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Retail on the Cusp of a New Era

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Retail on the Cusp of a New Era SPRINGBOARD Executive Summary 4th MARCH 2021 JOIN THE FIFTH GENERATION Retail on the Cusp of a New Era SPRINGBOARD RETAIL ON THE CUSP OF A NEW ERA | EXECUTIVE SUMMARY Agenda Introduction 3 Retail 5.0 and the New Battleground for Shoppers 4 4 Ways Consumer Brands Can Prepare for Future Trends 6 Sizing the Prize: The Delivery Intermediary Opportunity 9 Master Alibaba’s Digital Ecosystem to Succeed in China 12 About The Consumer Goods Forum 15 About Edge by Ascential 15 RETAIL ON THE CUSP OF A NEW ERA | EXECUTIVE SUMMARY Introduction Over the past 25 years, retail where necessary and understand how has been on a difficult journey: from a to optimise their operating models and physical-only activity to an omnichannel business and marketing strategies to pursuit. The growth of ecommerce capture the marketplace shopper can win around the world is well documented and big in this new era. Those that are slow to the pandemic has accelerated digital retail do this will fall behind fast. as shoppers have shifted their spending The Consumer Goods Forum and from experiences and holidays to Edge by Ascential hosted a virtual cooking equipment, TVs and trampolines. SpringBoard event on 4th March 2021 to By 2025, online sales will account for discuss the future retail environment and about 40% of total sales in the consumer the biggest challenges and opportunities goods industry and ecommerce will be for CPGs in the new era of commerce. This dominated by a handful of major platforms Executive Summary offers an overview of and marketplaces, such as Alibaba and the key themes of the event, with a focus Amazon. on why CPGs must embrace the might of This is the next phase of the retail the marketplaces and change priorities revolution - an era categorised by over the next few years to achieve results marketplaces mastering personalisation in Retail 5.0. at scale and big data being effectively leveraged. Consumer packaged goods’ (CPGs) brands that are agile, can pivot SPRINGBOARD 3 RETAIL ON THE CUSP OF A NEW ERA | EXECUTIVE SUMMARY Retail 5.0 and the New Battleground for Shoppers “By 2025, five marketplace giants will generate Since the beginning of the century two-thirds of global ecommerce sales” and the early days of the internet, -Edge by Ascential research retail has had to evolve in line with the emerging drivers of industry growth. As digital marketplaces gained traction with shoppers, consumer packaged goods Global Growth in ad spend on Amazon (non-DSP), Year-on-year % change companies (CPGs) had to figure out how to manage transparency in a digital world. They had to work out how to allocate their advertising budget effectively, product Speaker: innovation and fulfillment strategies for Deren Baker, CEO, a world of clicks as well as bricks. Then Edge by Ascential came the fantastic rise of algorithm-driven commerce and the development of the technologies that we are seeing scaled today. The big challenge for CPGs over the past decade or so has been speed to market. Now, we are heading into a new era of retail, what we at Edge by Ascential call Retail 5.0. Source: WARC *Excludes demand side platforms Brands must focus on digital retail, where transactions actually happen. Expensively trying to buy a crowd is not a strategy that can succeed in the Retail 5.0 future. 4 RETAIL ON THE CUSP OF A NEW ERA | EXECUTIVE SUMMARY Mastering Personalisation advertising to increase shopper loyalty levers that power each marketplace and marketplace marketing because that’s at Scale and grow new customer markets and consistently managing these variables where your customers are already buying segments. In addition, the death of at scale, across multiple retailers and your products. Retail 5.0 is a big shift in This new generation of retail is the cookie means data management regions. how most brands and manufacturers characterised by marketplaces mastering platforms (DMPs) won’t offer brands an currently operate and could require a new personalisation at scale and leveraging alternative personalisation option. The fundamentals of shopping organizational structure as well as new big data to win. For the most well-known and driving sales have not changed: business and marketing priorities, but marketplaces today, commerce is just Effective Marketplace ensure your products are available, easy doing business like it’s 2010 is simply not one spoke of an integrated ecosystem Strategies Will Be Key to to find and are compelling enough to an option in the 2020s and beyond. with shopper data at the core. Amazon Future Growth drive conversion. In the world of scaled has a loyalty programme, entertainment ecommerce, we believe this translates to services through Prime, cloud computing Our Retail Insights analysts predict managing inventory in line with the rules through Amazon Web Services among that by 2025, five marketplace giants will of the marketplace, mastering the search other service lines that make the shopper generate two-thirds of global ecommerce algorithms to rank high in the results experience “sticky”. In 2020, Amazon sales. This underscores the urgency of and using content, rating and reviews spent almost USD $43 billion on research CPGs to master a defined set of priority to improve the shopper experience and and development. e-tailers, tiering them and then targeting boost conversion. them methodically. Brands must focus We have seen estimates that by resources on learning the dynamics and Shift Your Ad Spend 2025, marketplaces could spend as mechanics of these global marketplaces much as USD $60 billion on R&D. CPGs based on category and geographical Finally, we recommend CPGs move will simply be unable to compete with the coverage to drive sales share and their advertising and marketing spend capital availability that these marketplaces optimise revenue in mature markets. This away from more generic search and social have at their disposal for innovation and means really understanding the individual marketing and allocate it to on-platform 5 RETAIL ON THE CUSP OF A NEW ERA | EXECUTIVE SUMMARY 4 Ways Consumer Brands Can Prepare for Future Trends “Winning on a digital ecosystem is like learning a new Every year, our Retail Insight analysts video game… first, learn the rules, then play until you review what we see as the biggest drivers figure out how to win” of change that could disrupt business in - Xian Wang, VP, Retail Insight, Edge by Ascential the retail industry under five core themes: society, technology, economy, industry and policy. We call these the STEIP drivers. We use the STEIP framework as a lens to form a view on how the future will unfold, with an emphasis on shopper mindsets and behaviours and market trends. Speaker: Xian Wang, VP, Retail With this set of assumptions about Insights, Edge by Ascential the future world, we recommend market, customer and talent strategies that will help forward-thinking businesses succeed. Despite the uncertainty of the future outlook, CPGs must still make plans. Based on our 2021 research, here are 4 key recommendations for CPGs in 2021. *57% Of global sales will be made online by 2025 *3 X By 2025, ecommerce will grow that much faster than store-based channels Data provided by Edge by Ascential 6 RETAIL ON THE CUSP OF A NEW ERA | EXECUTIVE SUMMARY Engage With All Digital drive innovation. Strong execution through who is maturing and moving into their 1. Touchpoints social media will be key to facilitating prime spending years. Brands that can discovery, inspiration, conversion and demonstrate localism, provenance and In 2020, retailers embarked on a loyalty in 2021 and beyond. transparency will earn the confidence of needs-based digital expansion to serve these coming-of-age green consumers their stuck-at-home customers during the Innovate With New Models - and using popular social channels in COVID-19 pandemic. Many have spent 2. and Digital Touch Points innovative ways to drive engagement and the past 12 months trialling new initiatives Like Social Commerce sales should be seriously considered. in ecommerce, fulfilment and technology to better meet consumer needs for Social media is an established Differentiate Through convenience and safety. This trend will influencer in shopper behaviour. The rise 3. Speed and Convenience continue with retailers tailoring platforms, of Tik Tok, Pinterest and Instagram has pricing and engagement to win over been quite tremendous over the past few Speed will become a major differentiator shoppers in an increasingly omnichannel years. But one of the things we saw last this year and beyond. Not only have shopper society. Brands must leverage all digital year and we expect to see grow in 2021 expectations increased with respect to channels and platform tools to connect is social becoming a sales channel in and fulfilment requirements, but priorities are with shoppers, particularly as physical of itself. This has led to a rise in sponsored fast-changing too. To compete, brands must shelf space continues to decline. Support advertising and purchasing through social develop the analytics capabilities to predict your retail partners with online-to-offline platforms. Livestreaming is booming, first demand more accurately as well as develop integration that will build brand loyalty popularised in Asia but now spreading more flexible product innovation cycles and in-store but also, understand you can no across borders. It started with fashion supply chains that can keep pace with fast- longer just rely on these retailers to build and apparel but now increasingly food is changing customer requirements. This is a loyalty for you. being featured. Cooking demonstrations radical change to the go-to-market of five are gaining traction. This is an emerging years ago. Direct-to-consumer channels are but potentially significant opportunity to worth considering, with a laser focus on connect with the purpose-driven and constant testing and real shopper insight to socially responsible Gen-Z shopper, 7 RETAIL ON THE CUSP OF A NEW ERA | EXECUTIVE SUMMARY Case Study: Walmart.com.
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