Future Value Chain 2022: New Industry Initiatives Address the Challenges of Today's Digital World

9/24/2013
With so many critical issues and challenges facing the consumer goods and retail industry, how do we identify those that matter most? Those that will have the greatest impact on companies going forward? Those that can best be addressed by collective action from manufacturers and retailers?

This was the challenge facing the Future Value Chain program, a longstanding initiative run under the auspices of The Consumer Goods Forum with support from Capgemini. The Future Value Chain program has been established over the past seven years with a focus on extensive industry research and analysis. More than 200 executives from some of the world's leading consumer goods and retail organizations worked together as part of the program to focus on how, through a set of collaborative initiatives, the industry can continue to bring benefits to consumers. This effort was triggered by the significant changes taking place in society, consumer behavior, the environment and technology.

Identifying the trends that matter most
The Future Value Chain team engaged in an exhaustive process that consisted of desk research, an online survey, a crowdsourcing exercise and a facilitated workshop. This process ultimately led the team to focus on two key megatrends that will significantly impact consumer goods and retail companies in the coming years: Digital World and Fight for Resources.

Why select these two trends? Digitization is changing consumers' lives and hence their shopping behavior, which affects the "moments of truth," the critical points when shoppers make their choices. They expect to find information through multiple channels and devices — and they expect to find it quickly. They are looking for consistency and convergence among different technologies. And they expect more transparency into product information, availability and price.

At the same time, demand for resources like food, water and energy is rising rapidly, particularly as increasing economic prosperity in emerging countries puts pressure on the world's ecosystem. As global demand for resources rises, access becomes more competitive, with the potential for demand to outstrip easily available supplies in the next decade.

Apparel shoppers move in a digital direction
The challenges of the Digital World have particular relevance to the apparel industry. Today's fashion and apparel shoppers are a special breed. They are among the most active digital shoppers, making extensive use of mobile apps and social media during their shopping journeys. Compared to consumers in other categories, fashion shoppers will purchase more products in a single transaction online than in physical stores and are interested in shopping online together with friends. They are also likely to spend more money in a physical store if they have researched the products using digital means prior to their shopping trip. This is a strong indication that digital complements physical for fashion shoppers.

In light of these digital developments, how can apparel companies further simplify consumers' daily lives through new technology? How can businesses handle new options and requirements through data transparency (for example, by providing clear, uniform and accurate digital product information)? And how can they determine the best way to engage with consumers via digital channels, ensuring they respect privacy while still gaining valuable insights into shopping behavior?

Future value chain addresses digital consumer engagement
As part of the focus on the Digital World megatrend, the Future Value Chain team explored how to solve the "consumer insights vs. privacy" issue. Physical retailers have long been confronted with privacy regulations when it comes to analyzing customer interaction data and using it for individualized service. As digital shopping grows, consumer awareness and concern about privacy in e-channels is increasing as well.

Trust is an essential element in addressing this issue, but how should the industry go about establishing trust with consumers in the digital world? A key idea raised by the Future Value Chain team was the importance of self-regulation rather than government regulations.

The team proposed two concrete initiatives focused on the Digital World that highlight the need for swift action:
  • Consumer Engagement Protocol
  • Next-Generation Product Identification
Consumer engagement protocol: develop a code of conduct for digital engagement with consumers
Increasingly, companies recognize the need to be proactive vs. being regulated in terms of how they engage with consumers and shoppers in digital channels. But currently there is no voluntary global commitment concerning this in the consumer goods and retail industry.

The industry needs to invest time and effort into how brands and advertisers maintain trust and credibility in a highly transparent, 24/7 consumer-driven culture, where mobile devices and other digital channels play an increasingly dominant role. Social media is elevating the impact of consumer opinion and user-generated content in the engagement and purchase cycle. User-generated content is becoming the "trusted source" despite the lack of standardization and consistency in ratings and reviews across the digital and shopper landscape.

The Consumer Engagement Protocol initiative is focused on establishing guidelines for digital engagement with consumers. The cross-stakeholder framework will define a protocol and principles for the "give-and-get" model (what consumers get in exchange for giving personal data), including how to collect data from consumers, when to engage with them and areas of data usage. The simple, easy-to-use guidelines will address different "classes" of data (such as "who I am," "what I do," "what I like," "where I am").

The mission of the project is to ensure that the consumer remains the focal point and, more specifically, to see things through the consumer's point of view. The project looks at the expectations of the consumer and how the industry can nurture trust and credibility in the best way through a standardized industry etiquette.

Next-Generation Product Identification: transform product identification and information
The second Future Value Chain initiative related to the Digital World focuses on the urgent need to provide technology-enabled consumers with accurate digital product information coming from trusted sources. This is not always possible with the current EAN/UPC barcodes.

With today's rapidly expanding online commerce solutions, barcodes are unable to provide consumers with the rich digital product information they seek. Consumer barcodes do not uniquely identify product or package variations that carry the same product identifier, meaning minor product variations cannot be accurately disclosed. Also, when the product identifier needs to change to reflect new information, it adds waste to the system in the form of out-of-stocks, remnant inventory and transition costs.

The Next-Generation Product Identification initiative is focused on developing a solution to this industry concern. It will document requirements for the "next-generation" consumer product identifier, work with GS1 to recommend a standards-based solution and develop the business case needed to support global adoption.

The project focuses on connecting the dots to improve supply chain transparency, efficiency and traceability. The ultimate goal is to provide consumers with accurate product information by leveraging new technology capabilities for product identification to replace the current barcode.

Next steps
The collective effort of the industry executives who participated in the Future Value Chain program resulted in detailed proposals for each initiative. These were presented to The Consumer Goods Forum's Board of Directors for approval to develop business plans with existing or new working groups. The board subsequently voted to support all the recommended initiatives.

Working groups have been established to build out the initiatives. Industry companies are invited to engage in and support these collaborative initiatives to help ensure a strong "Future Value Chain" that can more efficiently and effectively serve consumers and shoppers around the world.

More information about the Future Value Chain program and these initiatives is available at www.FutureValueChain.com, www.capgemini.com/FutureValueChain and www.TheConsumerGoodsForum.com.

Kees Jacobs is principal consultant, Consumer Products & Retail Global Sector, Capgemini.
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