Convergence in Europe’s Market: The Lines Between Retailers and CPG Firms Grow Fuzzier

August 16, 2023
Convergence in Europe’s Market: The Lines Between Retailers and CPG Firms Grow Fuzzier
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Changing consumer behavior, technology and market dynamics have combined to blur the distinction between Europe’s retail and consumer packaged goods (CPG) firms, according to a new research report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

The 2023 ISG Provider Lens™ Retail & CPG Services report for Europe finds one of the lasting legacies of the COVID pandemic has been the digital transformation of both retailers and CPG companies, driven by the expectations of consumers who have grown accustomed to a more enhanced and personalized customer experience. As is often the case when faced with new challenges, the answer lies in the clouds.

“Cloud-first is becoming the new normal for Europe’s retailers and CPG firms,” said Andreas Fahr, partner and managing director, ISG DACH. “Service providers can play a key role in helping these companies by managing transformations and operating the resultant infrastructures.”

During the pandemic, many of Europe’s CPG firms got a tantalizing taste of the retail customer experience and have since sought to widen their reach by adopting a direct-to-consumer (D2C) sales approach through own-brand stores and online channels, the ISG report says. In fact, according to the report, some of the major CPG brands aim to achieve more than half of their sales through D2C channels. Even CPG companies that don’t currently have plans for D2C sales are seeking to strengthen their relationships with consumers through loyalty programs, highly personalized marketing and offers redeemable through stores, ISG says.

Just as some CPG companies are starting to resemble retailers, some retailers are behaving more like CPG firms by developing their own private-label brands that they promote and sell both in store and online. Many traditional brick-and-mortar stores that were able to remain open during the pandemic implemented technologies such as contactless payment systems, self-checkout options and in-store pickup solutions, ISG says.

These advances have raised customer expectations both in-store and online. As a result, retail and CPG companies are increasingly relying on IT services to digitize and optimize their new customer-facing and supply-chain processes, the ISG report says.

“Whether your firm is a CPG company or a traditional retailer, your best course is essentially the same,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “New IT technologies, such as headless commerce [an e-commerce architecture where the front end is decoupled from back end] based on a microservices architecture, are paving the way forward.”

The report also examines how AI and machine learning models are driving better customer support through automated support services and more personalized responses.

The 2023 ISG Provider Lens™ Retail & CPG Services report for Europe evaluates the capabilities of 27 providers across four quadrants: Business Transformation Services, Digital Innovation Services, Platform Modernization Services and Managed Services.

The report names Accenture, Capgemini, Cognizant, HCLTech, Infosys, TCS and Wipro as Leaders in all four quadrants, while IBM is named as a Leader in two quadrants. Kyndryl and LTIMindtree are named as Leaders in one quadrant each.

In addition, Genpact, Hitachi Vantara, LTIMindtree and Tech Mahindra are named as Rising Stars – companies with a “promising portfolio” and “high future potential” by ISG’s definition – in one quadrant each.