In the consumer goods supply chain, the importance of consumer data

Demand for goods surged early during the pandemic when Americans received stimulus checks and boosted unemployment benefits. Companies that sell apparel, home furnishings, beauty and wellness products, and other goods had to scramble to keep up.

Because of the shipping delays and long product lead times that followed that demand spike, some consumer goods companies placed larger orders from their producers to ensure they would have more supply on hand.

But in recent months, things have shifted; consumers are spending more on services, and more of their household budget has also been diverted to gas and food amid high inflation. As a result, consumer goods businesses are pivoting once again.

For businesses across all industries, harnessing consumer data has become increasingly crucial in navigating ebbs and flows in both supply and demand. In the consumer goods space, the rise of direct-to-consumer models over the last two years is perhaps the greatest example of changes companies are making to gather more granular data on their end consumers.

Such models allow businesses to understand elasticity better, see in real-time how price changes affect demand, and make better decisions—which products to eliminate from the portfolio, which materials to use, which styles to focus on—using all that information.

“Imagine you run an Instagram ad on Tuesday, and you see specific sales spike,” says Peter Cadigan, RSM US consumer products senior analyst. “If you’re selling through a retailer, you might have no idea or might not have the information to make meaningful pricing decisions in a timely manner.”

Amid recent supply chain disruptions, companies are indeed making changes, according to April’s RSM US Middle Market Business Index survey questions about supply chains. Thirty-two percent of respondents from organizations negatively affected by such disruptions said they exited one or more product lines.

Data is also playing a larger role in forecasting. Smaller middle market consumer goods companies, in particular, are increasingly buying data from third-party sources to understand trends and plan accordingly, Cadigan says.

“Do you understand who your consumers are, and how are you going to understand the shifts that happen over the next six to 12 months, with the holiday season being the beacon?” he says. “If consumers are going to be trading down from one brand to another, where do you fit into those shifts? I think a lot of answers to those questions come down to data.”

Companies should also keep looking for new opportunities in the ever-shifting retail environment. One example is smaller middle market companies filling empty food and beverage spots on grocery store shelves when larger players placed bets on their most profitable items and dropped other products. Another example is apparel businesses that can’t afford to diversify production but have embraced a more seasonless style for their goods made overseas, and then add finishings onto the product here in the United States.

Larger companies have a clear advantage when it comes to reorganizing because they have more flexibility in terms of which suppliers they work with. Smaller midsize companies—especially in the apparel space—are typically much more dependent on fewer suppliers and have a narrower product mix.

But consumer engagement and aligning with customers on values might be areas where middle market companies can excel compared to their larger counterparts. That’s especially true as consumers are putting value around companies’ environmental, social and governance positions.

"In the 2008 recession, a lot of consumer goods brands relied on discounting to drive volume and unintentionally eroded their brand value,” says Cadigan. “I think now, consumers spent the pandemic filling their homes with products and goods, so that discounting to drive volume may not work.”