As the growth rate of the FMCG industry slows down, and consumer upgrading and personalized demands continue to increase, FMCG companies are leveraging reverse customization to shed the rigid image of one-size-fits-all, volume-driven sales.

With the slowdown in FMCG industry growth, more and more FMCG companies are viewing reverse customization as an opportunity to break through. The reporter learned that recently, well-known FMCG brands including Wufangzhai, Mondelez, and Budweiser have launched online reverse-customized products using the Tmall platform. In the industry's view, against the backdrop of consumption upgrading and increasing personalized consumer demands, FMCG companies are striving to move away from the old-fashioned approach of mass production and sales.

Reverse Customization Attempts

During the just-passed Dragon Boat Festival, it was undoubtedly a challenge for the time-honored Chinese brand Wufangzhai. Wufangzhai collaborated with Tmall to launch a DIY activity for zongzi fillings, where consumers could choose from various ingredients including beef, eel, shrimp, and more, in both salty and sweet categories, to configure their own zongzi fillings. Theoretically, this allowed for over 10,000 different filling combinations.

As a seasonal product for the Dragon Boat Festival, zongzi have traditionally been produced with fixed flavors and then sold. Such large-scale filling customization is rare for traditional time-honored brands.

Ma Jianzhong, head of Wufangzhai's e-commerce division, told reporters that reverse customization of zongzi is a trial for Wufangzhai in the era of new retail and consumption upgrading. As a time-honored Chinese brand, Wufangzhai has experienced channel-driven, market-brand-driven, and internet-driven phases. The next era will enter the new retail era driven by users and services. Facing the prominent personalized demands of consumption upgrading, it is necessary to set aside the mindset of being an industry leader with advantages in large-scale manufacturing and focus on the needs of the new generation of consumers.

Another company attempting reverse customization is Oreo, under the world snack giant Mondelez. In late May, Oreo launched a limited-edition Oreo music gift box, which was snapped up immediately upon release. Ultimately, over 30,000 units were sold out within 12 hours. Even on Xianyu, this product, priced under 100 yuan, was resold for hundreds or even nearly a thousand yuan. The reporter learned that in addition to the special music box, Oreo also achieved personalized customization in packaging, allowing users to choose their preferred patterns, colors, and add blessing messages.

More and more FMCG companies are attempting reverse customization. Budweiser previously collaborated with Tmall to launch a Chinese New Year Golden Rooster recording bottle, where consumers could click on customization and record a message on the product page. Budweiser and Tmall then imported it into the production line, so that when users opened the bottle cap, they could hear the blessing.

According to Qin Xiao, Senior Director of Strategic Client Cooperation for Tmall's Large FMCG Business Group, based on Tmall's C2B interactive mechanism, to date, around 40 brands across 7 industries have attempted reverse customization.

Supply Chain Restructuring Behind the Scenes

Product customization and personalization are not new, but in the past, FMCG companies only dared to make changes in personalized packaging, and true reverse customization practices were rare.

Qin Xiao told reporters that social interaction used to be limited to social platforms, making it difficult to combine social experiences with product sales, because it involves the supply chain and transaction integration.

In the traditional model, the entire process from product design and packaging to reaching consumers could take 2-3 months, including pre-determining production quantities and procuring corresponding raw materials, packaging materials, and consumables. Therefore, the front-end challenges of reverse customization, whether for handmade zongzi or industrially produced Oreo cookies, are the same.

Ma Jianzhong told reporters that the difficulty of reverse customization for zongzi is not small. On one hand, it tests the company's ability to collect and utilize big data on existing consumer demands; on the other hand, the company must have information technology and relevant talent reserves; additionally, the software and hardware renovation of the workshop, including the entire supply chain from procurement to manufacturing, needs to be rebuilt; of course, the biggest challenge is the company-wide cognitive revolution in user thinking and flexible supply chain. In his view, reverse customization is a reverse value chain reconstruction from the original "goods-field-people" to "people-goods-field".

Dong Xin, E-commerce Director of Mondelez China, expressed the same view. He told reporters that the cooperation with Tmall is actually a supply chain restructuring. On the consumer side, consumers decide the product design, while on the production side, the company starts production from the moment an online order is placed.

The reporter learned that beyond front-end production, the difficulty of achieving large-scale commercialization of reverse customization also exists at the back end. For example, Oreo's reverse-customized packaging requires code integration among Tmall, Oreo's packaging suppliers, and operation service providers. After consumers complete customization and payment, a code is generated in the backend. Suppliers read the code to accurately produce the packaging the consumer wants, and finally, the operator ships the corresponding packaging and product to the consumer.

Dong Xin pointed out that achieving supply chain restructuring for reverse customization is also a result of technological innovation. On the system side, Mondelez and Alibaba co-created a new customization system that turns consumer demands and designs into printable and shippable documents. On the printing technology side, they tried new digital printing technology that does not require pre-color matching like traditional printing, allowing direct printing based on each customized packaging design.

It is understood that the reverse customization model differs from the traditional FMCG volume-driven model. In the past, food FMCG companies often relied on volume to compress supply chain costs and ultimately achieve profitability. From a supply chain perspective, volume growth leads to lower marginal costs, which is undoubtedly the ideal state for FMCG companies. Reverse customization clearly contradicts this.

Zhu Danpeng, a food researcher at the China Brand Research Institute, told reporters that with the rise of the new generation of consumers, China's FMCG industry has shown trends of high-end, personalized, and fashionable consumption. The days when FMCG companies could "read one book until old age" are over. Currently, some companies are gradually moving closer to this trend, which is also a result of precise consumer segmentation and fission.

For many FMCG companies, there are also compelling reasons to transform. In fact, FMCG companies including Budweiser, Mondelez, and Wufangzhai are all facing challenges brought by changes in consumption trends. For example, Budweiser faces the problem of a sluggish Chinese beer market; Mondelez faces the challenge of Chinese consumers turning to healthier snacks due to health concerns.

In February this year, the "2017 China FMCG Industry Annual Report" released by the Shanghai Oriental Century Consumer Development Promotion Center showed that in 2016, China's FMCG industry was affected by the macroeconomic downturn, presenting a weak growth pattern, with growth lagging behind overall economic (GDP) growth; offline growth lagged behind online; growth in first- and second-tier cities lagged behind third- and fourth-tier cities.

Zhu Danpeng stated that the slowdown in FMCG growth is mainly seen in well-known enterprises and listed companies, but many niche personalized and customized consumption is actually growing, and these hidden channels and consumer groups are difficult to count. Under the background of consumption upgrading, consumer demands are becoming increasingly personalized. How to accurately meet the needs of different consumers is a problem FMCG companies need to solve.

It is worth noting that reverse customization has shown FMCG companies new opportunities.

Dong Xin told reporters that customized products themselves sell well, and as traffic-driving products, they can also boost sales of ordinary products. In addition, the social impact of reverse customization helps enhance brand image and influence. From a profitability perspective, in the e-commerce environment, pricing for customized products is more flexible, and actual product profits are not bad. Nowadays, post-90s and post-00s consumers pay more attention to the purchasing and after-sales experience, even more than the taste of the product. Providing consumers with experiences that combine content and products faster and better through e-commerce platforms can effectively increase sales.

Qin Xiao told reporters that online, brands can directly reach target consumers, while offline it is impossible to give consumers a thousand-person, thousand-face visual experience and promotional mechanisms. After all, through customization, brands can communicate with consumers using their preferred language, mechanisms, and products, ultimately converting to sales and driving sales growth.

However, in Zhu Danpeng's view, reverse customization cannot "cure all diseases," but it can at least solve some consumer demands and needs. Products customized and designed based on consumer needs will definitely have a market. After all, various niche consumer demands have not yet reached a phenomenal level, but in the future, they may become a key means and method for FMCG companies to develop and maintain growth.

Ma Jianzhong believes that for FMCG companies, reverse customization cannot be refined to the individual level. The future of reverse customization still lies in finding a path for small-batch customization to meet the needs of a class of consumers.

Source: China Business Network (CBN) -END-