The Promise of Smart Replenishment for CPGs

How Connected Product Smart Replenishment Benefits Brands, Consumers and the Environment

It's happened to all of us. We're in the shower, reach for the shampoo bottle, only to realize: it's empty! The situation gets worse with products that are shared in our household, like milk or laundry detergent. You're ready to do laundry: we're out of detergent too?

It’s Hard to Remember to Put Things on Your Shopping List

Fast-moving consumer packaged goods, or CPG products, continually need replenishment. With our busy lives, we often don’t remember to replace them before their absence becomes frustrating. The only solution is to add items to a shopping cart as soon as they run low. This may be easy for some products, like the laundry detergent or milk mentioned above, but it isn’t as simple to add shampoo to a list while I am in the shower. Periodically, then the items in the shopping cart would need to be purchased.

In today’s world of IoT (Internet of Things) technology, there must be a better way to automatically create a shopping cart for the household. If refrigerators can keep track of the groceries they contain and add items that are almost empty to a list, then why can’t a bottle of shampoo add itself to the shopping cart? That should be a very simple IoT solution.

The Problem With E-Commerce Subscriptions

Traditional e-commerce subscription models are very appealing; but are also built on a lot of assumptions. So, the promise to both consumers and brands is hard to realize because of the challenges inherent in schedule-based subscription.

According to a survey deployed by McKinsey & Company, 15% of consumers belong to an e-commerce subscription, 32% of which are focused on replenishment of regularly-purchased items in order to save time and money.

The survey also indicates that in e-commerce subscription programs, customer acquisition costs are high and 40% of subscribers cancel their subscriptions (often in the first few months),

While subscriptions offering replenishment are the most successful at driving long-term subscriptions of a year or more, there are still many reasons that consumers pull the plug on their subscription.

For example, the lack of mismatch between delivery and actual consumer usage causes many consumers to end up with more stock than they need. Consumers have to modify their schedules which counters the convenience benefits. They end up canceling their subscription as a result.

If brands can better deliver on the value and convenience of the subscription model through a superior consumer experience, they can win long-term subscriptions. That’s where the connected e-commerce model comes into play.

How Smart Replenishment Helps

Smart replenishment provides consumers with exactly what they need, when they need it.

Smart replenishment differs from traditional time-based auto replenishment, or subscription in that it is based on true demand rather than timing. Consumption based smart replenishment reorders when a product is ready to be reordered, not based on a set schedule.

Consumption-based reordering overcomes the biggest issue with schedule-based subscription programs, which is that they don't always match actual consumption patterns. Consumers end up either over-stocked, such as when they go on vacation, or under-stocked, as when guests are increasing a household’s typical consumption rates.

By contrast, smart replenishment solutions use real-time product usage data to determine the precise moment when a consumer needs to replenish a product.

For instance, by attaching an IoT-enabled smart label to a refillable bottle or bin, consumption is accurately tracked as it happens. These non-intrusive labels passively track usage information by day and time, geolocation, and volume. At the moment that the product is running low, the solution can auto-reorder, or notify the consumer of the need to reorder. As smart labels capture consumption data, it is sent to a dashboard for the brand to review.

Privacy and security are build-in and the consumer is always aware of and in control of how their products are connected.

How Consumers Benefit From Smart Replenishment

Connected products make reordering more convenient, reduce waste, and give consumers new ways to connect with the brands they love.

Connected products give consumers, that opt-in with their smart product purchase choices, a range of options to understand their consumption patterns and better connect with the brands they love.

Benefit #1: Convenience

Image a world where products just reorder themselves at just the right time. When a container comes close to running out, it is added to the shopping cart. So, one less thing for consumers to have to remember.

Consumers still have as much control as they want. For instance, they can choose to initiate the reorder and also define the container volume that triggers a reorder, i.e., specifying a reorder when 20% of the olive oil or detergent remains in the bottle.

Benefit #2: Better Reorder / Subscription Programs

The convenience of the subscription is overshadowed by the inconvenience of the additional task of monitoring usage or remembering to update subscription settings. Consider your own experience with subscriptions - how many times have your unboxed yet another package of your favorite subscription product, when you’ve already got one or two in the pantry?

Depending on usage patterns, a “30 day” supply might not actually be used at the rate that the subscription is set for. This leaves it to the busy consumer to manage their subscription manually, logging on to skip or pause the subscription if they aren’t ready for the next shipment. This is the moment that the subscription model unravels.

Smart reordering solutions solve this problem with real-time product usage data to determine the precise moment when a consumer needs to replenish a product.

Benefit #3: Brand Connection

Thanks to e-commerce, consumers have plenty of ways to find and engage with their favorite brands. At the same time, brands are benefitting from selling directly to consumers online and often use the subscription model to drive repeat purchases.

By adding convenience and eco-friendliness, brands can motive deeper consumer loyalty. Smart reordering offers a “zero-touch” shopping experience that eliminates the need for customers to make constant decisions in regard to which products to buy, remembering when to buy them, and spending time placing orders or shopping in stores.

At the same time, deeper insights from connected products helps brands deliver more thoughtful brand experiences that many consumers now expect.

Smart Replenishment Benefits for CPG Brands

Today's consumers expect more than ever from the consumables they use daily. Quality, convenience and value have always been top purchase considerations. Now, sustainability is another reason why consumers favor and pay more for premium brands. In order for brands to maximize returns, reuse and refill programs must be aligned with the needs of the consumer.

Smart replenishment allows brands to deliver on these new consumer expectations by redesigning their programs around consumption vs. schedules. This is done using real-time data on product usage from connected product packaging, such as a bottle, bin or container outfitted with an intelligent IoT powered label.

Investing in smart replenishment offers several benefits that can far outweigh the effort and cost of implementation. Here are the top benefits.

Benefit #1: Revenue and Retention Growth

While subscription models for automated product replenishment have gained popularity over the past decade, they are not without challenges. Steep acquisition costs and high churn rates often leave brands questioning whether the subscription model is worth its costs.

In particular, churn is a big problem to solve. According to Retail Dive, nearly 40% of subscribers of any service type​ cancel. That's a big chunk of consumers abandoning subscriptions after just a few months, before brands can break even on their acquisition costs.

We believe there are two big reason for the high rates of churn. First, standard scheduled subscription models don't match consumption patterns accurately enough. And second, consumers experience 'subscription fatigue' when they have to keep adjusting their subscriptions to match their consumption.

Smart replenishment solves these issues and offers consumable brands several additional benefits to their top and bottom lines:

• More predictable product revenue

• Improved LTVa, loyalty and ROI

• Reduced acquisition cost and churn

• Reduced product cost (refill packaging)

• More sales through smart packaging differentiation in highly competitive categories

• Enables new channels of consumer engagement to drive revenue and loyalty

Read more:

How DTC brand Olivery Used Smart Replenishment and Packaging to Boost Customer LTV and Loyalty

Benefit #2: New Sources of Consumer Insights

Consumer brands that don't sell directly to consumers lack valuable access to what happens with their products after purchase. And traditional sources of consumer insights, such as in-home studies, rely on self-reported, stated data that isn't always reliable. It some cases it can also be dated and not specific enough.

When CPG brands make their product packaging or containers 'smart', it enables in-the-moment continuous usage insights based on actual consumption vs. what the consumer has to remember. This is great timing for CPG brands as competitive and pricing pressures, as well as the need for more personalized brand relationships are driving the need for more detailed, finely tuned consumer insights with significantly more data points.

Benefit #3: Differentiated Brand Experiences

Subscriptions and auto replenishment have been wonderful for both brands and consumers, but earning consumer loyalty is harder than ever. For CPG brands, winning long-term loyalty may require a next level experience differentiated through personalization.

For instance, imagine if consumable brands offered the following through connected products:

• Suggestions to get more value from their products.

• Special offers to save on future purchases.

• Reminders to complete a vitamin regimen.

• Early access to new features.

All of this is possible, and in use today by progressive CPG brands using IoT enabled connected products.

The connected products also integrate with fulfillment and e-commerce networks, which provides the ability for the brand to send triggers and automatically reorder, based on the predetermined amount of product remaining.

Sustainability Benefits

As climate change gains more attention, consumers as well as businesses want to act in ways that reduce waste and protect the plant. Refill and reorder solutions provide environmental benefits because they allow for less single-use of plastics with more eco-friendly reorder containers.

Reusable packaging is a promising solution to waste reduction because it minimizes packaging and waste in a way that is directly seen and measurable by consumers. This in turn helps to instill environmentally friendly habits that create more positive outcomes over time. Smart reusable packages reduce the amount of material needed for each product, contributing to a more sustainable production process and reducing the amount of landfill waste.

Smart reordering boosts this benefit even more because the reuse is more precise. Refills are sent in environmentally friendly packaging at the best times for consumers to use them while improving the product’s environmental footprint.

Smart Replenishment Benefits Retailers and Distributors Too

Even the intermediaries in supply chain networks could gain from an auto replenishment model by using their own IoT labels on product containers. For example, Target might use an after-market IoT label on my shampoo. With this sticker, Target could send me the next order of shampoo when mine is close to running out. This model would provide a consumption-based subscription model to Target, enabling the additional sale to occur with no shelf space necessary in the store. The time-based model of subscription would be obsolete in minutes.

Preventing Counterfeits

We can imagine IoT label providing a way to deter the production of counterfeits, as the fake product would not be able to access the IoT system. Even if a counterfeit chip were created, it would not communicate the correct data to the auto-replenishment system.

Ready to Get Started With Smart Replenishment?

Smart replenishment presents an exciting shift in commerce for both brands and consumers. Brands benefit from better returns and a richer understanding of consumer behavior smart replenishment brings about the convenience that consumers crave.

At Adrich, we have a vision of products that reorder themselves and connect consumers, homes and brands sustainably.

Adrich is a consumer insights and smart replenishment platform powered by AI and IoT. Our goal is to help brands and retailers build better products, deepen consumer engagement and accelerate the adoption of refill consumables.

We are powering new levels of post-purchase consumer insights and smart auto-reordering solutions for the largest brands in the world with patented technology and e-commerce partnerships.

Would you like to see how smart replenishment can work for your business?

Get in touch for an overview and demo.