- On June 27, 2019
Since it was founded in 2013, the eBusiness Institute has proven to be a leader in helping companies to adapt to the latest technological changes in order to remain relevant and competitive in the digital age. The eBusiness Institute’s CEO and Founder, Luigi Matrone, was asked to deliver a keynote at the Tetra Pak Annual Supply Chain Management Team Meeting in Munich on 24 June 2019. Tetra Pak, one of the three companies in the Tetra Laval Group, is the world’s leading food processing and packaging company offering safe, innovative and environmentally sound products which last year led to more than 189 billion Tetra Pak packages being sold in over 160 countries and net sales of €11.2 billion.
In his keynote to Tetra Pak’s Supply Chain Management Team and their staff, Luigi offered his expert insights into the key eCommerce trends transforming the consumer packaged goods (CPG) industry and structured his speech around three principal topics: global opportunities in consumer packaged goods; the significant impact of digital disruption from China on eCommerce; and how the 'subscription economy' is transforming consumer behaviours.
Setting the scene: eCommerce and consumer packaged goods
While the CPG industry may have initially been slower than other sectors to embrace eCommerce, a study published by the Food Marketing Institute has projected online to make up 20% of all grocery sales in the US by 2022, making it a $100 billion market. Changing consumer behaviours and the emergence of the 'smart consumer' have helped to bring about this shift. Another key trend in CPGs is the transformation of the shopping shelf from physical to virtual and the significant implications this has had for packaging, some of which have been beneficial to brands and eRetailers. Sustainability has also become hugely important with 66% of all consumers being willing to pay more for sustainable brands and brands actively looking for ways to make their products more sustainable such as P&G’s Olay piloting a refill pod for its best-selling moisturiser.
China, the digital disruptor
In 2008, during the global economic crisis, the Chinese government took the decision to invest massively in its internal capabilities, including plans to drive technological advancement and shape global standards and norms.
The result of these massive investment policies is a Chinese digital landscape that is unprecedented in size and scope. Indeed, by 2018, Chinese tech giants Alibaba and Tencent ranked in the top 10 of the world’s most valuable brands. Over the same 10-year period, China has seen the number of internet users almost triple and, with 690 million smartphone users, it is safe to say that the internet is mobile in China. The digital disruption from China - the innovations in social media platforms such as the Tencent-owned WeChat, the seamless omnichannel shopping offered by the Chinese giant eRetailer, Alibaba, and the growth in livestreaming - has given rise to a consumer that is well ahead of any other in terms of digital adoption and the demand for the integration of platforms. It is a consumer that can shape the digital landscape and show us the way forward.
A deep-dive into the 'subscription economy'
The third and final topic covered by Luigi in his keynote to Tetra Pak was how the subscription economy is transforming consumer behaviours and the implications for packaging and consumer goods. Over the past five years, the subscription eCommerce market has grown by more than 100% each year with the largest players in the market generating more than $2.6 billion in sales in 2016. Accompanying this trend has been the emergence of a more 'nomadic' consumer who will, in the future, continue to move away from owning things. Consumers like the convenience, personalisation and element of surprise that come with subscriptions. For CPG brands, the shift to a subscription market presents both exciting opportunities and dangerous pitfalls. In order to succeed, they need to adopt a 'subscription mindset' with the customer rather than the product as its central focus since the formula for growth in a subscription economy is based on monetising long-term customer relationships rather than shipping products.
It is essential for businesses to adopt careful planning and an innovative strategy to enhance the consumer experience when making the subscription mindset shift and to remember that elements such as packaging can play a vital role in fulfilling the subscriber’s needs of convenience, personalisation and surprise.
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