E-commerce was one of the earliest industries to experience an immediate impact from the COVID-19 pandemic. Although traditional retail will take some time to recover, online retail, including the consumer packaged goods (CPG) companies and logistics providers who drive the industry, continues to surge. Amazon’s sales were $96 billion for Q3 2020, representing a 37% year-over-year increase.
The good news is that several CPG companies and their logistics providers had already invested heavily in technologies and processes to weather disruptions to their businesses. However, let’s have a look at how the pandemic has either accelerated those strategies or changed them altogether.
Pressure on the Supply Chain
COVID-19 has exposed the strength — and vulnerability — of CPG companies and their supply chain relationships. While some companies had already been building smarter and more flexible supply chains, this focus has become even more priority under the pandemic.
Investments in shipping technologies are nothing new. According to Material Handling and Logistics magazine, there is $1.5 trillion of value at stake for logistics players and a further $2.4 trillion worth of societal benefits resulting from widespread digital transformation in the transportation industry. While the visibility of buyer shopping patterns and the movement of goods continues to be necessary, the ability to predict consumer purchases and the feasibility of fulfillment will be the strongest indicator of success.
As such, CPG companies are placing much more emphasis on predictive analytics, machine learning, and AI to cultivate an insights-driven environment. However, due to the vast quantities of data available and the need to harness it effectively, CPG companies are sharing more and more of this data with their logistics partners. This is to everyone’s benefit, as it can unlock information critical to avoiding supply chain disruptions and creating a superior consumer experience.
“Digitalizing supply chain management strengthens capabilities in anticipating risk, achieving greater visibility and coordination across the supply chain, and managing issues that arise from growing product complexity,” explains Scott Clarke, Vice President of Retail Consumer Products at Publicis Sapient a digital strategy and consulting firm.
Digital Marketing or Digital Experience?
Technologies have evolved that enable e-commerce companies to source, engage and convert shoppers at any point of contact. The key is the maintenance of a multichannel experience so that consumers can make purchases based on their preferred platform. This is nothing new, but e-commerce companies have accelerated their efforts under the pandemic to meet shoppers at any opportunity they can. For example, a brand might maintain its direct-to-consumer website powered by a platform like Shopify, in addition to maintaining a presence on Amazon Marketplace. Both would be available via mobile platforms, all providing a seamless user experience.
E-commerce no longer refers necessarily to single unit purchases by consumers. Thanks to COVID-19, businesses of all sizes have become more comfortable with e-commerce transactions, as their employees and customers are most likely online, too. Products might be sold as single units, bulk orders/wholesale, or even subscriptions.
Marketing has become much more complicated under the pandemic. While in-store advertising and promotions may have dropped, online advertising has skyrocketed and has become more competitive. For e-commerce companies, finding the right mix of marketing dollars to spend on email, Google Shopping ads, Amazon Ads, Instagram, and the like is a challenge and could squeeze smaller players.
E-commerce providers might not usually share their marketing data with their suppliers and logistics providers, but given the need to inject predictability whenever possible, this is emerging as a key strategy moving forward. In this way, all players work cohesively to deliver the best experience possible — both online and offline.
“COVID-19 has changed how consumers shop, with greater emphasis on digital channels and new drivers of value. With consumer-decision journeys encompassing more digital touchpoints and increasing in complexity, shoppers will expect CPG companies to have a consistent presence online and offline,” according to Clarke of Publicis Sapient. “CPGs must deliver meaningful value to consumers to stay relevant and maintain market positioning. Doing so requires a holistic, full-funnel approach to commerce, including the right balance of distribution channels and tightly integrated routes to market.”
Any Good Can Be a Packaged Good
The pandemic has also created a trend: products traditionally purchased only in a physical retail store are now being purchased online — for example, furniture and groceries. “For higher-end beauty, furnishings, and apparel brands, stronger e-commerce will also include more advanced inventory control, a more refined virtual customer service and online shopping experience, and tiered delivery options,” notes analysts at credit rating firm S&P Global.
While this may have been a challenge early on for retailers caught off-guard, many have now launched strategies that facilitate the distribution of products. Rather than create entirely new distribution systems, online retailers have invested substantially in last-mile deliveries to consumers’ homes. Of course, this has required even more reliance on and integration with logistics partners to offer a seamless experience.
More On the Packaging
Before making an online purchasing decision, consumers generally do not inquire about the box and shipping materials. However, the pandemic has shaped the way goods arrive at both distribution centers and consumers’ doorsteps, as logistics providers have found themselves needing to be more creative and dynamic concerning the packaging. “Innovation in product design and packaging to facilitate ease of storage and distribution will go a long way to help accelerate e-commerce,” notes S&P Global.
What might typically be packed in a corrugated cardboard box might arrive in a lightweight polyethylene (“poly”) bag or envelope. The pandemic has made more use of such flexible packaging. It saves space on delivery trucks and can be less conspicuous than a box left on a doorstep. E-commerce companies can look to their logistics providers to guide packaging trends to enable or even stimulate additional sales.
Consumers Expect More ESG
Investors and boards have increasingly evaluated companies on their ESG (Environmental, Social and Corporate) governance, or the levels to which sustainability and direct societal impact are mandated by company leadership. ESG has been shown to correlate with more substantial business outcomes and higher financial performance.
This might sound like something only large organizations can afford to carry out, and they certainly have for several years long before the arrival of COVID-19. However, the pandemic exacerbated the need for companies of all sizes to demonstrate their commitment to ESG — even if it isn’t mandated by a company’s board of directors or a hedge fund seeking to invest in the company. In times of crisis, consumers choose to do business with companies taking the initiative and effecting positive change, even in small, measurable ways.
Keeping ESG initiatives in mind, e-commerce companies have begun to incorporate more of this sensibility into their sourcing. According to a survey conducted by management consultant BCG, 90% of consumers said they were equally or more concerned about the environment and sustainability since the COVID-19 outbreak. Nearly 95% said they believed their actions could help reduce waste, attack climate change, and yield additional benefits. Another 27% to 30% of the respondents to the survey noted that this belief had strengthened due to the crisis.
Rather than go at it alone, e-commerce companies can team with their suppliers and logistics providers to develop ESG strategies that address these market concerns.
What’s Ahead
Consumer behavior was already evolving long before the arrival of COVID-19. The pandemic only served to accelerate change. The good news is that those e-commerce companies and their manufacturers and distribution partners (including 3PL providers) have already committed to technology investments the challenges brought on by the pandemic. As life gets back to normal, buying patterns and consumer tastes may shift, but channels may stay in place for quite some time.
Jake Wengroff writes about technology and financial services. A former technology reporter for CBS Radio, Jake covers such topics as security, mobility, e-commerce, and IoT.
Sources:
S&P Global – COVID-19 Will Shape The Future Of Consumer Goods
Publicis Sapient – Five Imperatives for CPG Companies in a Post-COVID World
Deloitte – 2021 consumer products industry outlook
MH&L News – How Robotics Technology Is Modernizing Third-Party LogisticsBCG – Sustainability Matters Now More Than Ever for Consumer Companies