Consumer Products
Founder & Director of Consumer Business
Bluefin Solutions
With Web 2.0, Enterprise 2.0, Social Media - call it what you will - there are fantastic new opportunities for consumer engagement. If only the pressure from volatile input prices and domineering retailers would go away!
The rise of Social Media has delivered a proliferating number of channels for consumers to engage and interact with. From fan pages on Facebook and real-time feedback on Twitter, to user-generated content on companies' own websites - those that make consumer products have never had it so good in terms of tapping into customer demand! And yet, input price volatility in both raw materials and energy, has caught the less responsive players off guard, and there is the ever-present dominance of the major retailers to contend with. In an increasingly global market, supply chain risk has risen up the agenda to battle for strategic attention against growing pressure from customer demand.
Input price volatility
While managing commodity exposure has been a part of the Consumer Products business for some time, the pace of change picked up when China gathered momentum and drove a tightening of global supply across a range of commodities. Then the economic collapse drove prices the other way, and market volatility hasn't looked back since! Hedging is not the only answer, as those that put hedges in place prior to the collapse have found out. More importantly, many companies discovered that they simply didn't have the information and tools needed to rapidly and accurately model price-change scenarios, and understand fully the impact of such volatility on their profitability.
Supply chain risk
Globalisation has been a driver for many years now, and in some industries such as shipping, the risks are understood. What the recent economy shock has shown, is that all countries around the world are more connected than ever before, and it's a myth that Asia can buffer the global economy from weak Western demand. So if you have a more global, more dependent, less transparent supply chain, how visible are the risks, and how much greater is the impact of any one failure?
Dealing with the major retailers
Tesco is the most common global success story example. But, in truth, all the major retailers wield a lot of buying power, and that can put Consumer Products companies in an awkward position. Retrospective changes to terms, and buyers moving to different categories as soon as they understand the category they are in, lead to transient relationships. This can make it difficult to develop a relationship based on trust or decent consumer-oriented information on which to base decisions on - for example, how robust is point-of-sale data when so many products are on promotion?
All of these things contribute to a feeling that the major retailers are more of a barrier to reaching the consumer, than a channel! Web 2.0 offers opportunities, and the independent retail sector can provide leverage in some categories, but one thing is certain - the major retailer is not going to go away. Increasing the engagement with the consumer is critical, and managing the vast array of information-rich communication channels is one of the challenges that CP companies will have to rise to.
Driving consumer engagement
Social Media, Web 2.0, Enterprise 2.0, Facebook, Twitter, SMS, user-generated content and on it goes. Tomorrow's marketplace is starting to feel more like the media sector than the consumer goods sector! There is a vast array of opportunities for quickly and cheaply opening up new channels to engage and interact with consumers. And different types of consumers are demanding engagement through a wider choice of channels. In 2009 for example, only one in ten teenagers used email every day, and SMS use continues to grow exponentially - 15 years old, and still producing 10% year on year growth. More than that, consumers are willing to invest significant amounts of personal time into subjects they are passionate about.
Indeed, while every year in the 20th century saw an increase in the amount of television the average consumer watched, by 2010 the amount of time the average teenager spent watching television actually started to decrease. Why? Because people are more willing to actively engage in content they care about, rather than passively soaking up broadcast messages.
This raises a number of challenges for Consumer Products companies - one is how to best engage the consumers that care about their products. And another, associated challenge is how to capture and embed the massively increasing amount of data from interacting with consumers, into already overloaded enterprise architecture.
It's an exciting time to be in consumer products, and the companies that play it right stand to make some big wins!