As Bloomberg points out, this depressing reality comes while consumer confidence is sky-high, unemployment is at an historical low, and the US economy keeps growing. These statistics normally signal a retail boom; yet more chains are filing for bankruptcy and rated distressed than during the financial crisis. And it’s going to get worse…much worse for retailers and more complicated for our industry.
Just ask yourself: Are FMCG companies prepared to wrangle with Amazon over shipping costs and added fees? Of course, there aren’t any traditional slotting fees with Amazon, but there are plenty of add-ons. For example, for half-a-million-bucks, brands can enhance their product pages with wide-screen videos and interactive, multimedia displays. That $500,000 price tag includes all of the participating brand’s Amazon pages. Still, we’re betting that by the time Amazon is done, it’ll make all those supermarket slotting fees seem quaint by comparison.
Then there’s the Amazon-added charges for packaging that doesn’t measure up to its requirements. A potentially-leaky bottle must get bagged and guess whom gets left holding the bag on the cost of that bag? The manufacturer, of course!
More disruptive, are the Unilevers, Procters and others ready to say so long to retail completely and strike out on their own? McKinsey notes that digitization has given manufacturers new ways to engage with consumers. Nearly one in four US households already shops for food and beverages online; McKinsey research suggests that the number of US consumers buying health and hygiene products online could more than double within a year.
Obviously, multinationals are well aware of direct-to-consumer’s power, as Unilever paid $1 billion for Dollar Shave Club and Nike already generates more than $9 billion in D2C sales.
A new year is ahead that’s filled with new opportunities and more than a few headaches, too, up and down the supply chain.