In this interview, Al Lalani, Co-Founder of Annex Cloud and Javier Flores, Customer Engagement and Commerce Industry Principal at SAP, discuss the current environment of the consumer products industry. They review the impact of Covid-19 and thoughts on planning for 2021.
Welcome to another discussion of Annex Cloud Market Movers for industry insiders. Today, I am very, very excited to welcome Javier who is the global industry principal for consumer products at SAP. While we dive deeper into the consumer products slash TPG industry today. Welcome to the discussion Javier.
Hi, thank you for having me.
Wonderful. Very, very glad to have you. And what I want to sort of start a little bit about is if you can tell everyone a little bit about what your role is within sort of SAP and how you work with customers together today.
Okay. Perfect. Well, I mean, I'm kind of a long timer in SAP I've been working for more than 20 years, it started as an implementation of the back office. So all the sales and distribution pieces as a consultant. And then when SAP moving to, into the front office, I moved also with the old CRM, which now is CX and I'm basically focused also on consumer products. And I own the front office or customer experience on the front office for CP.
Perfect. And then when you look at the consumer products slash CPG industry, how do you broadly categorize the different types of companies, whether it's fast consumer goods or other types of products that are in that industry?
That's a good question because, I mean, that will let us kind of set the ground so that we know what we're talking about. In SAP we have consumer products, we have fast moving goods and in fast moving goods can be food and mirrors or can be also personal care. Also we have fashion and I also, there is like this line between fashion and personal care is kind of hard to define because the beauty is on personal care but it's also fashion. Also, we have the agribusiness, which is kind of a very different business because you're talking with farms and all that. And we have consumer durables where we talk about bicycles or home appliances that's a lot on the consumer durables side.
Got it. And so when you look at the impact of COVID-19, a lot of times when we think of consumer products, we are thinking fast moving consumer goods a little bit in there, but there's also durables. And the impact of COVID-19 obviously on the manufacturing slash consumer products industry has been enormous. Some very positive, some challenging from a distribution and execution standpoint, and some challenging from a real sales standpoint. So maybe you can give us a little bit of an idea between sort of, let's say the durables or the consumer fast moving consumer goods, parts of it. What has been the positives of COVID-19 and what have been the challenges and negatives of COVID-19 as in the last six months or so?
Yeah. I mean, we kind of split this, or let's say take the view of the consumer. How the consumer has changed. I mean, the demand have shift. If we talk about, let's say, the fast moving goods, that consumer they have stopped going to restaurants, which means that all the food service business is highly impacted or that host. Companies that are selling to restaurants to hotels. I mean, to the travel industry are really impacted, but also we see that at the end, that consumer is consuming the products in a different way. So all that, the home delivery. We heard about the toilet paper thing, right? So it's like, people may think, that's great for companies because now they're selling a lot of toilet paper to consumers, but, also those same companies were selling to hotels and restaurants. Right? So there is a good part on a bad part.
So the challenge for most of those companies kind of is to shift their strengths and to move from one, let's say, route to market, to the other, in order to serve the consumers. I mean, that's a lot on the fast moving goods. On the durables, we do see some part like all the luxury that is really highly impacted on the wrong side, on the bad side, but also you see like sports equipment and bicycles. I mean, now everybody's a cyclist, right? So it's moving now, I mean, for those so interested, let's say it is doing great.
Perfect. And you know, when, when you look at these things, and this is interesting for me personally, because as a consumer, you would think, Oh, the positive impact on the fast moving consumer goods is massive. But what we don't realize is a lot of these companies were selling to restaurants and to hotels where it's negative. So it may not be a net positive for them. It actually might be a net negative in some cases. And then secondly, also on the distribution side of things the ability to move distribution away from hotels and restaurants to maybe, groceries or direct to consumer sort of ways has been probably a challenge from an execution standpoint, which brings me into my next question, which is, from a CX technology perspective, how do you see that CX technology can help these businesses as they plan for 2021 and beyond? What do you foresee these companies adopting more than they have in the past?
Yeah. I mean, we have seen a huge growth on e-commerce. I mean, companies that we with them, let's say early this year, like January, February, they were say, "Yeah, commerce is good. The decisions were taking kind of by the brands." But now we talk again. I mean, the priority has shifted tremendously. Now it's a corporate decision. It's a strategic decision because it's a channel that is growing rapidly. So I think that commerce on B2B and also in direct to consumer is growing really, really fast. And then with the direct to consumer, that responsibility of managing that consumer information, I mean, with that responsibly is also leading to have this technology, like customer that are cloud to support that consumer information.
Makes sense. So when we think about the growth of commerce use mentioned both B2B and B2C, but let's focus on B2C on the first side of things. The part I'm really interested from a CX perspective is how important retention and loyalty is. And if we start with a B2C aspect of things, as you think about these companies that did not have a direct relationship with their end customer that are starting B2C, e-commerce probably want to also build some sort of loyalty or retention for those customers in some capacity, because there's a big channel shift that we're trying to think about. Right? And so, as you think about B2C or B2B2C, let's put it that way. How do you foresee the impact of loyalty programs and retention programs as it pertains to the growth of CX and commerce in general for these companies?
Yeah, definitely. There is a challenge. When I think about loyalty basically is that loyalty is a way to build a long-term relationship. Right? And when we talk about programs is kind of a way of rewarding the consumers for their preference, for their choice, right? Because they have many different choices. So it can be on a way of discounts or free goods that you can send them to their home. But, and kind of the challenge has been if we want to reward the pushes. I mean, it's to actually that the things that we are doing with you guys on it's kind of a ticket, right. Which is kind of, So that we can reward the pushes. But there are many other actions that they do. I mean, they can reference to a friend, right? Yeah. So, or they can buy certain volume that we can also reward. So there is a lot of different activities that we can reward on based on their preference.
Absolutely. And one of the things that I know we are very excited to kind of work with SAP on, as that B2B2C part of the channel, where if they're from the end retailer, a product, they can take a picture of their receipt and they can even send it to kind of rewards at brand name or consumer products, company named.com. And we're able to read the receipt of the purchase they made at a retailer and add that consumer into your direct to consumer loyalty program. So now you're able to communicate with them directly, maybe even ask them to buy direct eCommerce or direct you buy direct from you. If you build a direct eCommerce kind of direct to consumer commerce channel, that is. And so I think that can sort of build in a lot of abilities for, for connecting with the end customer, so to speak on the B2C side. I guess, next on the B2B side, you mentioned commerce as well. And, so how do you apply loyalty to B2B commerce?
Yeah. On B2B commerce. I mean, we need to split, if we're talking to the store owner or to the employee that is actually buying. So on the loyalty side it works more to the owner of all these long tail customers. So there's this little mom and pop shop that we're normally go and buy things from. How can we nurture that relation with that people? It can be in many different ways. So normally we think on the monetary aspect, like so giving free goods or special discounts, or maybe some point of sales support or equipment, giving credit, depending on their volumes and upwards for the drive by it. But also we can also give them benefits, right? So like we can give them a special advice or we can give them, how can we serve eventually, or special delivery times or, or their frequency. So there is this aspect of, there is the monetary aspect in which we would work their choice, but also that the benefit that we can give them on the day to day business.
Absolutely. And I think the application on loyalty for B2B is taking a big spike as well as trying to create and as companies are trying to create that channel shift towards commerce, as you mentioned, potentially they want a digital way to also have a loyalty maintenance with their customers. In some cases, there might be a long tail of customers where you've got your direct relationship where your salespeople are managing one-to-one, but then you've got a very long tail that is coming through commerce, or what have you. And you want to build a digital relationship with those customers and market to them better as well.
What I like about, about that piece, if you let me add something, is that I remember long time ago there were these exclusivity contracts. Like, okay, you only buy from me. You will get this special kind of things, which is not legal right anymore. So, but that loyalty, that relationship with a brand that's the highest barrier of entry that you can build, right? Because for them, it's like, okay, should I start a new relation with a new vendor, or should I keep this relation with these guys that know me very well, and that they are actually helping me grow my business? Right. So that, I think that the relationship building on this B2B side is super important.
Got it. And I guess last to close it off, I mean, what are you personally very excited about? And as they say, never let a good crisis go to waste. And so a lot of things are growing from a technology perspective, leapfrogging in the commerce space, especially over the last sort of six months we've made, as they say, five years where the progress on the commerce side frogging some of these. Especially in the B2B aspect of things. What are you most excited about from a CX perspective for the consumer goods space for the years to come?
I mean, I am really excited that now because of the high adoption of the CX technology, now brands can actually fund those projects they couldn't fund before, right? And now they can take corporate decisions, having a broader view than just brand decisions that are the end. It won't give the same benefit. So having this broader decision, getting closer with that consumer understanding those changes on the decision making. I think that's amazing so that we can have better products for the consumers.
Absolutely. And I think you nailed it because I think, the biggest challenge to any change was primarily getting buy-in from the various departments. Some of which didn't want to work this way, but this shift has caused everyone to think in the same way saying we have to digitalize some of this stuff. And I think that's sort of in itself is worth a lot, that decision. This was a great discussion, Javier, I appreciate you taking the time. We try to keep these small enough where people can consume this. So I really thank you for taking the time to speak with our audience today. For everyone else if you want to see more such videos, you can go to annexcloud.com/marketmovers or annnexcloud.com/industryinsiders. And that's it for now. Thank you. Bye.
Co-Founder, Annex Cloud
Customer Engagement and Commerce Industry Principal, SAP
Since 2010, Annex Cloud has provided industry leading loyalty solutions to more than 250 leading brands and retailers, including Jenni Kayne, Hewlett-Packard, Bed Bath & Beyond, e.l.f. Cosmetics, Olympus, Sugarfina, Mizuno, MacKenzie-Childs, VF Corp., with the ability to engage tens of millions of their customers one-to-one at scale.
The Annex Cloud platform provides fully integrated Customer Loyalty, Referral Marketing, and User Generated Content (UGC) solutions that seamlessly work together to optimize the customer journey and deliver a unified customer experience that is designed to accelerate revenue growth, retain valuable customers, increase average order values (AOV) and drive repeat order frequency.
SAP is the market leader in enterprise application software, helping companies of all sizes and in all industries run at their best: 77% of the world’s transaction revenue touches an SAP system. Our machine learning, Internet of Things (IoT), and advanced analytics technologies help turn customers’ businesses into intelligent enterprises. Our end-to-end suite of applications and services enables our customers to operate profitably, adapt continuously, and make a difference. With a global network of customers, partners, employees, and thought leaders, SAP helps the world run better and improves people’s lives.
To learn more about SAP, visit sap.com