How can brands manage supply chain and fulfillment uncertainty with consumers cutting back on spending as inflation grows amid a bear market?
According to a Deloitte study, the consumer products industry will see strong growth this year — good news for companies after the turbulence of the past two years. In the survey, 93% of executives said driving greater revenue was their top goal, and 50% expected operating margins to increase.
But how does a CPG company achieve these optimistic goals against a backdrop of ongoing supply chain issues, labor shortages, and rising costs?
The survey provides a clue. One of the three imperatives it cites is the need for digital engagement systems that build greater trust through enhanced experiences.
Let’s look at two frequently overlooked routes to market these digital technologies can open up for consumer products manufacturers.
CPG routes to market: Mom-and-pop stores
The next time you pop down to your local tienda, corner store, or variety store to buy a late-night essential, consider the cumulative power of these retailers.
Millions of stores around the world are independent outlets or, more specifically, mom-and-pop stores. Together, these stores comprise an almost trillion-dollar business that’s expected to grow to US $1.34 trillion in 2025 — a 9% compound annual growth rate from 2021.
On a micro level, customer lifetime value from these stores is high. Order volumes may be small, but they’re usually frequent and high margin.
And this value could be even higher if you innovate and bypass your normal channels to sell directly to these stores.
Consumer products companies need to get ready for more change as consumer preferences continue to shift and the market becomes even more competitive.
You might say, “That’s just too complex and expensive.” Yes, selling directly to independent stores has traditionally been a hard nut to crack. The tools weren’t available to help you support multiple small stores cost effectively in a very fragmented market. Just creating an ordering system for numerous independent stores would have been very complicated.
But the new wave of digital commerce technology has altered this landscape. These solutions let you connect different regional platforms to a core commerce engine to give mom-and-pop stores intuitive, consumer-grade tools they can use to manage their business. Crucially, you can embed applications on store owners’ phones, meeting their needs where they’re doing business.Using these tools helps you:
- Streamline processes and cut out middlemen, increasing your margins.
- Leverage in-depth customer behavior data to help small stores innovate and grow.
- And in turn, gain more data that lets you fine-tune your product mix, create new business models, and increase your profits.
Top brands are using customer data to understand the customer journey and deliver positive experiences that boost loyalty and revenue.
The direct selling approach
Now, let’s consider another route to market being transformed by e-commerce technology.
Direct or person-to-person selling accounted for sales of nearly US$190 billion in 2021, almost a quarter of which were in the United States. And the sector is expected to grow at a rate of 6.1% between 2022 and 2028.
Does this mean Tupperware parties? Well, yes and no. Consultants or ambassadors once used catalogs and physical products to encourage customers to buy. But the business is now much more digitalized as it taps into some significant market, employment, and social trends.
Many of the products sold within this model are in health, cosmetics, and personal care, the very categories that saw sales rocket during the pandemic as home workers focused on wellness and nutrition.
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And as a model in which consultants rely on their network to sell a manufacturer’s products, direct selling dovetails perfectly with our ever-present mobile phones and insatiable appetite for social media.
You may already use celebrity influencers, who wield substantial power to create awareness of your products among their millions of followers. So why not use this route to market of direct sellers, who are already microinfluencers within their own networks?
Business-to-business (B2B) e-commerce technology has the power to elevate the experiences of both these consultants and your consumers, helping you harness this huge potential profitably and at scale.