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With pandemic restrictions lifting and businesses reopening brick-and-mortar locations, there’s cautious optimism that the world may return to something that more closely resembles “normal” in 2023. With that said, certain changes are here to stay, from remote work culture to continued eCommerce demand.
The same is true for consumer packaged goods (CPG) brands. Changes that came about over the past two years in response to COVID-19, shifting demographics, supply chain disruptions, and more will remain relevant well into 2023 and beyond, and new trends are emerging every day. With that in mind, let’s take a look at some of the leading CPG trends for 2023 — and the technologies behind them.
1. Consumers Resume In-Store Shopping — While Continuing to Embrace ECommerce
With COVID-19 vaccines readily available and social distancing guidelines and masking requirements gradually being phased out, consumers are making their return to in-store shopping. In fact, Forrester estimates that 72% of U.S. retail sales will still occur in brick-and-mortar stores in 2024, due to consumers’ desire to test products in person and walk away with an item after purchasing.
But don’t expect eCommerce sales to decline. A Wakefield Research report shows that 83% of consumers say they plan to shop online as much or more after the pandemic as they did during its peak. Additionally, digital CPG sales are projected to account for approximately 10% of the U.S. CPG market this year — up from roughly 4% to 5% in 2019.
Given these metrics, we expect to see a mix of in-store and online shopping become more commonplace, with consumers taking full advantage of all of the omnichannel options at their disposal.
2. Direct-to-Consumer Sales Remain Strong
The height of the pandemic saw a growing number of CPG brands establish new direct-to-consumer (DTC) sales channels, with great success. Shopify reports that DTC channels account for 40% of sales growth in the CPG industry, while eMarketer predicts that the total number of DTC eCommerce customers will reach a record 103.4 million this year.
Though many brands pursued DTC purely out of need, the amount of opportunity within the market is undeniable — so much so that even well-established brands like Nike, Unilever, and Nestle have gotten in on the game.
As companies continue to evolve their CPG strategy, they face new challenges from a technology perspective. Given the dramatic difference in target market, it’s become clear that the systems designed to support B2B operations aren’t well-suited for DTC business. From investing in call center technology to gaining visibility into reverse logistics, we expect brands to carefully consider how their interactions with end consumers differ from those with retail customers, and build technical infrastructures that support those needs.
3. Brands Rethink Inventory Management for Omnichannel Shopping
If there’s one clear takeaway from these first two trends, it’s that omnichannel shopping is the way of the future — and brands need to optimize operations accordingly.
In-store, online, and DTC demand introduces new challenges from an inventory management perspective, making it more difficult for brands to gain real-time visibility into where their inventory is located, to streamline order fulfillment, to ensure that the right products are in the right place at the right time, and so on.
As a result, many CPG companies are choosing to invest in modern supply chain management solutions that leverage business intelligence, data analytics, and other emerging technologies to ensure that popular products are consistently in stock, fulfillment workflows are designed for maximum efficiency, and demand forecasts are up to date and accurate. This degree of visibility is invaluable for brands as they work to fine-tune forecasting and planning to accommodate increased costs due to inflation. It also provides much-needed insight for brands looking to offer same-day delivery — and even shorter delivery windows — in order to maintain a competitive edge.
4. Brands Look to Build More Resilient Supply Chains
Supply chain disruptions resulting from COVID lockdowns, port congestion, natural disasters, and more have dominated headlines for the better part of two years now, with brands suffering their ill effects.
This has prompted many companies to reconsider their supply chain strategy, looking for opportunities to increase resilience, from bringing manufacturing operations closer to home and diversifying their sourcing networks to leveraging Internet of Things (IoT) technology to monitor container shipments and even chartering their own cargo vessels.
Many brands have found, however, that one of the most effective ways to make their supply chains more resilient is to develop end-to-end visibility into their entire value chain. In order to achieve this, CPG companies must replace disparate, legacy systems with tightly integrated solutions capable of consolidating data and eliminating silos. With all sourcing, manufacturing, procurement, supplier, shipping data, and more in a single, easy-to-access location, brands can more easily apply analytics, forecast potential disruption, engage in more proactive planning, and build stronger supply chains.
5. Product Personalization Creates Tailored Experiences
Successful companies are getting to know their customers better. This means understanding buying trends, customer patterns, and more. McKinsey recommends setting up a centralized customer data platform (CDP) to keep data in one place. This is handy for CPG companies to distribute the right products to the right customers. Along with boosting sales, this will also boost brand loyalty.
A reliable CDP, such as Dynamics 365 Customer Insights, should offer invaluable information on customer behavior, experience, and demographics all in one place. This enables employees to access this important data. By breaking down data silos, CDPs enable brands to develop a more well-rounded understanding of their customers, refine market segments, and create more personalized messages, products, recommendations, and experiences across all channels.
6. Younger Generations Prove Surprisingly Loyal
It’s long been said that shoppers from older generations — namely Baby Boomers and Gen X — are more loyal to brands than their Millennial and Gen Z counterparts. That may no longer be the case. In fact, more recent research suggests that Gen Z may be the most loyal generational cohort of all — at least, to the brands whose loyalty programs they belong to. And in order to convince younger generations to sign up, a CPG firm must first develop a loyalty program that consumers feel is worth joining.
Let’s talk about that a little bit more. By now, most brands have some form of basic loyalty program in which consumers earn rewards in exchange for making purchases. While these programs were probably effective when first implemented, many haven’t been updated in years and rely on legacy systems and outdated structures. In order to create a loyalty program that not only entices, but actively incentivizes younger generations to join, brands must do the following:
- Reward interactions rather than just purchases. From visiting brick-and-mortar locations, to filling out surveys, to referring friends, it’s vital that brands reward consumers for every action they take, thereby making it easier for them to earn points and ensuring their long-term loyalty.
- Offer perks that actually appeal to their target audience. Free and/or fast delivery, discounts, free products, early access to new products, and exclusive brand experiences are all effective ways to generate interest from Millennials and members of Gen Z; in fact, many young consumers are even willing to enroll in premium loyalty programs in order to access such perks. Bonus points to brands that enable shoppers to donate their points to the charities of their choosing, as this is a great way for companies to demonstrate that their values align with those of their consumers.
- Refresh their loyalty program user interface. Today’s consumers — especially younger ones who are often digital natives — are less likely to utilize a brand’s loyalty program if its user interface (UI) feels outdated and hard to navigate.
- Invest in hyper-personalization. Consumers who sign up for loyalty programs do so with the expectation that they’ll have a different experience than those who don’t. Make good on that promise by providing rewards program members with product recommendations tailored to their specific interests and past purchases, giving them the option to personalize products at no additional cost, and offering unique experiences through their preferred channels.
7. Brands Go Green — But Consumers Grow Wary of Greenwashing
Consumers are more environmentally conscious than ever before and are adjusting their spending accordingly. Globally, 85% of people report having shifted their purchasing behavior to be more sustainable over the past five years. As a result, a growing number of brands are looking to invest in more sustainable practices, from eliminating single-use plastics to developing circular supply chains.
While “going green” has certainly become a leading CPG trend and offers incredible upside, it’s important for brands to avoid greenwashing, which Sustain.Life defines as:
“A deception tactic — whether intentional or accidental — employed by companies that can cause customers to believe its products, services, or mission are more environmentally impactful than is true.”
For an example of greenwashing and its damaging effects, look no further than Keurig Canada, which was fined $3 million for making false or misleading claims about the recyclability of its K-Cup pods. Greenwashing not only hurts businesses’ bottom lines — it’s also proven to confuse and breed distrust amongst consumers, making them that much more likely to avoid and speak ill of a brand’s products.
Bearing this in mind, it may be helpful for brands to look at sustainability not as a trend, but rather as a mission. Brands that cannot sincerely commit to sustainability and that are not transparent in their practices would do better to leave this one alone
8. Delivery Services Bring the Store to Your Door
As work-from-home becomes the norm for many businesses, direct-to-consumer subscription services will continue to see a rise in popularity, with the so-called “subscription economy” expected to grow to $1.5 trillion by 2025.
It’s easy to see why the DTC subscription-based model has gained so much traction. While consumers enjoy the convenience of direct delivery services, brands have the opportunity to:
- Generate predictable, recurring revenue
- Collect first-party data
- Increase engagement
- Offer curated product selections
- Strengthen consumer relationships
- Engage in continuous product innovation and service improvement
Before they can begin to explore this CPG trend, brands must first determine whether they’re capable of competing with major retailers such as Amazon and Walmart. It’s also helpful to gauge end consumers’ price sensitivity, and whether they’d be open to free shipping on orders that meet a certain order volume
9. Private Labels Crank up the Competition
Private labels or store brands have been fierce competition for CPG companies for years. In fact, they have outpaced national brand growth for both edible and non-edible goods in the last three years. Private labels offer tight control over the retail supply chain and produce higher profit margins.
Experts agree that brands can do more to create emotional connections that boost customer loyalty. Specifically, competing with private labels “demands a greater commitment from CPG marketers to innovation and a clearer communications strategy to remind consumers — especially younger generations — of what is special about their brands.”
This is where brands can leverage engagement insights and analyze how customers are interacting with their website. They can track things like what pages are getting the most views, what links customers are clicking on, how long customers are spending on each page, and more.
10. Brands Give Back
Consumers want to feel good about their purchases, not just financially, but also emotionally, which is why it’s important that brands embrace corporate giving and sustainability. One easy way to give back is to donate goods and funds to support those in need — an effort that has the power to make a meaningful difference in people’s lives, with the added bonus of helping to humanize brands, which can make them more relatable and memorable for consumers.
For inspiration, the Consumer Brands Association offers a list of companies within the CPG industry that have found ways to give back, including:
- General Mills, which provides transitional housing for veterans
- Procter & Gamble, which operates not one, but two donation programs which aim to end oral-health inequality
- Molson Coors, which launched a giving program that matches employee contributions to local causes they care about
- Coca-Cola, which has given over $55 million to support local organizations and vulnerable communities during the pandemic
11. Data Continues to Be a Strategic Asset
Many companies are shifting to DTC sales, which creates new opportunities to gather customer data, enabling CPG companies to create more complete datasets.
Companies can track a multitude of analytics, including consumer buying behavior, demographics, online behavior, and more — all of which help drive more informed decision-making. According to Consumer Goods Technology, “Businesses that have successfully adopted data analytics-enabled decision-making have seen up to a 22% increase in demand for specific products.”
When discussing this particular CPG trend, it’s important to note that consumers are more aware of data collection now than ever before, so it’s essential that brands make data ethics an embedded part of their corporate data program. In order for companies to enjoy the benefits of first-party data access and advanced analytics while providing consumers with peace of mind, the Harvard Business School advises applying the following five principles of data ethics:
- Ownership — Obtain consent before collecting consumers’ data and give them ownership over their personal information.
- Transparency — Clearly explain to consumers how their personal information will be collected, stored, and used.
- Privacy — Store consumer data within a secure database in order to reduce the risk of personally identifiable information, such as phone numbers, addresses, and credit card information, falling into the wrong hands.
- Intention — Before collecting consumer data, carefully consider whether there’s a genuine need for it, and whether the motivation for collecting that data is good.
- Outcomes — Consider the potential outcome of collecting consumers’ personal information, including whether it will have a disparate impact, which is unlawful under the Civil Rights Act.
12. Brands Fight to Win the Digital Shelf
Consumers across all generations made the shift to online shopping due to COVID-19 — and it looks like the trend is here to stay. Accordingto a PYMNTS survey,21.7% of seniors and Baby Boomers said that their shift to online shopping is permanent, compared to just 11.8% who said they only changed behaviors temporarily because of the pandemic. brands must not only offer products online, but also offer a positive brand experience. As mentioned earlier, the key to having a positive brand experience is knowing your customer, which AI and customer insight data play a huge part in.
Take Advantage of the Latest-and-Greatest CPG Trends with Hitachi Solutions
Hitachi Solutions supports the CPG industry by leveraging the full power of Microsoft Dynamics 365, Azure, and the Power Platform. With our Digital Compass initiative, we work with valued CPG customers to prioritize their technology initiatives and transform their business model. With our Digital Transformation Advisory Services, we work with our clients to establish a roadmap to innovation with each solution implementation and project. To learn more, contact us today.