E-commerce is growing faster than ever, thanks to social distancing, supply chain disruptions and widespread stockouts. Consumers are using the internet in new ways to find products and are more open-minded when it comes to new brands.
The ability to compare a near-infinite array of products based on customer ratings, precise specifications, time to ship and cost has changed the way consumers buy things. But most large consumer packaged goods (CPG) companies were built on the older brick-and-mortar retail model where consumers had limited choice and information at the point of purchase.
What’s more, in brick-and-mortar retail, CPG companies have comparatively little insight into why consumers make decisions: It’s often impossible to know why a consumer enters a store and what the rationale for choosing one product instead of another might be.
The consumer insight that e-commerce retailers generate by capturing website user data — searches, products viewed, filters chosen — doesn’t exist in brick and mortar. The trouble is that product design has not caught up with the e-commerce distribution model: Most large CPG companies offer legacy product lines that were not designed with insights from e-commerce front and center.
Mohawk Group Holdings Inc. (NASDAQ: MWK) has set out to reinvent CPG for the digital age. Founded five years ago in New York City, Mohawk is a tech-enabled CPG platform that is building brands and products tailored to the e-commerce shopping experience. The company’s premise is to incorporate technology and insights from large amounts of data at every part of the product life cycle, including market research, design, quality control, logistics and marketing, to deliver high-quality products that consumers desire most for the least amount of money.
What does that mean? Mohawk ingests millions and millions of e-commerce data points — think of searches like “best standing desk for WFH” or “stainless steel programmable 6 quart slow cooker” — and then builds the products that consumers are actually looking for. While Mohawk sells approximately 240 SKUs across numerous brands (e.g., Home, Vremi, xtava and RIF6), the brands aren’t really the point.
Mohawk Group co-founder and Chief Executive Officer Yaniv Sarig explained that the strength and relative value of traditional “brands” is falling in the world of e-commerce. Now that consumers have more choice and product data at their fingertips, brand matters substantially less in purchasing decisions.
“Consumers have an endless choice of infinite products and they’re armed with better data and technology to search for the products they want,” Sarig said. “People used to rely only on brands, but now they can look at price, reviews, etc. The majority of searches are based on a specific need — not on brand — such as ‘best air conditioner for a small room.’ Consumers now rely more heavily on these specific searches and are putting brand in the back seat.”
Mohawk Group applies big data analysis not only to product design but also to sales and marketing, which allows it to run at very lean inventory levels. Mohawk’s brands are embedded in fulfillment centers across the country so that it can offer one-day shipping to the vast majority of ZIP codes in the United States. Automated marketing promotions and price adjustments tied to available inventory levels and in-route shipments are used to control sales volumes and ensure that Mohawk can fulfill all of its orders in a timely manner.
“Brand value is diminishing on a macro level,” Sarig said. “In the past, you had a cost-of-goods-sold and you created margin through the brand’s perceived value; today the most important thing is to optimize the cost to get products to the consumer, offering them the best value their money can buy.”
That means that Mohawk Group needs an extraordinarily flexible and responsive supply chain.
“We’re continuously improving our machine learning algorithms to forecast with every container how we can most efficiently get the product closer to the customer,” Sarig said. “For instance we just sold 2,000 air conditioners, but where are the best locations to put new ones based on what we’ve learned from these recent sales?”
Mohawk brought in Kevin Nohl, vice president of global logistics, to streamline how information and products flow through Mohawk’s supply chain. Nohl, an Amazon veteran, also served as senior director of operations for Rent the Runway and director of omnichannel fulfillment for Bed Bath & Beyond.
Nohl decided to partner with Convoy for Mohawk’s full truckload needs based on Convoy’s disruptive business model, APIs, self-service model and data-centric company culture.
“Using Convoy allows us to be very agile and nimble,” Sarig explained. “We’re constantly trying to optimize how inventory shifts from one warehouse to another, which will be a never-ending process. It’s all about benefiting the customer by delivering the most valuable product at the best possible price.”
Mohawk’s international supply chain streamlines the complex movement of finished CPG from overseas factories directly to the customers’ homes. Using both traditional and cutting-edge supply chain solutions, Mohawk simplifies the movement of goods from factories, including intermediate destinations such as departure ports, destination ports and fulfillment warehouses directly to the customer. By bringing e-commerce CPG to the warehouses that are closest to the customer, Mohawk is able to reliably and repeatedly deliver products to customers in one to two days while delighting them with attractive pricing and product quality.
“To be a major player in e-commerce, we have to be able to react very quickly using data from all parts of our supply chain,” Nohl said. “For example as customer demand fluctuates across the various cities and states, we have to optimize our inventory placement to ensure our customers can receive their orders in one to two days. The ability to offer this level of delivery speed can often be the difference between getting the sale. Convoy’s software platform and fleet of vehicles/drivers are flexible and simple enough to support a supply chain that performs at the speed of e-commerce.”
Before Convoy, Mohawk worked with a lot of carriers using spot quotes and sought economically priced offerings, which often resulted in complications that led to more labor, time and paperwork — and ultimately reduced profit margins.
“Our goal is to simplify our transportation providers and work with tech leaders,” Nohl said. “We grow our operations based on data, and companies that don’t have that infrastructure could be inexpensive today but long term aren’t the right horse to be on in the e-commerce race.”
Although Mohawk’s partnership with Convoy is only a few months old, Convoy’s technology already has Mohawk’s leadership team thinking about ways to further optimize its supply chain. Mohawk is investigating Convoy’s APIs to apply the same level of automation it has in its product design, marketing and sales to its supply chain, and then bring all of those models together.
“Our marketing engine needs to make decisions on the fly,” Sarig said. “Which advertising should we use, which price, coupons or not? If marketing doesn’t have visibility into the supply chain, it can make the wrong decisions. You cannot grow sales if your inventory is not optimally located where the demand is coming from. It’s important to have visibility as far as the factory that makes the product, and that visibility is only possible with companies like Convoy.”
This article is published jointly with our partners at Convoy. To view more Future of Freight content, click here.