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How Digital Tech Is Paving the Way for FMCG Innovation

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The global pandemic has incredibly changed consumer behavior – from physical stores to online mediums and there will be further changes in their wants and needs in the months ahead. Now more than ever, it has become crucial for fast moving consumer goods (FMCG) companies to adopt digital technologies in a strategic manner to not only cater to the changing consumer preferences, but also personalize the user experience and improve efficiency and profitability. In fact, studies have proved that firms that have stepped up digital adoption in their sales, warehouse and inventory management, and distributor systems are enjoying improved efficiency and productivity in the long run.

Manish GuptaIn a recent interaction with CXOToday, Manish Gupta, Managing Director and Lead – Products, Accenture in India, discusses how FMCG companies can  explore new business models, and adopt disruptive technologies to find new sources of growth in order to thrive in the post-pandemic times.

What is the pace of digital adoption by FMCG companies, especially in the past one and a half years?

The pandemic has undoubtedly altered consumer behaviors and preferences in the long run. While a lot of FMCG companies were at various stages of exploring digital transformation, the pandemic has accelerated the pace and scale of adoption. In the past 18 months, most consumer goods companies have doubled down on the use of technology to refine their strategy, define new markets, and boost employee productivity. Many have also used the power of data to reinvent marketing and sales strategies to address the changing consumer preferences. COVID-19 has led to compressed transformation, with companies simultaneously transforming multiple parts of the enterprise and reskilling people in what previously would have been longer-term step-by-step programs. Many consumer-facing companies have re-platformed their businesses in the cloud, addressed cost pressures, and continued to build resilience and security, putting the infrastructure in place to enable innovation and position them for future success.

What are the key factors driving digital adoption in the consumer goods segment?

Several factors have led to the accelerated digital adoption across consumer goods. Industry estimates indicate that the internet usage in India continues to grow and there are more than 600 million active internet users. Changes in consumer behavior – fundamentally, the shift to online purchases from physical retail stores is driving digital adoption in this sector. The rise of digital native companies, disrupting traditional business models is also leading to digital acceleration of the ecosystem. The physical channels have been disrupted as well, forcing consumer goods companies to explore newer avenues and channels.

According to the findings of Accenture research, the dramatic rise in e-commerce is likely to remain or accelerate further. For instance, the proportion of online purchases for products such as food, home décor, fashion, and luxury goods by previously infrequent e-commerce users — defined as those who used online channels for less than 25% of purchases prior to the outbreak — has increased 667% since the outbreak in India.

What are some of the challenges faced by these companies as they take the digital route?

Businesses have been through a challenging time since the last year. A combination of lockdowns, store closures, supply chain disruptions, remote working and other essential measures have changed market demands. One of the key challenges faced by companies in their digital transformation journey is choosing the appropriate data and technology infrastructures and investments, aligned with their business goals. Another issue is ensuring that they have the right talent with the right skills to leverage digital technologies. Companies also need to undergo change management to transform their ways of working, embed more resilience and agility.

With growing focus on health and hygiene and evolving consumer behaviors, companies are struggling to reinvent and reposition their products. The availability of multiple channels also requires agility. Mostly, companies get constrained by the existing technology architecture to respond to the market needs in timely an agile manner. According to Accenture’s Tech Vision 2021 research, 99% of respondents from the consumer goods and services sector said that the pandemic has proved to be an unprecedented stress test for their organizations. In particular, it has brought significant pressure on four aspects – technology architecture, strategy, processes and workforce.

The ripple effects of the pandemic will continue to impact consumer goods industry in the foreseeable future. It will mean being more flexible, resilient, and sensitive to meet the evolving needs of consumers, employees, and business partners.

What emerging technologies is the FMCG sector banking on?

As consumers migrated from offline to online purchases, FMCG companies have responded by ramping up investments in digital technology. According to Accenture’s Tech Vision 2021 research, sixty three percent respondents in India said that COVID-19 has accelerated digital transformation with a particular focus on cloud, AI, analytics and cybersecurity.

Technology architecture and its ecosystems have become critical to the overall success of an organization. To stay agile and resilient, companies need to fast-forward digital transformation with cloud at its core. In fact, 93% of executives in India project that 50% or more of their organization’s business will move to cloud in the next three years, as per our Tech Vision 2021 research. We are also seeing companies invest in building a data platform, providing a single view of different customer and market data points for actionable insights. Using real-time data, analytics, and AI not only helps companies respond to future disruptions but also opens up new growth opportunities. With increasing focus on digital, investments in security become extremely important.

How are these companies using tech in creating a unique user experience?

User experience needs to be looked at holistically across all consumer touchpoints, in a manner that is convenient, reliable, and timely. To provide a seamless consumer experience, all aspects of the business need to be digitalized and not just the front end. The pandemic has sparked a new wave of innovation.Consumer goods companies have reimagined the consumer experience by adopting immersive technologies such as conversational AI, AR/VR and 3D technologies. These disruptive technologies have enabled personalization of experiences by creating the equivalent of physical store like experiences using digital technology.

According to Accenture’s new Business Futures, Signals of Change report, less than one percent of retailers use AR/VR technologies to improve the consumer experience. But, increasing this to just two percent could translate into an estimated additional sales growth of $66 billion for retailers. For example, we saw beauty brands really embrace AR and VR during the pandemic to increase their sales and help consumers find the right shade of color when shopping online, or to personalize and customize their purchases. Current VR technology primarily engages our senses of vision and hearing. Over time, it will become increasingly realistic – engaging smell and touch and sight and sound. As this integration happens, virtual worlds will become increasingly realistic, providing a great sense of the physical.

How can consumer goods companies reimagine their supply chain with technology?

Supply chain will play an integral role in finding growth for consumer goods companies as they look at post-pandemic recovery. According to Accenture’s Technology Vision 2021, 77% of executives surveyed in the consumer goods and services industry in India said that their companies have faced a moderate to total supply chain disruption.

Companies that reorient their supply chain towards delivering consumer needs by making use of data available internally as well as externally and a technology architecture that is agile and responsive to demand fluctuations, will emerge successful in the future. With rapid market changes and external disruptions, companies need a mechanism in place for scenario planning and predictive analysis to overcome the constraints in supply chain. They need to invest in a scalable digital architecture to turn data into actionable insights. For example, we helped create an autonomous and integrated supply chain for Tata Consumer Products Limited (TCPL) to improve end-to-end visibility across the value chain to meet growing consumer demands and enable purposeful growth.

Investing in an intelligent supply chain network, powered by digital technologies can help companies become more profitable and efficient. However, it is also important to monitor and generate growth from these investments.

What niche skills are FMCG firms looking at to thrive in the post-pandemic era?

To thrive in the post-pandemic economy, companies need to focus on reskilling and upskilling their workforce. A more adaptive workforce that is digital and data fluent can help companies meet the evolving expectations of both consumers and employees. According to Accenture’s Tech Vision 2021 research, 87% of executives surveyed in India agree that organizations must train employees to think like technologists, giving them the ability to use and customize technology solutions at the individual level without highly technical skills.

As consumer goods companies scale up their digital commerce presence, they will need people with different skillsets such as digital and analytical capabilities, data led marketing, business to consumer (B2C) commerce and services, platform-based skills, advanced cloud management and optimization and others. It will also be important to not only recruit these specialists but also provide them a meaningful career path for the future. Another important aspect is that unless people have the right mindset to leverage these skills, it will be difficult to progress on the digital transformation journey. Leadership buy-in to adopt digital for differentiation and growth is also critical.

What is the way forward for consumer goods and services companies to thrive in the post-pandemic economy?

The pandemic has accelerated a shift in consumer behavior towards higher digital adoption. Companies must digitally reinvent themselves and strategically invest in technology, data, niche skills, and supply chain to prepare for a post-pandemic economy. It is important to keep reinventing the organization, leveraging the power of digital to achieve future growth. Those who accelerate their digital transformation—embracing cloud, AI powered analytics, flexible IT infrastructure and intelligent operations—will be best placed to lead in the future. Companies also need to undergo holistic transformation instead of taking a piecemeal approach. Digital reinvention combined with a clear purpose, will help businesses not only reach out to customers in new ways, but also react faster to changing market conditions.

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Sohini Bagchi
Sohini Bagchi is Editor at CXOToday, a published author and a storyteller. She can be reached at sohini.bagchi@trivone.com