Blog Post - Tim Reay, Oct 23 2017

FMCG: Slow-go on the global checkout

FMCG: Slow-go on the global checkout

Kantar's recent perspective on the changing face of FMCG and retailer growth fortunes paints a pretty bleak picture for some of the globe's leading brands and retailers. Stagnant growth rates, low inflation, redundant store formats, emerging competitors, and rising costs all evoke slow value growth for FMCGs the world over.

In their 2017 report "Winning Omnichannel: A Global View On Changing Trade Dynamics", Kantar discussed the omnichannel world we now operate in, and how hypermarkets and large format stores are losing share in the face of the increasing popularity and presence of discounters and online channels. Globally, we are observing similar trends with a push towards greater convenience and ease from retailers and, in turn, the FMCGs who enable them. This dynamic will only accelerate as technology continues to penetrate every area of our day-to-day lives, leading to phenomena such as Programmatic Commerce (that's automated purchasing).

In light of this harrowing information, how should the world's leading retailers and FMCGs respond to this dynamic? How do they exploit this threat to their advantage by moulding it into an opportunity so they can, sooner or later, take share from rivals? Surely the simple answer is to focus on new and emerging channels, and drive growth across them? If only it was that simple...

And herein lies the problem: this approach does not reflect the new customer dynamic and, instead, introduces some greatly unwelcome friction points (where the channels overlap) into your customer experience.

The need to move to a customer-led dynamic

For far too long, brands and retailers have treated ecommerce as a channel that sits alongside physical stores and distribution channels. What they need to realise is this is no longer an effective approach for their business. Gone are the days when customers choose either the physical store or the ecommerce equivalent to shop - rather, they now flip between and across channels. Your customers may initially visit your digital site to research a brand and search for best prices, but will also visit the store to utilise a click-and-collect service.

All too often, when a customer shops using only a physical or digital store at a given time, they are met with significant friction, resulting in lost sales and brand value. An all-too-frequent customer nightmare is enquiring in-store about an online order and being met with "my store till systems can't see your online orders" or "I can't manage your subscription from here - you'll need to phone this number". The process is drawn-out and inconvenient, and leaves the customer disconnected from your brand. These unnecessary friction points are created from the mindset of a channel-centred, rather than omnichannel, approach.

It's also far too easy for an FMCG brand to consider this a retailer problem. However, retailers are an FMCG's problem. as they fail to recognise that a retailer is their predominant route to their customers. With the lines between FMCGs and retailers increasingly blurring, brands cannot afford to sit on the side-lines, as they must be proactive across all their routes to customers. Only by moving to a customer-led dynamic can brands and retailers adapt to and exploit changing customer preferences. This process is led by organisational design, but enabled by business process and technology solutions. Where the processes and technologies of different channels meet, the customer experience suffers.

Pair up the physical and digital, and kill the friction:

There is no doubt that the digital experience has taken hold of every touchpoint and every channel, and operates without boundaries. Retailers who recognise this will lead the way in the ecommerce race, as they can begin to orientate their organisation to capitalise on it.

Digital technologies can be as important for a physical store customer as they are for an online customer. Whilst a customer is shopping in-store, they also use the digital website that was initially created to offer brands a channel to sell direct-to-customer, to gain more product information. Additionally, the social media channels designed to promote brand values are used as an outlet for customers to vent their customer service issues to the brand.

So, what does this mean for your business?

These friction points can be overcome by creating structures, processes and technologies which look beyond the single channel and create an omnichannel capability. Ultimately, it is crucial for brands and retailers to stop generating channel-centric strategies whilst claiming to be omnichannel (which, by the way, they are not). A retailer's, and your, strategy needs to change from creating separate teams to deal with retail stores, online retailers and Amazon marketplaces, to one amalgamated team that deals with all these channels.

Salmon works with the world's leading brands and retailers to make this happen. The foundation is how your customer is behaving, then using this to build the organisational, process and technological design you need to exploit it. Contact Salmon today to discuss how we can make it happen for you.

Download our report on why the UK is leading in FMCG ecommerce