With the recession behind us, Joe Public feels that he has more disposable cash in the pocket but the actual impact on consumer goods companies is still mixed.
The luxury retailers are still under some pressure as the result of the slowdown in China and the collapse of the Russian exchange rate. And, after years of watching the pennies, Joe has become extremely savvy about how and where he buys. The meteoric rise of the discounters and the change in the high street has meant that value shouts from the rooftops at all times.
If the internet has done one thing for retailers, it has slashed margins. Although Amazon has its many detractors, it cannot be underestimated the positive effect it has had on the consumer; prices have come down significantly for almost all types of product. Although (as I have written before) given the scant margins to be achieved online, I regard ecommerce retailers more as distribution businesses rather than pure play retailers; their success has been testament to the willingness of the consumer to shop around.
But, what does this mean for the manufacturers?
In any consumer products environment, the value of the product is held in a number of areas -innovation, intellectual property and brand. The role of the retailer has shifted significantly, and, in order to keep up it is now far more important for the manufacturer to harness some of the customer relationship management skills previously monopolised by the retailer. The manufacturer as custodian of the brand needs to use every tool possible to maintain the relationship with the customer.
Apple uses its own retail channels to great effect and is now the third biggest online retailer in the UK. Hewlett Packard on the other hand, is 39th. The ability to link directly to the consumer base is more valuable than just additional margin; insight, behaviours, trends and data are extremely useful to any marketing department.
Many of the large FMCG blue chips are now looking at how they can use all these new retail channels to engage with consumers. Although the creation of some direct –to-consumer retail models is initially expensive, it is anticipated that the long term gains will mean strong ROI. Any company that can generate real brand loyalty with the right level of consumer engagement can take advantage of this.
Retailers have had to become excellent at managing customer engagement. Their skills in day-to-day analysis and customer management are second to none. While the manufacturers may be good at segmentation and brand marketing, the details of day-to-day trading are not understood. It is my opinion that many manufacturers could benefit from better insight into retailing.
There is a wealth of experience in retail businesses that can add excellent value to manufacturers. Business changes and evolves continuously, and, in the current environment the brand owners and custodians need to be ahead of the game. Having recruited across the consumer space for a number of years, including brands, retailers and ecommerce, I really believe that the next big opportunity is brands retailing directly to the consumer. The challenge is, do they have the people and the skill set to be able to get to them?