Consumer Packaged Goods (CPG) players today are gripped by a paradoxical situation! Across categories, they have seen a surge of 20-40 percent in the consumer intent to make purchases online. However, a recent survey of US CPG executives indicated that 25 percent of respondents were concerned about low profits from e-commerce – a classic case of exponential growth and low margins.
With e-commerce projected to be a significant driver of growth for CPG companies, how can they ensure that it can translate into profits and greater value? Advanced analytics holds the key.
Starting out as a bookseller, Amazon today strides the world of e-commerce, cloud platforms and advertising. Walmart has now developed its third-party marketplace in a big and profitable way – and there are other success stories too. Advanced analytics has paved the way for them to expand their vision and develop newer, creative and profitable avenues of business.
Raising the Analytics Bar to Overcome D2C Profitability Challenges
As the direct-to-consumer or D2C business model comes to the forefront, three major challenges could shackle the profitability quest for e-commerce players:
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Volatility and granularity of customer demands and behavior – this confounds the forecasting of future demand
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Inadequate integration of inventory across e-commerce and brick-and-mortar models, leading to sub-optimal inventory and distribution
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Inefficient planning due to time-consuming ‘data wrangling’ from multiple data sources, internal and external. Add to this the costs of digital advertising and logistics – and margins are all but non-existent
Fortunately, data analytics can enable CPG players to beat these challenges by maximizing ROI from marketing investments, driving revenue growth and establishing omni-channel supply chains.
Read how D2C data analytics is helping brands build customer intimacy
Maximizing ROI from Marketing investments
For most CPG players, a key challenge lies in making the right distinction between shopper marketing, digital marketing (advertisements and other promotional material appearing on digital channels), and e-commerce marketing (advertisements aimed specifically at boosting online sales). They are not always clear, especially when it comes to budget setting and performance management.
Measuring returns on marketing investment gets further complicated in an omni-channel environment, especially when taking trade and promotions into account. Advanced analytics techniques such as Optimize Funding, Attribution and Performance Management, and Stakeholder Coordination can help CPG companies to develop a more agile re-allocation mechanism to shift spend quickly as opportunities arise.
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Optimize Funding: Re-imagining planning processes through cross-functional budgeting and joint performance-management sessions. This generates a clearer view of total investment
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Attribution: Leveraging cost-attribution models to drive relevant comparisons across channels and enable better informed investment trade-offs. Advanced analytics capabilities such as ROI modeling can crack the code to accurately measuring omni-channel ROI
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Performance Management & Stakeholder Coordination: Creating a single source of truth on omni-channel performance, which is a vital aspect of efficient investment management
Increasing Revenue Growth
CPG companies have taken steps to mitigate channel conflict by creating channel-specific – in some cases, even retailer-specific – assortments in terms of bundles, pack sizes, formulation and packaging. While unique SKUs reduce price erosion, they are expensive and complex. More importantly, unique SKUs will not be effective if consumers are unable to make direct price comparisons of different SKUs across channels.
Intelligent deployment of new data sources can help CPG players to:
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Equip SKUs with consumer-backed rationale to maximize ROI
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Understand retailers’ strategies in the relevant categories, and tailor pricing and assortments
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Monitor online prices in real-time across channels, swiftly addressing pricing conflicts
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Develop retailer segmentation to make the right prioritizations in trade spending for key retailers who offer the most levers to influence performance
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Closely coordinate with supply chains to ensure the right alignment and reduce logistics cost
Building an Omni-channel Supply Chain
Across all categories, CPG companies are plagued by high shipping and warehousing costs. Omni-channel supply chain solutions driven by advanced analytics offer the following positive outcomes:
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Improved demand forecasting and forecast accuracy through sophisticated algorithms
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Enhanced collaboration with omni-channel retailers to align ordering patterns
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Better efficiencies and reduced costs through re-design of e-commerce product packaging
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Optimized deliveries enabled by re-imagined delivery pathways and segment warehouses
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Collaborative partnerships with last mile logistics providers underpinned by real-time information sharing
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Healthy balance between lean fundamentals and automation
Considering the enormous D2C opportunities that are waiting to be unlocked, CPG companies will do well to swiftly adopt advanced analytics – perhaps with an analytics partner with expertise in domain, data and digital.
About WNS Triange:
WNS Triange (formerly WNS Research and Analytics practice) powers business growth and innovation for 120+ global companies with data, analytics and Artificial Intelligence (AI). Driven by a specialized team of over 4000 analysts, data scientists and domain experts, WNS Triange helps translate data into actionable insights for impactful decision-making. Built on the pillars of consulting (Triange Consult), future-ready platforms (Triange Nxt), and domain and technology (Triange CoE), WNS Triange seamlessly blends strategy, industry-specific nuances, AI and Machine Learning (ML) operations, and intelligent cloud platforms.
Driving a futuristic edge are WNS Triange’s modular cloud-based platforms and solutions leveraging advanced AI and ML to provide end-to-end integration and processing of data to actionable insights. WNS Triange leverages the combined strength of WNS’ domain expertise, co-creation labs, strategic partnerships and outcome-based engagement models.