Virtual makeovers. Killing Kroger's stock. The future of trash can tech.
Hungry for data
Welcome to the first issue of CPG Insights! In this newsletter we’ll be taking a data-driven look at the new technologies, rising startups, and corporate innovations transforming consumer goods and retail. You can check out some of our past work here.
If you’re interested in anything specific, feel free to reach out!
Do you hitch yourself to Amazon, and take advantage of its online reach and tech/logistical prowess? Do you try to reach online shoppers directly?
You can do both — but no matter what, if you want to reach consumers on your own you need data. Lots of it.
You need demographic data, you need online and offline activity data, and if possible you need to avoid relying on Amazon — or even retailers like Walmart and Kroger — to be your point of sale and intercept that data before it gets to you.
So, direct data will guide consumer companies’ strategy in 2018. We expect to see the following themes:
Using direct-to-consumer distribution – Direct-to-consumer distribution is already widespread among apparel and accessories startups. Recently, we’ve seen the launch of some notable direct-to-consumer CPG startups that are building up their own arsenals of consumer data, including Brandless, Public Goods, Revere, and Daily Harvest.
By letting customers personalize their products, CPG startups can capture even more data. D2C haircare startup Function of Beauty, for example, pushes users to not only submit data on their current hair state, but also their hair hopes and dreams:
(Though as a colleague commented, “It’s hard enough to choose five life goals — now I need five hair goals?”)
Acquiring direct-to-consumer startups – If you don’t yet have your own D2C business, you can always acquire one and access its data set. When Nestle invested in D2C meal delivery startup Freshly, for example, it cited “visibility into Freshly’s advanced analytics” as a motivation.
Using experiences to collect data – To bypass retailers and connect with consumers directly, CPG brands are increasingly leaning on pop-up shops, restaurants, and salons. If done well, these strategies can help brands without their own storefronts to observe people’s offline habits (not to mention, nabbing some Instagram shares). We spotted, for example, a recent Manhattan pop-up by beauty brand St. Ives that attracted people willing to share their information on their skin in order to buy personalized product blends.
Startups such as Vengo also set up interactive tablets for CPG brands in public spaces, and can offer free samples in exchange for personal data.
Putting AI in the store – CPG leaders may not run their own stores, but new AI tools can help them collect data from the shelves nonetheless. Trax has raised $148M and provides Coca-Cola and others with machine vision tools to observe activity in stores. As AI capabilities increase, and even as we see robots slowly rolling out to monitor store shelves, CPG brands may have new tools to gather data from third-party retailers.
Adding interactivity – Augmented reality and AI can not only add interactive features to apps and websites, but also capture data about exactly how users are interacting. For example, Estee Lauder, L’Oreal, and other makeup brands now offer virtual styling features (many by partnering with either Modiface or Perfect Corp). This lets them capture valuable data streams about what products different users try on, what makeup combinations they choose, and what try-ons ultimately lead to purchase.
Leveraging smart home technologies – Perhaps the most valuable data stream? Your home. Imagine if, for example, Crest could not only sell you a tube of toothpaste, but track how often you actually use it, ship you a new tube automatically when you’re about to run out, and maybe even remind you to start brushing again if you miss a few days.
We haven’t seen much yet in terms of CPG leaders launching connected products, but Walmart, for example, has applied for patents for smart fridges and smart trash cans (below) that track consumption. We could see these ideas gain traction in 2018.
We’ll be tracking these trends and more at CB Insights through this newsletter and our blog.