Podcast Summary: The CPG Guys – "The Age of Immersive Commerce with 5 New Digital’s Michael Zakkour - Part 2"

Introduction and Guest Overview

In the second installment of their two-part series on immersive commerce, hosts Peter V.S. Bond and Sree Rajagopalan welcome back Michael Zakor, founder of Five New Digital and Managing Director at Sellside Group. Released on January 4, 2025, this episode delves deep into the evolving landscape of digital commerce, emphasizing the pivotal role of platforms like TikTok, trends in mergers and acquisitions (M&A) within the Consumer Packaged Goods (CPG) and Fast-Moving Consumer Goods (FMCG) sectors, advancements in the Far East's commerce technologies, and the integration of Artificial Intelligence (AI) in retail.

The Impact of TikTok's Potential Ban on Commerce and Influencers

A significant portion of the discussion centers on the looming threat of TikTok's potential ban in the United States and its broader implications:

• TikTok's Role in Immersive Commerce: Michael emphasizes TikTok's transformation from a social media platform to a commerce powerhouse. "On Black Friday alone, TikTok shops realized $100 million in 24 hours of sales," he states (17:07), underscoring the platform's massive influence on online sales.

• Influencer Economy Concerns: The hosts express concern over the livelihoods of millions who rely on TikTok as their primary income source. Sree remarks, "They think that, you know, they get paranoid about this and they are concerned about the consumption and the influence" (23:54).

• Political and Geopolitical Dimensions: The conversation touches on the political tensions surrounding TikTok's ownership. Michael clarifies, "It's actually Singaporean, right?" (19:11), and discusses the U.S.-China rivalry's impact on the platform's future in America.

• Economic Implications: The potential shutdown isn't just a social issue but a significant economic disruption. Michael draws parallels with Argentina's Twitter shutdown, highlighting the cascading effects on creators and businesses (25:26).

Mergers and Acquisitions (M&A) Trends in the CPG/FMCG Sector

The episode transitions to an analysis of current M&A activities within the CPG and FMCG industries:

• Strategic Consolidation: Michael observes a trend where large CPG companies are shedding non-core brands while acquiring strategic ones. "They're doing a massive shedding of non core, non strategic brands... to do a massive wave of acquisitions of what they believe to be core and strategic brands" (34:19).

• Impact of Digital Transformation: As companies undergo digital transformations, the criteria for what constitutes a "core" brand evolve. Michael notes that brands once deemed valuable may no longer align with the new digital-centric strategies of their parent companies (35:20).

• Opportunities for Smaller Firms: This strategic consolidation presents opportunities for smaller CPG firms, PE firms, and family offices to acquire valuable brands at favorable valuations. Michael emphasizes the importance of understanding the critical mass of buyers and sellers to capitalize on these opportunities (40:32).

Evolution of Commerce in the Far East vs. the United States

Michael provides a comparative analysis of commerce advancements between the Far East and the U.S., highlighting how countries like China and India have leapfrogged traditional infrastructures:

• Leapfrogging Infrastructure: He explains, "China was so far and remains far ahead of us in the development of commerce technologies... because they had what we didn't have." Michael uses the analogy of building a tent, where newer infrastructures can integrate modern technologies without legacy constraints (42:02).

• Case Studies in E-Commerce: Michael cites Alibaba's transformation of the automotive sales process from cash-based transactions to online sales as a testament to the Far East's rapid commerce evolution (46:27).

• Cultural and Regulatory Factors: The discussion acknowledges that while these regions have made significant strides, they also face challenges like regulations and corruption that can hinder growth (47:40).

The Role of AI in Retail and CPG

AI's integration into retail and CPG industries emerges as a critical theme towards the episode's conclusion:

• Operational Efficiency: Michael argues that AI is primarily being used to enhance operational efficiencies, such as supply chain optimization and inventory management. "It's being implemented at scale on what I call the two great enablers of our industry... supply chain, logistics and fulfillment and operations" (52:23).

• Perception vs. Reality: Despite AI's tangible benefits, there's significant skepticism within the industry. Michael attributes this to a lack of awareness about existing AI implementations that are already driving efficiency and growth behind the scenes (50:21).

• Human-AI Collaboration: He advocates for a collaborative approach where human creativity works in tandem with AI's analytical capabilities. "The human AI collaborative experience will produce the best results" (50:48).

Conclusion and Future Outlook

As the episode wraps up, the hosts reflect on the insights shared and outline their upcoming engagements:

• Strategic Importance of Creator Economy: Sree underscores the global significance of the influencer economy and the potential disruptions caused by policy changes affecting platforms like TikTok.

• Upcoming Events: Peter and Sree announce their participation in major industry events such as CES, NRF in New York, and FMI in Florida, where they will further explore topics like the Cornell Retail Media program and engage with industry leaders.

• Final Thoughts: Michael expresses optimism about the future of immersive commerce, emphasizing the continuing evolution of digital platforms and the integral role of AI in shaping the industry's trajectory.

Notable Quotes with Timestamps

• Michael Zakor on TikTok's Commerce Impact: "On Black Friday alone, TikTok shops realized $100 million in 24 hours of sales." (17:07)

• Sree Rajagopalan on AI Perception: "They're using AI to replace the dreary, repetitive operational kind of things that aren't really sexy, but they actually move the numbers." (50:21)

• Michael Zakor on Commerce Evolution: "China started building their tent 20 years ago. We started putting our tents up 140 years ago." (42:32)

Final Remarks

"The Age of Immersive Commerce with 5 New Digital’s Michael Zakkour - Part 2" offers a comprehensive exploration of the dynamic intersections between digital platforms, consumer behavior, strategic business maneuvers, and technological advancements. By dissecting current trends and forecasting future developments, Peter V.S. Bond, Sree Rajagopalan, and Michael Zakor provide valuable insights for brands, retailers, and industry professionals navigating the rapidly evolving CPG and FMCG landscapes.

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