Retailers and consumer goods companies have long understood the need to develop enhanced digital capabilities. But the pandemic shocked the industry into action, making digital transformation an urgent imperative and accelerating the need to change to meet customer demands and respond to a world requiring speed, agility, and a high level of service.
Moving into 2021, retail companies and consumer goods manufacturers face continued challenges from COVID-19, even as social restrictions ease. And as optimism begins to return in consumer sentiment and their anticipated spend, companies need to be vigilant in order to capture an increase in consumption. As sited in the recent KPMG Consumer Pulse Survey (Spring 2021), consumers expect to increase spending across both discretionary and essential retail.1
For retailers, customer expectations are increasing—where consumers are demanding more digital engagement across the entire purchase lifecycle. Powerful competitors, including platform companies, are harnessing a vast amount of consumer data to inform quick adjustments to customer buying behaviors. And direct-to-consumer businesses are challenging legacy retail models with increased competition. To survive in this new business reality, retailers must look for new opportunities and pursue new strategies because any stop-gap digital measures put in place to manage COVID-19-related issues are not adequate to support the current needs of the increased digitally savvy consumer.
For consumer goods companies, the pandemic impacted product categories differently. There has been an abnormally high increase in consumption for some segments, such as home improvement, gardening, and prepared foods.
While other segments saw a steep decline—restaurants, apparel and luxury, and are only now starting to see signs of a potential return in spend to prepandemic levels. This volatility in demand has created supply chain and distribution disruptions, leading to complexities in managing inventory at store shelves. With consumers changing their consumption behavior, organizations need greater insight into their customers' shopping preferences in order to appropriately meet demand, as well as consider different product delivery models, such as direct-to-consumer, that provide greater flexibility and more customer data.
To compete with digital-first companies that are purpose built for new customer experiences, and to meet changing demands, retailers and consumer goods need to a consider large-scale digital transformation. In the KPMG 2021 Consumer & Retail CEO Outlook Pulse Survey, 78 percent of consumer and retail executives reported that they plan to invest more in e-commerce, and 77 percent said they would spend in customer-centric technologies in the coming year.2 Organizations need to build new business models that leverage technology and data to create a self-accelerating effect: consistent, steady results that ultimately produces momentum. Ask yourself: Are you building technology and data to drive growth? Are you keeping pace with subtle and more dramatic customer behaviors? Have you digitized your entire enterprise to remain connected? Are you using the right technology, data, and analytics to ensure demand visibility and supply chain transparency?
A case in digital evolution
Seeing profound shifts in industry and customer buying behavior, Dawn Foods, which serves bakers around the world as a maker and distributor of everything from raw ingredients to ready-to-sell goods, knew it needed to make big changes including an enterprise-wide digital transformation.
“One of the reasons we decided to continue to invest in digital, even though it was, yes, pretty unusual times as we all know, is because we recognize this was the next transformation for Dawn. This was going to set us on a trajectory that was going to change the future of this organization.” — Carrie Jones-Barber, Chief Executive Officer, Dawn Foods
The organization worked with KPMG to design, build, and deploy a new digital bakery business platform, on cloud-enabled, microservices-based commerce architecture, which included a customer onboarding program to support the successful adoption of new technology and processes. To get started, KPMG benchmarked Dawn Food’s current-state operations against competitor and marketplace data to identify potential initiatives, which were prioritized by business impact, risk, and competitive advantage. A thorough digital transformation business strategy was then put in place to support the necessary investments in new processes, technology, and people skills. And a target operating model was designed and implemented to address the needed change programs across every dimension of the enterprise, including business metrics, governance, and business process changes.
“There's really a blurring of old world and new world, a blurring of off-line and online. And so the challenge is really, for us as business operators, is to pull those things together and embrace the world that we are now in.” — Bob Howland, Chief Digital Officer, Dawn Foods
Dawn Foods is on its way to business growth with renewed customer value by using digital innovation as a sustainable competitive advantage. All key functions are digitally integrated, including product strategy, supply chain, data and analytics, e-commerce, technology architecture, and alliance partner network.
Things to consider during your business model transformation journey
As the shape, size, and trajectory of the consumer and retail industries continue to shift dramatically, small steps aren’t big enough to succeed long term. Moving forward requires consumer manufacturers and retailers to transform their businesses in fundamental ways and forge ahead with renewed vision, agility, and resilience. Read the five key things your organization can do get started.
1. Win with superior customer experience
Differentiated customer experience—whether you’re a consumer goods company or retailer with digital and brick-and-mortar stores—sets leaders apart. With technology providing new connection points between retailers and consumers and manufacturers and customers, you can create nearly limitless choices for where and how to purchase.
In the new business reality, consumer and customer needs, expectations, and demands look markedly changed. Consumers are getting used to entering and exiting stores without interacting with anyone, letting technology do the work of fulfillment and check out. Customers in the supply and distribution chain want automated access to products and services. To provide an experience that drives the business forward, detailed consumer and customer behavior and trends insights derived from powerful data and analytics capabilities are the first requirement. It enables your organization to meet customers where they are and build a better and more connected digital and in-person experience. You can also leverage real-time feedback at critical customer interaction points to expertly manage customer experience quality.
2. Incorporate advanced data analytics to drive more growth
Consumer goods manufacturers and retailers need to ensure products, services, and experiences meet a new definition of everyday life. But where do you place your bets? The answer lies in the data. Advanced data and analytics (D&A) and artificial intelligence (AI) enable organizations to follow a digital trail of customer and transaction information and remap the customer experience to match prime growth opportunities. With a clearer understanding of customers—including how demographics, behaviors, desires, and needs change over time and place—your organization can make smarter investment decisions.
3. Digitize your enterprise
One-off projects won’t get the job done. Enterprise-wide digital transformation is key to success. It’s the best way legacy consumer goods companies and retailers can compete in the expanding competitive landscape. Technical architectures with new platforms that are more scalable offer agility and flexibility from the back- to front-end and can integrate more seamlessly across the enterprise, helping your organization improve visibility and user experience.
4. Rebuild your supply chain using technology and data
For consumer goods and retail companies, consumer changes are making demand visibility and supply management crucial capabilities. But as a new industry standard for supply chain logistics emerges, it’s leaving legacy structures designed for a one-channel world in upheaval. Technology will be at the heart of future supply chains.
Lightweight and “smart” supply chain platforms that leverage AI, D&A, and other innovations can connect to top suppliers across the ecosystem and deliver nimbly against today’s increasingly complex customer journey. Top supply chain investment areas include omnichannel, predictive planning and forecasting, flexible operations, improved inventory management, and real-time visibility.
COVID-19 made it clear that innovative supply chain models are more capable of handling supply and demand disruption. Many were able to continue to support customers through the pandemic, providing seamless purchasing, payment, distribution, delivery, and returns regardless of channel. As port delays, container shortages, and driver shortages become the theme in the first half of 2021, the flexibility and nimbleness of supply chains will be tested. Agile, data-driven supply chain operations are now pulling farther ahead of traditional linear supply chains by using their superior technology and agility to predict and respond to the next wave of consumption shifts.
5. Embrace responsible practices
As people confront the role of businesses in complex global issues such as income inequality, climate change, health and safety, and diversity and inclusion, today’s stakeholders—from customers to employees, to investors—are setting a high bar for companies in terms of the impact they have on the world around them. Heightened social consciousness, activism, and the desire to support positive change are putting pressure on companies across industries to integrate environmental, social, and governance (ESG) practices into practically every tentacle of their operations.
Given the discretionary nature of sales, the financial and reputational risk to consumer and retail businesses that fail to protect their people and planet is significant. Organizations that are successful will embed ESG factors purposefully and authentically in their transformation, demonstrating clear leadership from the top, generating enterprise-wide buy-in, and a creating a culture focused on what really matters.
It’s time for a restart
Today’s consumer and retail companies need to find new ways to promote, deliver, and support their products and services in unique and agile ways. The transformation will likely impact every aspect of the operating model, from the number and type of stores and outlets to the people who support customers, to transaction and delivery methods, to the processes that enable the business and the technology and automation that integrates key capabilities. To get started, identify your demand baseline and analyze when and at what pace demand will return and which customer buying preferences will emerge. Determine how operating models need to evolve to support the business, understand what costs need to be taken out to achieve profitability and not exhaust liquidity, and define the “new” customer experience.