To keep our clients and colleagues informed on the ever-growing changes and development within the Consumer Goods industry, our DZH Phillips team of experts meets once a month to discuss the latest developments that could impact business. Included here are two key findings from our January meeting:

 

1. Upcoming Revenue Changes

Consumer goods clients may have to take a new approach when considering the following changes to revenue recognition and how these standards could affect their business, specifically:

  • Management charge backs (MCBs) – How/when a company will recognize volume discount promotions (i.e. buy 5 and get a 20% discount), cooperative advertising (i.e. when Safeway sends out their weekly fliers with certain products on sale), slotting fees (i.e. manufacturers pay to have their product displayed on certain shelves for better visibility to consumers), rebates (i.e. Costco is a big fan of these!), and coupons (i.e. 20 cents off your next purchase of detergent). Volume discount promotions will likely require the most analysis and estimation under the new standard. Main way to account for other MCBs is to record the advertisement and other sales incentives in the period that the sale took place. Therefore, companies will have to estimate how much of the coupons and advertisements will actually be used by the consumers.
  •  Sales return allowances (SRAs) – Businesses that have a return policy in place can use this to their advantage when accounting for estimated returns.

 

2. Industry 4.0

Digital technology has shifted throughout many stages over the years and is catching up to the consumer goods industry at a rapid pace. Starting with the “onset of digitization” in the 1990s and to the recent “disruptive digital technologies” that were popular from 2000 to 2015, and today’s “industry 4.0” which is expected to run its course to the end of 2020. Prepping your business for what’s to come is an important factor when planning ahead of the curve, here are a few changes that you can expect:

  • What this means for your business – Purchasing is shifting out of brick and mortar stores and into e-commerce. Retail stores that are unable to catch up with today’s online consumers, may soon face the challenges of staying in business if they cannot integrate technology. It’s become a fine line between balancing technology, building apps or mobile sites to replace in-person experiences.
  • Data Integration – Customer analytics, digitally integrated stores, personalized supply chain, digital CRM, product tracking and transparency and social commerce, are all ways to help expand your business in today’s market. These are all findings related to the Smart factory, Smart Site, Smart Engineering, Digital Display and Digital Procurement.