The Logic of FMCG: From Winning Market Share to Creating Demand I have been in FMCG for 25 years, and also worked for large international companies for 25 years. In recent months, I have spent considerable time chatting with founders of leading new consumer brands, and I have found that the development of FMCG today has undergone a logical change. ** △Bain & Company Global Expert Partner Lu Xiuqiong** ____ So today, I want to talk about the new discipline of FMCG. These words are very familiar to us, and we have been in this industry for many years. Re-examining the term "FMCG" today, I am deeply touched, as each character behind it carries a different interpretation. "Fast" refers to the fast efficiency of channels; "Moving" (consumer) refers to the rise of new consumption; "Consumer Goods" refers to the power of brands.**** It can be said that this industry is on the path of being disrupted. More importantly, can we see this trend and, at the same time, down-to-earth change and lead such a trend? First, let's talk about "Moving" (consumer), the rise of new consumption. This generation of consumers has grown up in an era of material abundance, so for them, everything is within reach, and there is no need for any product. So the biggest question is: in such a market lacking meaning, how can we create new consumer demand? The underlying logic of the rise of new consumption is actually the self-awakening of the new generation's consumer consciousness; consumer needs have changed. From having more to being worth better, from functional satisfaction to emotional drive, from material price to psychological value. For all of us, our task has changed today: from winning market share to creating demand. This is a completely different logic. Second, the consumer decision path has changed significantly. There is a book called "Thinking, Fast and Slow," but in today's fragmented era of information explosion, the fast become faster, and the slow become slower. Today, we no longer think when buying many things, but when we eat a meal, we may take out Dianping to see how the restaurant is. So the consumer decision chain has changed greatly. Third, the relationship between consumers and brands has changed significantly. The entire FMCG business model has also undergone tremendous changes as a result. In the era of mass markets, the relationship between brands and consumers was weak-touch reach. What was our traditional work? Produce products, then production, transportation, inventory, give to distributors, and at the same time brand reach. When your brand and product are presented at the terminal, it may become the final push to promote consumer purchase. Such a traditional market has not disappeared, because China is very, very large. But we also see the rise of the new consumption era, which I call strong empathy linkage. Today, the relationship between consumers and brands is actually driven more by time-space fragments. Consumers no longer buy products because their lives are full of products. What consumers buy is a solution that can help them solve problems under a given time-space fragment. So today, the relationship between consumers and brands has become a trinity of cognition, relationship, and transaction. Live streaming is the best example: the first time you may know a certain product and brand, and the second second you start buying. On this basis, our tasks for the C-end and B-end have changed dramatically. For the C-end, it is more about creating demand, how to empathize, innovate, express, and be with consumers. The relationship between brands and consumers today is already at eye level, not preaching from above. On the other hand, the work for the B-end is no longer circulation, but the improvement of fulfillment efficiency, how to continuously improve the efficiency of delivery to home, to store, and to goods. This may be the most fortunate and most distressing point in this new consumption era. Because the underlying human nature has changed, the basic consumer needs have changed, and the logic of the business model has changed. Under such changes, in fact, everyone needs to ask themselves: how should we keep up with this era and at the same time lead this era? Changes in the Four Functions of Channels The FMCG channel is a myriad combination of people flow, logistics, customer relationship flow, information flow, and capital flow. In today's era, we need to reorganize channel links and use digital empowerment to improve channel efficiency. We need to rethink how to generate traffic, how to increase conversion rate, average order value, and repurchase rate. From the perspective of people flow, what is the core of traditional stores? Location is king. The growth factors of a store are people flow, in-store purchase rate, average order value, and next repurchase opportunity. So, a store is a process of improving existing stock. What about the future? Borrowing Teacher Liu Chunxiong's words, it is called "store commerce." What is the core of store commerce? It is community increment, and the core is people. This factor has a lot to do with the number of people in the community around the store, activity, average order value, and repurchase rate. Today's world requires the integration of physical stores and e-commerce, with dual-store integration and dual-flow synergy. A typical case: how does Feihe build mother-and-baby stores? Feihe uses digital empowerment to transform its very strong field promotion team into operation specialists, how to recruit consumers, how to share knowledge with consumers, and how to empathize with consumers. How to integrate physical stores and e-commerce into dual-store integration, Feihe has given us all a very good lesson. From the perspective of logistics, traditional logistics is actually inventory management and a goods channel. Today's logistics is end-to-end; every store is the last stop of experience and the last mile of near-field retail. So, from an end-to-end perspective, retail terminals need to predict, and even conversely develop products suitable for the consumers around me. The most typical case is Uniqlo, which through a series of digital infrastructure, including the entire supply chain management, RFID digital label management, and each store's perfect pursuit of operations, plus refined member management. Third, customer relationship flow. What is the main task of all distributors and salespeople today? Selling goods. All means are for entering stores and selling goods. But today, the definition of the terminal has changed to the last stop of experience and service. So, the function of salespeople has also changed; their task is empowerment, how to help the entire store operate better and improve efficiency. Fourth, information flow. Traditional information flow is completely separated, but today we need to connect and re-match the five information flow elements: people, goods, money, orders, and data. Achieving this is easier said than done, but only by achieving such matching can we establish future-oriented growth capabilities. Today, the new consumption track is rising, but we must re-believe in the power of brands and the fast efficiency of channels. The future is not only about passive acceptance; old brands innovate, and new waves roll. I hope colleagues in the industry will boldly embrace, actively create, and jointly build a people-centered new business model. PS: Ms. Lu Xiuqiong is a Global Expert Partner at Bain & Company and former Vice President of Marketing at Coca-Cola China. This article is from Ms. Lu Xiuqiong's keynote speech at the 2021 (4th) China FMCG Conference, organized and published with her review and authorization. Click Read Original** to see more highlights of the 2021 (4th) China FMCG Conference... Are you "watching" me?