• by Nick Brien , Op-Ed Contributor, March 16, 2021

What does the winning CPG company of the future look like? Born into an age of Amazon, Shopify, Rakuten and Walmart.com, they are a hybrid of technology system integrators and innovative products creators. It’s fair to say that most traditional CPG companies are simply not equipped for today’s digital shopping reality. 

The global pandemic has accelerated the growth and dominance of online marketplaces, like Amazon (US), Alibaba (China), Rakuten (Japan) or Flipcart (India). These popular digital retailers are today providing consumers many of their daily product needs and these current shopping trends are set to continue, as online commerce continues to drive a growing percentage of product sales in the future. 

To compete and win on these digital retail platforms, CPG companies require innovative technology, smart data and end-to-end automation. The mega-marketplaces have leveled the playing field to enable smaller sellers to compete with larger CPGs, while at the same time providing consumers easy access to important data sets necessary to make smarter choices, based on performance, pricing and availability. 

To be a winning CPG, it’s all about efficiency of supply chain, understanding the customer and predicting his/her needs, turning data insights into desired products in a rapid fashion. Competing against the new generation of data-driven, tech enabled product sellers, CPG companies need to inject better tech and smarter data throughout their supply chains, beginning with product development. 

Today, there are over 3 million active 3^rd party sellers on Amazon - all relatively small businesses selling less than $1 million annually. The digital economy embraces small businesses who are able to cater for audience niches and provide product specialism. At the same time, these smaller on-line sellers are extremely agile and very data driven. Successful D2Cs operate with sophisticated first party data, utilizing CDPs to focus with an eagle-eye on the many important metrics necessary to pivot product development according to rapidly changing consumer sentiment. 

Winning CPGs need a full picture of their business, from production supply chain to real-time inventory, to be able to optimize it in an agile way. Automated marketing is also critical to create real operating leverage, as the barriers to entry have come tumbling down. Traditionally, brick & mortar retailers would limit their SKU selection to those brands spending regularly on TV, as well as committing to frequent shopper marketing programs. Today, the way consumers search for products and shop online has changed dramatically, specifically because people have themselves become so data driven.

Before consumers had access to their own super-computers (called mobile phones), they lacked the necessary data for smart decision making. When they walked into a store, they would rely heavily on a brand’s advertising to provide perspective on its perceived quality and value. Fast forward today, it’s incredible the way consumers are shopping, as 75% of product searches on Amazon don’t include a brand name! Consumers are empowered by these platforms to do their own due diligence on finding solutions to solve their problems and satisfy their demands. They’re looking at user reviews and price comparisons to make their own decisions based on data and insight. 

Traditional CPGs need to understand what consumers are searching for that they’re not finding – basically retracing the searches to figure out where there’s a lack of satisfaction, poor ratings, not enough choice, disappointing features etc. The challenge for CPGs is to respond swiftly to bring better products to market while focusing on improving the overall customer experience. CPGs need to be laser-focused to resolve consumers’ pain points, focusing on the particular area of the customer journey where there’s clear frustration and take market share by appealing to the consumer with a better product and a personalized experience. A sale can’t be considered a success if it doesn’t create the opportunity to establish an authentic relationship based on trust and transparency to build loyalty and advocacy. 

There is a winning formula in online selling that drives success--lower CAC and increase LTV. This has been clearly established as the golden equation of ecommerce. 

Commodity to Brand? I love brands but the tables are turning from a business-to-consumer world (B2C) world to a consumer-to-business (C2B) world. CPGs must acknowledge the symbiotic relationship between marketplaces and third-party sellers as the new reality. Size and scale can no longer trump speed and agility in the on-line world. 

Are brands dead? Absolutely not although they’re simply not emphasized in the world of online marketplaces. It’s today about speed to market and execution of data-driven approaches to building and selling products. Brand building on top of a high-speed supply chain and data-driven approach to NPD is certainly the best of both worlds for the new breed of CPGs. But the real competitive advantage is digital real estate - product ratings, user reviews and price listings. Traditional brick & mortar retail was heavily linked to media spend but marketplace players like Amazon and Alibaba have reinvented the online retail store to severely limit this impact. 

I believe that the traditional CPGs created in the era of selling their products in brick & mortar stores are being completely disrupted. The CPG company of the future that uses technology, first-party data and automation to go-to-market with a digital-first approach will succeed in on-line marketplaces like Amazon, Walmart, Rakuten and Shopify. 

The global pandemic has increased digital transformation investment for all companies by at least five years, ensuring that the future CPG will certainly be an innovative hybrid of a product and technology company.

Nick Brien is the former CEO/Americas Dentsu International.