CPG Partner Conversations: Solve Ecommerce Challenges in a Turbulent Market with Digital River
The COVID-19 pandemic created unprecedented disruption to businesses and global markets. Although most of the world appears to be past the uncertainty and turbulence of the pandemic, companies, especially in the consumer packaged goods (CPG) industry, continue to deal with major challenges. These include supply chain disruptions and labor shortages. Simultaneously, consumer buying patterns and expectations that shifted during the pandemic have become the norm. Now more than ever, CPG leaders must think strategically, with an eye toward innovation and agility, to address the continued market volatility and evolving consumer preferences. To gain insight and inspiration, we’ve embarked on a series of conversations with executives from AWS industry expert partners to showcase their leadership and expertise in challenging times.
In the latest installment of our CPG Partner Conversations series, we talked to Mike French, Vice President of Partnerships and Alliances at Digital River, a global provider of back-office ecommerce functions, including payments, taxes, compliance, and fraud mitigation. In this conversation, Mike shared his views on the challenges that he sees in the CPG industry, and how astute companies are managing the market turbulence to grow their business and reach new consumers.
AWS: Help our readers understand your vantage point. What’s the space that you focus on, and with what type of CPG executives does your company interact?
Mike French: Digital River serves mid-size through enterprise level brands seeking to expand globally, launch a direct to consumer (DTC) ecommerce channel, or scale ecommerce through hyper-growth. I’ve been with Digital River for 12 years, and I’ve witnessed our transformation from an ecommerce disruptor focused primarily on digital and consumer electronics verticals to a company that supports a wide range of CPG categories across both B2C and B2B channels. These include apparel, footwear, health and beauty, luxury goods, housewares and appliances, sporting goods, and more.
I’ve worked with CPG executives, such as CFOs, CIOs, CROs, and CMOs, and with executives at our commerce platform and system integrator partners. We help these leaders solve the toughest “behind the scenes” ecommerce challenges across payments, tax, fraud, and compliance. Beyond the technology, we act as the merchant and seller of records for brands, taking on the financial and legal obligations of conducting global ecommerce. This frees CPG brands to focus on what they do best—making and marketing great products, and creating compelling customer experiences.
Mike French: The biggest challenge I’m seeing right now is in the supply chain, and I don’t think that’s a surprise to anyone. I don’t believe we’re just dealing with a lagging disruption from the height of the pandemic. I believe we’re also dealing with present and ongoing disruptions driven by geo-political instability. As brands attempt to adjust supply availability to meet routine shifts in seasonal demand, they’re also trying to prepare for the holidays. Last year, shortages heavily impacted both retail and ecommerce channels across CPG categories. For brands that do 20% or more of their annual revenue during the holidays, supply chain disruptions were particularly challenging.
I think the other major challenge that brands are facing is economic instability. Labor availability is impacting the continuity of operations, and the rising cost of fuel and basic living expenses are thinning consumers’ wallets. I believe this is an even tougher challenge for CPGs to manage than supply chains.
AWS: How do you see CPG companies adjusting their current operating environments to changing market dynamics and consumer expectations?
Mike French: With the supply chain challenge, I think the most responsive brands are doing these three things to manage the situation:
- Diversifying supply chains—They’re adding more supply chain partners and distribution channels, because diversity translates to more resiliency and agility to divert supply where it’s needed.
- Turning “suppliers” into “partners”—This means mutual, disciplined processes for joint planning and forecasting, issue escalation and resolution, and the implementation of actionable business continuity policies.
- Enhancing communications—In addition to cadenced, routine communications, brands should implement automated, near-real-time information sharing that’s measured against tolerance-based thresholds. If you think of an “early warning system,” then the goal is to foresee and prevent breakdowns rather than respond to failures.
In addition to reacting to inflation and shrinking consumer wallets, a top-notch consumer shopping experience is table-stakes. From there, it’s about both creative and compelling merchandising, as well as finding ways to make it easier for consumers to foot the bill without tapping into their savings, if they have any savings.
AWS: The CPG industry is incredibly resilient. As you look toward the new normal, what role do technology and the cloud play for CPGs? How do you see technology enhancing the way CPGs make, move, or market their products?
Mike French: I’ll start with the cloud, and I think it’s pretty simple: If your critical business systems and data aren’t in the cloud, then you’re behind the technology curve, and you’re spending money on the wrong things. Moving forward, CPG organizations using cloud technologies will benefit from elastic resource availability, agility to meet shifting consumer demand, and access to expert technology resources to innovate—so CPG companies can focus on core competencies.
I think the most important role of technology is to help brands reach consumers on their terms in the channels where they spend time. This means promotions and transactional commerce in social media, gaming, entertainment, virtual and artificial reality experiences, and endless aisles in the retail channel. I see leading brands repeatedly researching and testing to make interactions with consumers beneficial, convenient, and appreciated by shoppers. Invasive or disruptive promotions and marketing tactics will have the opposite effect by pushing consumers away.
AWS: With the current CPG industry disruption, how is your company innovating to respond to changes?
Mike French: To begin with, we’re innovating with our partners to help CPG brands diversify existing supply chains. For example, we make it possible for brands to draw against inventory at distributors for ecommerce that they would otherwise only use for retail. We’ve also introduced a “plug n’ play” logistics capability that helps brands reach consumers in new global markets without the cost and hassle of building new trading routes into their supply chains.
Deep localization is another low-cost, low-effort innovation that we’ve implemented with partners, which includes things like preferred, local alternative payment methods, as well as “buy now, pay later” (BNPL) options to help consumers who may be cash strapped or reluctant to use credit. We also optimize payment processing through multiple local acquirers. This assures payment processing resilience and optimized acceptance, so legitimate transactions have the best chance for success. Simply put, brands aren’t leaving money on the table, and consumers aren’t disappointed or frustrated by false rejections.
AWS: There is a lot of talk about a “new normal” going forward. What does this “new normal” look like to you, and how do you think the CPG industry will look three years from now?
Mike French: I think instability is the new normal. I also think the pandemic will continue to impact supply chains, and geo-politics has a long road back to predictability and normalized trade relations. I also believe consumer buying power will be diminished, and it’s likely that we’ll see a recession hit some major economies in the next few quarters.
I believe brands should take a cautious approach when making firm projections for the intermediate or long term, and they should replan as conditions change. A more fiscally responsible approach is to right-size resources to support a more conservative plan and focus investments on resiliency and agility.
In three years, I expect to see most successful CPG brands move away from a sole reliance on commerce marketplaces as their direct channel. This will start with brands opening DTC commerce stores and evolving to include the other consumer channels I’ve discussed. By creating consumer convenience and appreciation, CPGs can drive loyalty. I believe consumer loyalty is a path to more predictability.
AWS: What makes you excited for the future of CPG?
Mike French: Although instability is difficult to deal with, it can be a positive thing. I’m excited by the atmosphere of innovation that comes from instability. It pushes businesses to find new ways to achieve goals and meet the demands of employees, customers, and communities.
In the CPG industry specifically, I expect to see improvements in existing products, as well as exciting new products that will be shaped by the unprecedented volume of valuable data that we can now capture about product use and consumption. I’m also excited to see more digitally native brands emerge and challenge some of the CPG industry stalwarts regarding consumer intimacy. This is going to drive a lot more digital transformation of the old guard. And finally, as consumers transactionally engage with brands in new channels, such as social media and entertainment, I’m excited to see how CPG brands respond to secure data, market products, and driving loyalty.
AWS: Thanks for chatting with us, Mike. We appreciate your insights and expertise.
We hope you enjoy our blog series. If you have questions for Mike French, Digital River, or AWS, leave a comment on this post. To learn more about Digital River, get in touch here.
And as always, if you want to discuss your ecommerce needs and how Digital River can help your CPG business, then AWS is here to help. Contact your account team today to get started.
AWS Partner Spotlight
With over 25 years’ experience, Digital River has mastered global commerce. An industry disrupter from the start, our Global Seller Services simplify global commerce expansion, enabling companies of all sizes to grow their revenue in 240+ markets worldwide. Global Seller Services combines payments, tax, fraud, compliance, and logistics into a single integrated and flexible API-based solution that helps brands increase conversions, turning browsers into buyers across the world or around the corner. The chosen partner of thousands of brands across the Americas, Europe and Asia. Digital River is global commerce simplified.
Digital River is headquartered in Minneapolis with offices across the U.S., Asia, Europe, and South America. For more details, visit DigitalRiver.com.