The DXP Catalyst Update - Jan 24, 2025

INTRO
Welcome to This Week’s DXP Catalyst Update

Lately, I’ve been reflecting on the unique challenges that consumer brands face when it comes to modernizing their digital ecosystems. Over the past year, I’ve increasingly focused on private equity (PE)-backed consumer brands, particularly after working with a PE-backed animal health company undergoing a major transformation. These organizations face intense pressure to scale quickly and deliver results, which often exposes critical gaps in their technology and processes.

One notable trend is the surge in private equity investment in animal health and veterinary medicine, reflecting the growing demand for pet care and related services. These investments bring significant growth opportunities, but also highlight the challenges of modernizing outdated digital ecosystems, managing compliance in regulated industries, and unifying fragmented customer data.

This week’s newsletter dives into these challenges, with a particular focus on digital ecosystems in PE-backed consumer brands. From legacy platforms holding back customer experiences to compliance hurdles and siloed data, I’ll explore how companies can unlock growth by addressing these pain points.

INDUSTRY
Unlocking Value in PE-Backed Consumer Brands

PE-backed consumer brands - whether in specialty retail, health and wellness, or animal health - face a familiar story - significant growth potential stymied by outdated technology. Many of these companies are on saddled with legacy platforms, fragmented data, compliance challenges, and manual processes, making it hard to scale their operations or deliver great digital customer experiences.

Compounding these challenges is the fact that many of these companies lack dedicated IT or marketing teams, relying instead on interim C-Suite execs and/or external agencies, consultancies, or specialists to fill gaps. When internal resources are unavailable, turning to external expertise - whether through leadership roles, agencies, or specialized partners - is often the most effective approach.

For CIOS, CTOs, and marketing leaders, addressing these challenges isn’t just about modernization - it’s about unlocking growth, driving revenue, and creating a scalable digital foundation.

The Core Challenges

Legacy Tech Hindering CX

While legacy back-office systems often present their own challenges, this issue of the newsletter focuses on the outdated digital experience technology that many of these brands struggle with, like commerce or CMS platforms. Common pain points include:

• Rigid architectures making it difficult to implement new features, like personalized product recommendations, mobile-optimized shopping experiences, or even provide omni-channel capabilities.

• Lack of integrations with their marketing and data tools, limiting the ability to deliver connected customer journeys.

• Slow performance that frustrates customers with long load times, checkout delays, or crashes during high-traffic periods.

These limitations hinder the ability to meet customer expectations, such as providing real-time inventory updates, dynamic pricing, or customized promotions. Ultimately, legacy technology prevents brands from competing effectively in a digital-first market.

Fragmented Customer Data

Customer data is scattered across various digital platforms, marketing tools, loyalty programs, and offline systems, creating major roadblocks for consumer brands:

• No unified view of the customer - disjointed data makes it impossible to understand customer behavior or preferences across touchpoints.

• Delayed decision-making - without real-time access to customer data, teams struggle to capitalize on opportunities.

• Missed personalization opportunities - siloed data prevents the delivery of tailored recommendations, timely abandoned cart follow-ups, etc.

This fragmentation not only diminishes the customer experience but also creates inefficiencies that hold back growth.

Compliance and Security Risks

As consumer brands increasingly embrace digital channels, they are collecting more data than ever before. However, this surge in data brings heightened risks, particularly for some industries where regulatory requirements are more complex:

• Data privacy regulations - Laws like GDPR and CCPA require strict compliance for storing, processing, and using customer data. Many legacy systems are ill-equipped to meet these requirements, leaving brands vulnerable to penalties.

• Cross-border challenges - As brands expand into new markets, they must navigate complex regional data laws, including requirements around where data can be stored and how it can be shared.

• Industry-specific regulations - For animal health brands, digital often involves additional compliance hurdles, such as ensuring that prescription medications or regulated products are sold only in approved regions or to verified buyers. Managing these requirements manually - or with outdated systems - can result in errors, delays, or even legal violations.

• Security vulnerabilities - Outdated platforms often lack robust encryption, secure user authentication, and real-time threat monitoring, increasing the risk of data breaches that can expose sensitive customer and transactional data.

For PE-backed brands, failing to address compliance and security risks can have significant consequences, including legal penalties, reputational damage, and loss of customer trust. These issues can also slow down growth initiatives, particularly when expanding into regulated marketers or launching new product lines.

Resource-Intensive Manual Processes

Manual workflows are another significant challenge for consumer brands, particularly those operating on disconnected legacy systems across their digital ecosystems. Pain points include:

• Campaign management - marketers spend hours manually segmenting audiences, launching campaigns, and analyzing performance, delaying time-to-market.

• Inventory tracking - without real-time visibility, teams rely on spreadsheets or outdated software, leading to overselling or delayed restocking.

• Order fulfillment and customer service - disconnected systems force teams to jump between platforms to process orders, track shipments, and resolve customer issues.

These inefficiencies limit scalability and prevent brands from focusing on strategic growth initiatives.

The Strategic Opportunities

To unlock value and overcome these challenges, PE-backed consumer brands can focus on a few key opportunities:

Modernize Legacy Technology

Upgrading outdated digital experience technology like commerce platforms and CMS solutions allow brands to delivery faster, more flexible, and customer-friendly experiences. Modern systems are designed to integrate seamlessly with other tools in the digital ecosystem, enabling omni-channel capabilities, personalization, and real-time data activation.

Unify Customer Data

Centralizing data across commerce, marketing, loyalty, offline, and POS systems enables brands to create a single, comprehensive view of the customer. This unified data empowers more personalized experiences experiences, real-time marketing campaigns, and actionable insights for leadership. Connecting this data to marketing systems - via tools like a CDP or an integration layer between a CDP and other systems - is critical to fully unlocking its potential.

Build in Compliance and Security

Ensuring compliance and data security shouldn’t be an afterthought. Embedding these capabilities into your tech stack allows brands to meet global regulatory requirements, reduce legal risks, and protect customer trust.

Automate Workflows for Efficiency

Automating key processes like inventory management, campaign segmentation, and customer service allows teams to focus on growth-driving activities. Automation also reduces costs and improves scalability as brands expand into new markets.

Invest in Scalable, Agile Systems

Whether it’s a new commerce platform, a CMS, or integrations with data tools, scalable systems allow brands to adapt quickly to new opportunities - be it launching a new product line or expanding into international markets.

The Path Forward

Modernizing digital ecosystems isn’t just about solving today’s challenges - it’s about building the infrastructure for long-term growth. By addressing legacy tech, unifying customer data, and streamlining operations, PE-backed consumer brands can unlock their full potential and gain a competitive edge.

WHAT’S NEXT
Upcoming Topics

• Next Week: When is composable architecture right for your business?