Landscape-Shifting Market Transitions in 2018: FMCG on Fire?

Been reading a lot of predictions about what’s ahead for retail and retail technology for 2018.

Some point to the continuation of an ongoing trend line – the digital influence of retail sales, for example. Or the growing shopper interest in (and use of) unified commerce capabilities such as click ‘n collect and extended aisle.

Some state the obvious: customer-centric retailers will continue to win.

And some – and here’s where it gets interesting – point to smoldering embers that are moments from bursting into flame.

Let’s discuss the one that I think is the most important, long-term:

This is the year that digital fully invades Fast-Moving Consumer Goods (FMCG.)

It’s not just because of Amazon and Whole Foods. It’s because there’s a generation of digital natives – in China, in the UK, in the States – who have now moved into their prime family – and household-formation years.

And for them, digital FMCG makes complete time-saving and convenience sense.

"A personal observation: It’s rarely the technology that moves the retail needle. Look instead to shopper behavior."

The data tells the story. Nielsen’s recent report on the US FMCG retail industry noted that online transactions are projected to drive $71.7 billion of FMCG retail revenue in 2017. That’s seven percent of the total business and reflective of 21.1% growth year-on-year.

"Do the math, and you find that online channels will drive 90% of the 1.3% YOY growth realized by US FMCG retailers in 2017."

Driving the US move to online are – no surprise – younger consumers, women, and families. Specifically, 22% of Millennials (that’s more than 1 in 5) are interested in shopping online for FMCG products. To the same question, it’s 15% of women – vs. 11% of men.

What products are driving the move to online? In a nutshell, babies/children, and pets.  Four of the top five fastest-growing digital commerce categories meet the needs (diapers, baby food, baby bath or pet supplies) of one or the other.

And what else does it mean?  Well, in other digitally-shaped categories, the initial impact falls on store traffic.

The data shows a 1% decline overall in FMCG shopping trips overall.

There are increases in visits to online channels (7.2% YOY) and value grocers (+f1.6%, think Lidl, Aldi). There are slight increases (+0.6%) in visits to mass merchandisers and supercenters (think Walmart and Target.)

However, there are significant decreases in visits to pet stores (-3.4% YOY), drug stores (-2.3% YOY) and conventional grocers (-1.8%).

Pause for a second.

Embers are red. Sparks beginning to fly. Now the accelerants of shopper affinity schemes such as Prime and the ease/convenience of conversational commerce – where voice recognition and artificial intelligence creates shopping that a 2016 study found to be 3X faster and easier.

Won’t be long until the neighborhood is on fire.

If you weren’t smelling the smoke, you better wake up.

Let me know what you think.

Join the conversation on Twitter and LinkedIn.


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Jon Stine

About Jon Stine

Global Director Retail Sales at Intel. Jon Stine leads Intel’s global sales and strategy for the retail, hospitality, and consumer goods industry sectors. His CV includes leadership of North American retail consulting practice for Cisco Systems, and a prior stint at Intel, where he founded the company’s sales and marketing focus on the retail industry. His perspective on technology’s value in the industry has been shaped by advisory and project engagements in the United States, across the European Union, and in India, Australia, and the People’s Republic of China, and from 15 years of executive sales and marketing experience in the U.S. apparel industry, working with the nation’s leading department and specialty stores. At Intel, his current areas of research and engagement include the future of the store in this new digital age; how and where retailers turn data into competitive advantage; the role of technology within the new cross-channel shopper journey, and, the critical business and IT capabilities that industry success will demand going forward.