The Consumer market has seen increased activity over the last few quarters, with multinational organisations scrutinising their portfolios to create a more streamlined offering. With the ultimate aim of reducing cost in their operating model, multinational consumer brands have been rationalising their portfolios and shedding underperforming lines. This ‘shrink to grow’ attitude is a relatively new approach for such organisations. But the world around, and particularly below, these giants of the consumer market is changing, and to all intents and purposes they have been a little slow off the mark to respond so far.
Over the last few years with the advent of new and better technology appearing all the time, all markets have become so much more customer driven. Customer satisfaction, ease of service provided and reputation have become three key drivers in whether a consumer led business will thrive or fail. Digital technology has given customers the knowledge to make informed choices, and a traditional marketing approach no longer guarantees the success of an individual product or business.
Smaller consumer businesses or start-up’s have begun to gain the advantage, as they are nimbler and more flexible in their approach to customer service and satisfaction. They are also able to amend their offering to satisfy customer demand. Where traditionally these smaller organisations might have been snapped up by a multinational and lost their identity, these smaller businesses don’t have the need or desire to be consumed in such a way anymore. They don’t need to be – technology allows them to not only keep their independence, but excel at what they do on a smaller and more personal level.
Customer purchasing trends have changed significantly. We all want to buy local where we can, and we have much better defined purchasing needs. Millennials are seen to be more interested in products that don’t necessarily scale well, particularly in the food and beverage sector: grains, coconut oil and water, oils, humanely treated animal proteins; the list could go on. This is the stuff of the small, niche producer and seller.
Large retailers are also involved in affecting this change. The Baby Boomer, although still relevant in a purchasing and profit model, is not the only cash rich purchaser on the block these days. The Millennials are right behind them, and they demand a very different in-store approach. To respond, retailers are getting better all the time at talking to and doing deals with the small guy, therefore providing a more rounded and up to date offering, both through ecommerce and in store. Studies show that ecommerce seems to democratise virtual ‘shelf space’, as top brands do not dominate online as they do in a real shop environment.
There is space in the market for everyone, and technology is the biggest driver in how all consumer business will behave moving forward. Technology streams not only show the customer instantaneously what is on offer, but also the best route to purchase. Customers have much greater influence over each other than ever before on what to buy and where to buy it. All empowered by social media. This digital revolution has left the customer with the ‘tyranny of choice’, so back to social media again for the information search and evaluation of alternatives. A world away from the traditional route of a business getting their product to market. The supplier must have a deeper understanding of the customer and their online habits as well as their purchasing habits.
For the smaller business or start-up, life has never been so good. The cycle time from the seed of an idea to a sucessful scale business has shortened dramatically. The barriers have literally never been lower. Social media is probably the ultimate key to success. The flexibility and agility typical of a small business suits the social media approach. Quick response times to customer queries, growing followers organically, getting online conversations started, friend recommendations – these all spread the word and help a small business gain a steady and loyal following which ultimately offers stability for the business. You can even set up your ecommerce site in under 24 hours if you really put your mind to it. So why would you want to sell out to a multinational who might quash your identity and your ideas. Or possibly even your ideals……
The small guys are ultimately forcing the large corporates to rethink and reinvent the way they engage with their customer base. And rethink it they have. Companies such as Unilever and Kellog’s are taking a very different approach with market investment moving forward. They have, alongside others, set up venture capital funds, in order that they can invest in new technologies and small businesses without over influencing and changing the face of that business, yet still gain the benefits. Big multinational consumer groups are offering venture capital finance to entrepreneurial companies. What a great way to access new ideas and trends. Young promising companies could or will become strategically relevant to the multinational in the future, either through product, packaging or technology. By starting the relationship early, you increase not only the success of the smaller business, but the knock on effect for the corporate. Smaller, entrepreneurial businesses are more willing to engage with, collaborate and share their technology and product with big companies like this, as the funding is at arm’s length from the company itself. The multinationals know they need to change. The problem just might be they don’t know how to. Internal private equity funding might just be the answer.
