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Top 3 business issues and challenges for consumer goods companies

ARTICLE | April 15, 2022

Authored by RSM US LLP

What issues are home, beauty, and other consumer packaged goods companies continuing to face in 2022?

Staying ahead of changing consumer preferences

Given variant surges, a return to work, school and recreation was somewhat tenuous at the beginning of this year. The climate has left businesses guessing how changes in consumer preferences might unfold for the remainder of 2022. However, as life begins to stabilize, consumer needs are likely to shift again. Consumers will turn to products and channels that fit their increasingly mobile lifestyles. Those at higher income levels will deploy excess savings to upgrade their purchases for premium, multipurpose products while those in the lower income brackets will be seeking out value purchases as rising inflation continues to erode purchasing power.

In addition, while some customers may return to in-store shopping, direct-to-consumer and digital channels will continue to expand as well to meet buying preferences. Likewise, technology will help businesses provide personalized consumer journeys via artificial intelligence, augmented reality and other consumer-facing platforms. Smart companies will use data analytics from customer, vendor and other sources, to make key buying and sales decisions. However, given the volume of data collected and used by companies embarking on or expanding these digital journeys, a robust cybersecurity strategy is critical to ensure safety and mitigate risks.

Solving supply chain challenges

Last fall, overseas imports of furniture and home furnishings declined to the lowest level since February 2021. Though supply chain challenges appear to have peaked at that time, a return to “normal” isn’t expected anytime soon. Businesses should plan for continued disruptions from labor shortages, increased freight costs, future COVID-19 outbreaks, weather events, geopolitical turmoil and more. 

Looking forward, businesses will need to ensure their supply chains can keep pace with change. With prices on the rise and a global shipping backlog, many beauty and home goods companies will find themselves struggling to procure products efficiently. Labor scarcity and rising wages continue to plague these companies. Consumer goods companies must look to diversify sourcing and suppliers, and continue to shift from just-in-time to just-in-case to ensure they can get the right products in front of the right consumers at the right time.

Data-driven demand planning and production optimization will play an important role in maximizing profits in 2022. Brands must respond to changing consumer preferences while also staying nimble due to supply chain stresses. Likewise, in terms of operations, growing consumer goods companies should address SKU management and leverage technologies like machine learning and automation, to improve processes, lead times and margins.

Addressing pricing pressures

Last year saw a trend of increased import prices for furniture and related products as certain input costs—including direct labor, ocean freight and raw material costs—also experienced increases. This trend will likely continue in 2022 as companies facing elevated employee vacancies offer higher wages and benefits to spur hiring, and freight rates maintain their elevated levels. Companies will pass along price increases to customers, but consumers’ wallets will face further constraints as government assistance diminishes.

For middle market consumer goods companies, it will be important to assess pricing sensitivity and margin pressures. Home, beauty and other consumer goods companies should adopt and expand reliance on data analytics and the ability to identify and nimbly adapt to shifting consumer behaviors. Businesses that demonstrate the ability to streamline production, mitigate the impact of shipping challenges, control costs, and provide customers with unique offerings in a timely manner will continue to perform well. 

Want more consumer products insights for 2022? Read our industry outlook.

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This article was written by Peter Cadigan, Mike Graziano and originally appeared on 2022-04-15.
2022 RSM US LLP. All rights reserved.

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