Download Consumer goods and digital: a huge opportunity for

Consumer goods and digital:
a huge opportunity for the French
economy, but can it be realized?
A year ago, McKinsey France carried out a major piece of work on France’s €100 billion
digital gap: the boost that French GDP could gain, by 2020, if French companies
fully embraced the digital transformation. But where do the opportunities lie for the
consumer goods sector, has the work of closing the gap begun, and will France get
there? Nigel Wright gets to grips with the issues.
You might be forgiven for pleading “ennui” with recent media
coverage on the French economy. The Republic’s beleaguered and
unpopular left-of-centre president has beaten the retreat on the latest
development in the long-running thread of labour market reform,
its economy is firming but fragile, and the country is struggling to
move beyond the jobless growth trap. But it’s not all gloom; with
online purchases of consumer goods growing sharply in recent years
and more than 45% of customers now shopping entirely online for
some products, there is huge potential in digital for France’s strong
consumer goods sector. Global brands like Pernod-Ricard, Danone,
and L’Oréal, with turnovers of ¤10-25 billion (equivalent to the entire
GDP of Nicaragua or Estonia), also have the power to make a material
difference to the French economy.
Like the first industrial revolution, today’s digital transformation
promises a brave new world, which unsurprisingly, has more
opportunities than threats. But, in today’s climate, it’s easy to equate
“digital” with good, and it’s important to remember that there are
potential downsides too. Companies that fail to address the risks
won’t just miss out: they’ll forego considerable amounts of turnover
as others forge ahead. High on the risk matrix for consumer goods
is “hyper-competition”. Mobile apps, using both search and scan,
have revolutionized online shopping aggregators, comparators, and
reviews. More than 60% of French consumers now shop online, and
they expect a seamless and consistent experience across all channels.
But what of the opportunities? First, the increasingly multi-channel
and relational nature of customer journeys. Proctor and Gamble’s
average global allocation of its promotional budget to digital channels
is about 35% (and 100% for some brands, like Braun), putting,
perhaps, a 21st-century spin on the old advertising joke: “Half of it
works, but I’m not sure which half.” But in France, allocations are of
the order of 10%, the kind of statistic fuelling fears that despite strong
state support and a strong digital sector (whose growth forecasts
were recently revised up by sector body, Syntec Numérique), France
risks falling behind. Digital is disrupting distribution too. France’s
“grandes surfaces”, like Carrefour or Auchan, are working hard to
respond to home-grown, “pure player” channels, such as Cdiscount
and, more recently, burgeoning direct sales channels. Evian, for
example, now sells directly to customers through evianchezvous.com
Aside from cost and convenience, digital offers scope for entirely
new products and services. France’s strengths in luxury goods and
01
France: Consumer Goods and Digital
...with online purchases of
consumer goods growing
sharply in recent years and
more than 45% of customers
now shopping entirely online
for some products, there is
huge potential in digital for
France’s strong consumer
goods sector
beauty are regularly on display in the launch of new online content
and mobile apps. L’Oréal’s Makeup Genius is a virtual mirror that
allows consumers to test some 300 make-up products on a tablet or
smartphone and Mumm, the iconic “maison de champagne”, draws
consumers to its virtual champagne guide, to learn about the rituals
surrounding the drink.
Looking within, embracing digital means getting a company’s
operations and marketing right too. Like other major economies,
France sees the opportunity of Big Data. But, in a country where
labour market rigidity remains a challenge, it can be hard to find
the right people for these relatively new disciplines. France’s
Syntec trade body, in tandem with digital-workforce watchdog,
OPPIIEC, has recently launched an online tool: an “observatoire
dynamique”, providing a rich seam of information for French
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France: Consumer Goods and Digital
companies looking for skills. In addition, French producers, like
others, continue to pursue end-to-end digital transformation of
their processes. Automation is no conceptual newcomer, but the
digital transformation has brought its own slant, with RFID tags now
tracking items-in-production in real-time and the rise of “usines
numériques”: entirely digitally automated factories.
With all this to play for, what are the stakes, and what should
companies prioritize? McKinsey’s detailed report on the French
digital gap estimates that consumer-facing opportunities
(transformed customer journeys, and new products and services),
have the potential to boost turnover by 20%. And better-focused
decisions and operations (in areas like Big Data and automation)
could be worth another 20%.
The consultancy, which made its name in exactly this type of big
picture advice, is equally clear about what companies should
prioritize. The first priority is continuing to transform the customer
experience, consistently, across all digital channels: not an entirely
unexpected recommendation for a sector that has exploited
traditional marketing methods so well, for so long. Second, comes
the need to innovate in terms of offer, with strong advice to make
full use of areas like crowdsourcing (already successfully used by
Danone, which crowdsources ideas for new flavours for its Danette
brand: both engaging consumers and cutting product development
costs). Better exploitation of Big Data comes a close third, with
an emphasis both on skills, and on making the considerable
investments (a game heavily involving distributors too) in increasing
companies’ analytical capabilities.
So, in conclusion, will the digital gap close for France? As
the apocryphal economist might tell you: in an increasingly
interdependent and still fragile global economy, it depends; a reality
captured in Napoleon Bonaparte’s maxim: “forethought we may
undoubtedly have, but not foresight.” Bon courage!