As COVID-19 continues to spread across the globe with no signs of slowing down, people are learning to adapt to the new changes in their day-to-day lifecycle. In this new era, Consumer Packaged Goods (CPG) industries are also learning to adapt to these new changes by realigning their strategies in order to fulfill the new demands of their customers.
Industries across the globe are experiencing a huge shift in customer shopping behavior. Amidst these changes, there has been faster adoption of online purchases and a rise in the hoarding of essentials products. As a consumer myself and a father of 3 kids, it’s very important for me to take additional precautions when it comes to moving around in stores while maintaining social distancing, and also limit the frequency between visits.
As more cities are moving into the lockdown stage, the demand for non-essential businesses has reduced drastically. In the ‘new normal’ businesses are ordered to close, restrict working hours, and limit shopping for all categories except for essentials goods. Brands are learning to adapt and become more flexible to meet these changing needs. With this change in trends, CPG industries are facing the greatest and fastest change ever witnessed in customer’s shopping behavior.
The online purchase of CPG products has increased significantly over the last two years, thanks to improvements in technology, infrastructure, and experience; coupled along with the reduction in barriers such as reduced shipping costs, lesser delivery time, at-home trials, etc. Yet with COVID-19 crisis, another wave of changes is expected to hit soon which will bring changes in customer shopping cycles, contact-less purchasing, etc.
For instance, In the US there was an upsurge in online and offline sales in March once lockdown was announced by the governors of respective states. This decision led to a sudden spike in average sales of both online and offline products by 15x for ~2 weeks. Based on historical data, such trends are expected to continue & result in an increase in growth-rate of online shopping.
Challenges for CPG Organizations during Covid-19:
CPG organizations today are facing multiple challenges over two broad categorizations:
Non-essential products – like beauty, hair, grooming etc.
- There is minimal footfall in retail stores by consumers buying non-essential products
- Inventory is moving slowly through retailers
- More consumers are buying these products online
- CPG brands are not able to cope up with sudden increase in online orders
All these quick changes in consumer behavior is having a huge impact on supply chain. Order fulfillment has taken a hit due to - longer supplier lead times, long delivery time, product stock-out, shift of demand from offline to online channels etc. All of this is resulting to lost sales.
Essential products – like paper products, health, nutrition, oral care etc.
- Due to a sudden onset of consumer demand, retailers are struggling to meet the rise in consumer demand and failing to provide shelves stocked with essential items
- Consumers lack visibility about available inventory and next availability of products in nearby stores
- Lack of correct information is leading to panic buying, over stocking and consumers buying cheaper alternative products online
Strategies to streamline consumer experience in these times
As the world fights this epidemic, organizations can help in multiple ways to ensure that impact to consumers is minimized. In the near term, it is extremely important to educate consumers, bring more transparency in communication and have an honest relationship with consumers.
Some ideas that could be deployed are as follows:
- Provide product visibility – Brands can create a notification service for consumers to subscribe to. This service can be linked to the retailer systems to provide real-time updates about the product availability of each store
- Consumer education – Set up a guide to educate people and become a trusted source of information for consumers to understand their health-and-wellness options.
- Product usage recommendation – Create online tools for consumers to estimate their needs for essential products and the required quantity, based on parameters like household size and estimate how long their supply will last and how they can use products to maintain hygiene.
- Augment delivery options – Brands can collaborate with delivery aggregators to deliver non-essential products from retail stores to consumers
- Re-balance supply chain – to manufacture, transport and deliver essential products in larger quantities to retailers and reduce non-essential products
- Leverage CRM for the benefit of the community – Brands can create a shared platform for consumers to share product stories, information and ensure that the needy are taken care of by their neighbors.
Learnings from an epidemic of such a scale is bound to have a profound impact on future strategies so that the world is better prepared.
There will be a renewed focus on automation through digital technologies to reduce dependence on physical labor for e.g. use of driverless vehicles for transportation, delivery through drones etc.
One of the key vulnerabilities exposed due to this epidemic is how quickly long-distance supply chains can get disrupted. Hence, CPG organizations will look at increasing their share of local sourcing and increase dependency on local suppliers as part of their future risk mitigation strategies.
AI/ML will become a core piece of any digital transformation, as organizations realize that building intelligent self-learning systems is key to protect and ensure business-as-usual in times of a world crisis for e.g. intelligent supply chains which can re-balance quickly based on shift in demand, use of robots for store audits for retail execution, etc.