Tag: retail

Sustainability in Retail and CPG: A Reactive Approach Will No Longer Work | Blog

With increasing customer preferences for environmentally friendly products and evolving government regulations, retail and consumer packaged goods (RCPG) enterprises are being compelled to embrace sustainable practices. Read on to learn how they are actively engaging with the rapidly evolving sustainability technology ecosystem to expedite their ESG journeys.

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Sustainability has long been a pivotal issue, but changing consumer behavior, a shifting regulatory landscape, and escalating climate change impacts have intensified pressure on industries to address their Environmental, Social, and Governance (ESG) footprint. Our recent research revealed that:

79% of consumers are willing to switch brands based on their environmental and social practices.

5% of revenue is the cost of waste and waste disposal on average for retailers and CPG companies.

Companies with consistently high ESG performance tended to score more than 2x on total shareholder return than those with medium ESG performance.

The retail consumer packaged goods (RCPG) industry is now more committed than ever to sustainable practices, recognizing the urgency of integrating sustainability in retail and CPG operations. This involves mitigating climate risks, enhancing long-term resilience, and contributing to a sustainable future through technological investments, product innovation, supply chain optimization, and transparent disclosures. Many firms have embarked on the journey to become purpose-driven organizations, embedding sustainability into their core business strategies.

From our analysis, the following key areas emerge:

  1. ESG data management: Centralized systems for collecting and analyzing ESG data help companies track their sustainability performance and identify areas for improvement. These systems enhance operational efficiency by automating data collection and reporting processes.

For instance, Walmart leverages an ESG data management system to track and report its sustainability performance, focusing on monitoring energy consumption, carbon emissions, and waste management

  1. Supply chain traceability: Advanced technologies like blockchain and IoT enable companies to monitor their supply chains in real-time, ensuring transparency and accountability from source to shelf. This helps in managing ethical sourcing and reducing the risk of supply chain disruptions.

For instance, Nestlé uses blockchain technology to track milk and palm oil supply chains, ensuring sustainable and ethical sourcing while providing transparency from origin to the final product

  1. Climate risk analytics: Predictive analytics tools assess the impact of climate change on business operations, enabling companies to proactively mitigate risks. These tools support scenario planning and help attract investment by demonstrating a commitment to managing environmental risks.

For instance, PepsiCo uses predictive analytics tools to evaluate the impact of climate change on agricultural supply chains. This allows the company to develop strategies to mitigate risks related to crop yields and water availability, ensuring long-term sustainability

  1. Circular economy practices: Embracing circular economy principles, such as using recycled materials and designing products for longevity, helps reduce waste and resource consumption.

For instance, SHEIN has launched a new apparel collection made from “deadstock,” the excess, unsold, and leftover fabric inventory that is typically discarded by fashion brands. SHEIN is utilizing Queen of Raw’s proprietary software, Materia MX, to source existing materials from brands and retailers looking to responsibly clear out their excess fabric inventory rather than have it go to waste in landfills

  1. Sustainable Consumer Experience: Digital labels and QR codes provide consumers with detailed information about the sustainability attributes of products, enhancing transparency and building brand loyalty.

For instance, Patagonia uses QR codes to provide customers with detailed information about product sustainability, enhancing consumer trust and reducing the need for single-use tags, thereby promoting a more sustainable consumer experience

  1. Waste minimization: Advanced inventory management systems and IoT sensors help companies monitor stock levels in real time, reducing waste from overstocking and spoilage.

For instance, Tesco uses IoT technology for real-time inventory tracking, reducing waste from overstocking and spoilage, enhancing sustainability by ensuring products are sold before expiration

A framework to guide RCPG enterprises in their sustainable business model transformation journey

As enterprises navigate the transformation to derive more value from their sustainability investments, The Everest Group framework for guiding Retail Consumer Packaged Goods (RCPG) enterprises in sustainable business model transformation involves four key steps: Commit, Define, Invest, and Sustain. This approach provides a structured path to integrating sustainability into core business strategies.

sustainability blog


The outlook for sustainability in retail and CPG

Consumer demand for sustainable products continues to rise as awareness of environmental impacts grows. This drives innovation and investment in sustainable practices, resulting in new products and business models that prioritize sustainability. Companies that embrace these changes will build stronger, more resilient brands. Ultimately, successful companies will be those that integrate sustainability into their core strategies, ensuring every aspect of their operations is environmentally mindful. This approach not only contributes to a healthier planet but also creates value for stakeholders and ensures long-term success in an increasingly eco-conscious marketplace. By embedding sustainability into their business models and leveraging advanced technologies, retail, and CPG companies can achieve environmental goals while driving growth and profitability.

Everest Group will continue to follow the evolution in this space. To discuss sustainability in retail and the CPG industry, please reach out to Abhishek Mundra, [email protected], Ambika Kini, [email protected], and Shraddha Pandey, [email protected].

The Evolving Role of Retail and CPG Shared Services Centers | Blog

Over the past few years, India has emerged as an attractive destination for both the expansion of existing shared services centers – or Global In-house Centers (GICs) – and new GIC setups by retail and CPG enterprises. This change is due largely to access to skilled talent, especially for digital services, and the relatively low operating costs. Today, India accounts for 20-25 percent of offshore retail and CPG GICs, of which roughly 50 percent were set up in the last five years.

While these GICs initially focused on the delivery of services such as IT, HR, F&A, and contact center, the need for digital integration to obtain faster results and innovation is driving retail and CPG GICs to help deliver core operations by leveraging next-generation technologies such as AI, advanced analytics, and automation.

In recent years, India-based retail and CPG shared services centers have started to deliver complex, judgment-intensive work such as sourcing and procurement, merchandising and inventory planning, sales and marketing, supply chain and logistics, and customer experience management; this work was earlier managed in-house by enterprises themselves.

In fact, best-in-class GICs have been aggressively pushing the envelope by building capabilities to deliver niche/complex processes for core operations. For instance, an American multinational CPG that set up its GIC in India in 2019 focuses only on the delivery of core services such as consumer science, packaging, and product development from the facility.

And that’s only one among many examples of enterprises leveraging shared services centers to deliver core functions. In the sales and marketing function, for example, India-based retail and CPG GICs are delivering some of the most niche/complex processes within the function. Here’s a look at these processes and the extent of GIC adoption for process delivery.

Processes managed by India based retail and CPG GICs

As you see, India-based centers are increasingly delivering processes like customer engagement and site merchandising, and there’s significant delivery potential for processes such as promotion management, marketing communication, and channel management.

Of course, the availability of skilled talent is key for the successful delivery of these core processes from India. Even when most companies globally face an acute talent shortage, best-in-class India-based GICs have been quick to scale up niche talent to deliver both core operations and digital services by hiring resources from adjacent industries. For instance, an American retailer’s shared services center has hired employees with TV, visual media, and digital content experience from the domestic advertising industry to support less-adopted processes such as promotion management and marketing communication. The GIC plans to establish structured upskilling programs to familiarize these new hires with global delivery operations.

Over the coming years, we expect this trend of GICs delivering core operations to continue and, in fact, increase significantly. Doing so will drive accelerated innovation, as the centers’ talent will have the advantage of deeper business context.

To learn more about the growing synergies between enterprises and GICs, please reach out to Bharath M or Ranjith Reddy.

Retailers’ Evolving Sourcing Strategy Industry | Blog

The National Retail Federation, industry analysts, and economists alike have debunked the idea that the retail industry is struggling, dying, or on the verge of an apocalypse. While some retailers and CPG manufacturers have sung their last swan song, many are dramatically transforming their businesses to effectively compete – and indeed, thrive – in the dynamically changing marketplace.

As part of this transformation, retail and CPG firms are evolving their sourcing strategy for: industry-specific processes including sourcing and procurement, merchandising and inventory management operations, sales and marketing, and customer experience; and horizontal processes like IT services, digital services, compliance and quality, and corporate functions such as F&A, contact center, and HR.

Global sourcing maturity across functions

Our recently released Industry Insights – Retail and CPG report looks at the changing shape and flavor of sourcing in the industry.

Here are the four key takeaways from the report.

Key takeaways

The in-house model is gaining ground

Historically, retail and CPG firms leveraged third-party service providers to deliver a broad range of services such as IT, F&A, and HR. However, in the past several years, many have invested in building what we call Global In-house Centers, or GICs. These in-house shared services centers (SSCs) give them more flexibility and control over the quality of work and reduce their costs. And they’re not only delivering standard back-office processes; they’re also building strong capabilities in areas such as store layout management, pricing optimization, custom application development, financial planning and analysis, customer sentiment analysis, predictive threat monitoring, and other digital services. For example, a US-based retail SSC in Bangalore, India, is developing a new order management system to scrape competitors’ websites for pricing data.

Service providers are moving up the value chain

Just like SSCs, third-party service providers in the retail and CPG stage are also upping their game. They’re not only delivering rules-based and transactional tasks, but also much more advanced services like cybersecurity, blockchain, ERP implementation and maintenance, and legal services.

Delivery destinations are similar to other industries

Retail and CPG firms choose their sourcing delivery destinations based on their competencies, just as enterprises in other industries do. They typically leverage locations in Central and Eastern Europe (CEE), such as Poland, for marketing and analytics, and India for business process services – including those specific to the retail industry – IT and digital services. The Philippines and other APAC countries offer capabilities such as customer service (both voice and non-voice) and regional language delivery of accounting services, while LATAM primarily supports the U.S. market.

As is the case with most industries, India has emerged as the most popular offshore location for retail companies’ SSC setups, delivering both business process services and IT/digital services (product analytics, application design and development, R&D, etc.) to North America and Europe. In fact, a U.S.-based retailer’s GIC in Bangalore, India, provides it a full suite of solutions including technology, marketing, HR, finance, merchandizing, supply chain, property development, and analytics and reporting services.

GICs and providers are building deep domain and digital skills

To help make sure their digital strategies are up-to-date, CPG and retail firms are opening dedicated R&D and innovation labs in offshore locations with the help of third-party providers and GICs to support them in automation, analytics, cloud, and social media services. And with the spread of e-commerce and mounting competition, some retailers have started employing engineering talent in India to build pricing systems that determine how demand would respond to a change in price.

As part of the broader digital agenda, some centers have also started exploring the use of AI for certain activities within operations and sales/marketing, such as store layout and pricing optimization, as well as RPA solutions for automating rule-based processes. For instance, Tech Mahindra signed a contract with a Nordic retailer for end-to-end managed services, wherein it will automate and consolidate the retailer’s existing IT infrastructure and enhance the end-customer experience through digital solutions.

Going forward, we expect both service providers and GICs in the retail space to evolve their capabilities with an increased focus on the use of digital technologies such as analytics, automation, blockchain, augmented and virtual reality, and IoT. These advanced capabilities will help retailers stake their claim in the highly competitive marketplace.

To learn more about sourcing in the retail and CPG space, please read our recently published Industry Insights – Retail and CPG report, or connect directly with the authors Bharath M and Sana Jamal.


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