Why Are Brands Adopting Smart Replenishment for Ecommerce?
Updated: Apr 21, 2022
Before we explain the “why,” let's define what Smart Replenishment means in ecommerce.
Smart replenishment enables brands to access real-time data on product usage through an IoT-enabled, connected product packaging, such as a bottle, bin or container outfitted with a smart label.
As consumers pour from their bottle of laundry detergent or shake their seasoning container, brands can monitor usage levels and automatically reorder or send ‘low supply’ notifications to consumers’ mobile devices. As smart labels capture consumption data, it is sent to a dashboard for the brand to review. It also integrates with fulfillment and ecommerce networks, which provides the ability for the brand to send triggers and automatically reorder, based on the predetermined amount of product remaining.
There are many benefits to brands when they incorporate smart replenishment into their ecommerce strategy. Let’s take a look at how brands are leveraging smart replenishment to grow and manage their brands.
#1: First-Party Data
If you are selling your product through a 3rd party distributor or a retailer, you are a couple of degrees removed from your consumers unless you also have a direct-to-consumer (DTC) channel established. You may be getting point-of-sale data from the retailers, or a data provider such as Nielsen or IRI if it is available.
However, whether you are distributing your product through a DTC channel or retailers, smart replenishment gives you access to first-party data directly from your consumers, providing a depth of insights that go far beyond whether or not a consumer has purchased a product or not. For the first time, brands are able to own consumer data without owning the point-of-sale!
#2: Happy, Engaged Consumers
Smart replenishment allows brands to engage consumers in a 2-way conversation. Rather than interrupting consumers at random moments, smart replenishment allows brands to offer the right message at the right time. This dynamic approach to engaging with consumers also means that brands are able to establish a direct feedback loop.
.With access to product usage data such as when consumers use a product (or when they have stopped), brands can offer a more personalized experience. For example, some brands use this data to determine follow up offers or content, such as coupons, recipes, or lifestyle tips. Ultimately, this data allows brands to guide consumers on how to better use a product to get the best possible experience. With deeper levels of engagement, brands are able to build intimate, one-on-one relationships with consumers, setting the stage for long-lasting loyalty.
#3: Higher Retention Rate and Lifetime Value (LTV)
Brands that have implemented smart replenishment through our platform have experienced a 33% increase in LTV. And, according to Amazon, the reorder frequency increases by 37% when using smart replenishment.
When it comes to your consumers, the more you know, the better you can serve them. For example, if you know that a consumer is about to run out of your product, you can trigger a reminder to reorder or ship the product to them before they run out based on their pre-selected reorder preferences. Are they slowing down on usage? Provide a gentle nudge to encourage regular use. Interestingly, we’ve found that consumers tend to slow down on usage to save product when they are running low. The need to do this can be eliminated through timely auto-replenishment!
Automating replenishment gives brands the ability to better retain their consumers, making it less likely that the consumer will wander off to choose a competitor’s product. In the competitive world of ecommerce, keeping existing customers leads to a higher return on the marketing dollars spent on acquiring those consumers.
#4: Unprecedented Consumer Insights
What kind of business decisions would be made if a company relied only on self-reported data? This “claimed data” by consumers is known for its low level of reliability, due to the gap between how consumers are actually using a product, versus how they say they are. When we parallel test our approach with journal entries by consumers, we typically see a large discrepancy between actual and self-reported usage. In some extreme examples, we’ve even identified that consumers weren’t even using the product that they’d agreed to as part of the study, opting to dump the product while reporting daily usage in their journal entries!
Thanks to real-time consumer insights, brands can gain true behavior insights while products are being used by actual consumers, instead of the usual artificial market research setting. The lifestyle-inclusiveness of this “consumer research” will prevent the usual bias, where consumers have to consciously remember to log their uses in a journal. These deep insights can be used to build a solid foundation for making important business decisions -- such as a brand’s innovation pipeline, positioning and messaging and how to allocate marketing dollars.
#5: Connected Subscriptions
Through a Connected Subscription, brands are providing the highest level of convenience to consumers while cementing loyalty. Subscription services are a common tactic for building loyalty, however they often fall short of their goal. Today’s common ‘subscribe and save’ type of loyalty programs are calendar-based, where consumers pre-select the delivery quantity and the frequency. The pre-selected shipping frequencies aren’t aligned with actual consumer usage, however, which ultimately leads to consumers having too much or too little of the product.
“Ashwin Ramasamy, Co-Founder of PipeCandy, told Forbes magazine: “Nearly 40% of consumers who use subscription services cancel their subscriptions within a year of subscribing as the novelty wears out.” Another study by McKinsey called “Thinking inside the subscription box: New research on ecommerce consumers”, found that nearly 40 percent of ecommerce subscribers cancel their subscriptions. Perhaps, this is why retailers like Target have decided to discontinue their subscribe and save program.
As a proactive alternative, brands can provide a personalized and convenient subscription by way of a “connected subscription,” with the help of need-based smart replenishment. This enables brands to deliver the product exactly when consumers need it so that they never have to experience running out of the product or having too much back stock. As consumers become increasingly sophisticated and demand instant gratification, connected subscription is a great way to cater to those needs. Of course, the data-driven nature of connected subscriptions means that brands are able to get to know more about consumer usage behavior than ever before, which translates to opportunities for brands to be more relevant and build loyalty.
#6: Better Sustainability
According to Marketing Week, “There is a disconnect that exists for the majority of consumers between the convenience they want and their expectations around sustainability. Moreover, it appears that customers aren’t going to go out of their way to buy eco-friendly brands, which means marketers need to do more in order to differentiate.”
When convenience is coupled with sustainability, there are powerful results. As recently noted by Virginie Helias, Chief Sustainability Officer at P&G, “You need to make it irresistible so people embrace it because they want to, not because they have to.”
#7: Supply Chain Efficiency
As many companies are trying to become more competitive in ecommerce, they face challenges by way of a lack of visibility into the ecommerce supply chain. Having to be reactive in order fulfillment is costing retailers and brands as unpredictable order patterns increase inventory carrying costs. A survey of 200 retailers in Europe and North America carried out by Geodis and analyst Accenture Interactive showed that just 16% of the companies surveyed are able to get real-time key performance indicators for their supply chain (25% of American brands and 10% of European brands say they have access to this information).
The real-time data gained from smart replenishment will be timely and accurate as your products will be capturing it directly from consumers’ homes unlike any traditional sources of data, which may be old by the time you get it. This will increase predictability and accuracy in inventory management and demand planning, ultimately reducing logistics costs.
Smart replenishment is one of the most impactful opportunities for CPG brands today - and it will soon become the new normal in the way that brands manage their relationships with consumers. Through better consumer insights and increased convenience, brands can leverage connected ecommerce and smart replenishment to improve competitiveness and build loyal, authentic relationships with their consumers for years to come.