer see your brand when they went shopping?Â

CPG Leaders – Retail Disruption changes people requirements

If you think that the HR solution to retail disruption is the creation of an E-Commerce team, then think again. While E-commerce teams are a quick fix, in our experience this approach rapidly causes problems. For one thing, as retail moves towards omnichannel, the number of pure e-commerce retailers diminishes. And there is no such thing as an ‘online shopper’: shoppers shop across online and offline channels all the time. An ecommerce team runs the risk of creating more silos and isolation, and can make it hard to manage cross-channel issues such as pricing.

As retailers feel the pain, they are changing their business model too. Retailers such as Amazon make huge profits from advertising. Major retailers are getting in on the act by setting up and extending their retail media networks to grab more of their supplier’s marketing funds. Sales leaders need to understand this, but so do media buyers, marketers and shopper marketing. Marketing communications can no longer live in a silo within marketing and their agencies. HR professionals need to consider new organizational structures, and new capabilities, well beyond the sales team.

CPG Leaders – Retail Disruption changes business processes

In our experience retail disruption challenges the way businesses work. Processes designed for the analog world simply don’t work in the omnichannel world. This problem manifests itself in many ways, but the biggest ones are speed and complexity. Online isn’t a channel – its many channels. All these channels create complexity, and that is harder to manage. And today’s retailers need things to happen fast. Decision making processes that take days or weeks simply can’t keep up with an industry that is making changes to their shopper offer on an hourly basis.

CPG Leaders – Retail disruption affects the supply chain

And retail disruptors have different supply chain requirements too. Service level requirements change, and retailers are increasingly looking for exclusive products, which threatens to broaden ranges massively, and make managing forecasting and inventory levels much harder.

CPG Leaders – Retail Disruption challenges Finance

Of course, Finance Directors and VPs need to pay attention too. Retail disruption makes massive calls on internal and external investment, both within the retail sphere and beyond. Retail disruption threatens corporate profitability in so many ways, one could argue that the VP Finance should have his office right next to the Head of Sales. If the company doesn’t get a handle on retail disruption, then its total finance will suffer. Period.

CPG Leaders: Time for a cross-functional approach to retail disruption

This is a blog post. Of course I can’t hope to cover all of the challenges that retail disruption brings to a manufacturing organization. But the bottom line is simple: Retail disruption is not a ‘sales thing’. CPG leaders need to recognize that retail disruption is a ‘CEO thing’.  And arguably retail disruption should be very high on the list of priorities for any consumer goods CEO. It should be on the agenda in the marketing, HR, Finance and supply chain teams too.

We’ve been working on projects like this for some time, and especially in China, where the convulsions caused by retail disruption have been being felt for a number of years. We’ve assembled a fabulous team of experts and crafted out a number of ways for businesses to prepare themselves with a pan-business strategy to ensure the business continues to be successful. If you’d like to understand more about the challenges that we’ve seen, or understand more about the solutions we’ve created for our clients in China and beyond, please get in touch. We’d be happy to share our experience and our thinking.