The consumer packaged goods (CPG) industry is evolving at a rapid pace. CPG brands are working hard to meet the consumer’s demands and exceed their expectations.
They are spending time and resources in market research to gather valuable insights and enhance the buying experience by accommodating factors such as demographic shifts and dynamic consumer preferences.
A 2017 study by McKinsey discovered that organizations leveraging customer behaviour insights project 85% higher sales growth and 25% more gross margin than their peers.
In keeping with this dynamic trend, Internet Retailer’s 2019 Online Consumer Packaged Goods Report discusses the strategic shift of CPG manufacturers into e-commerce to promote growth.
It talks about the rise of disruptive upstarts that are selling online, leaving major CPG companies scrambling to catch up with the digital marketplace.
However, instead of imitating their fast-growing web-only counterparts, big CPG players have sought out online retailers such as Amazon to sell their products, just as they do in the real world to cope with their web rivals.
To get a deeper understanding of how e-commerce is changing the CPG landscape for web-only CPG start-ups, major CPG manufacturers, and consumers, let’s take a look at the key findings that were projected in the 2019 Online Consumer Packaged Goods Report.
Creating an Omnichannel Experience
It is a buyer’s market, where conscious consumers are no longer reliant on companies for information. They can source any data ranging from product reviews to price comparisons on search engines.
Offering effective engagement and transaction efficiency is a crucial step for CPG brands to thrive in an e-commerce landscape.
In fact, Boston Consulting Group stated that e-commerce is by far the fastest-growing sales channel for CPG goods.
Furthermore, an IRI study revealed that that overall online CPG growth was 64% in 2018. However, establishing personal relations, asking for feedback, and gaining valuable insights are equally important factors that make a client feel valued and loyal.
That’s why web-only CPG companies are revolutionizing their purchasing process to create an omnichannel experience.
It features an online and offline platform that allows consumers to make easy searches and view important information such as description, pictures, SKU, and filters to access the right product and opt for secure, cashless mode of payment.
Web-only manufacturers such as Dollar Shave Club, Brandless, and Graze had chosen not to compete with established CPG companies for retail shelf space.
However, some proceeded to sell in stores by taking advantage of their online cachet to ensure a smooth experience for their customers.
Implementing D2C and Personalization Methods
Major CPG brands such as P&G report their online sales as the merchandise sold directly or by retailers on a wholesale basis which can create a disparity between their and Internet Retailer’s estimations.
For example, P&G’s global e-commerce sales totalled around $4.5 billion, or about 7% of their total sales.
Their Direct-to-Consumer (D2C) web sales amounted to just $4.5 billion, whereas Internet Retailer’s estimate was at $55.68 million—merely one-tenth of a percent of total sales.
These modest direct sales led them to shut down one of their D2C websites and redirect visitors to another website that displays coupons and product information.
Furthermore, the website redirected traffic to link with information about online retailers such as Amazon and nearby stores to expand its D2C footprint with additional acquisitions.
One of the leading CPG companies with nearly $93 billion in global 2018 sales, Nestle S.A., also has implemented D2C methods through beverage delivery.
ReadyRefresh by Nestle is a beverage delivery service that delivers products such as large water jugs for dispensers, bottled water from Nestle such as Nestle Pure Life and Perrier, and coffee products along with extra supplies such as coffee and water cups and sugar packets, to establish precedence in the D2C CPG industry.
Major players like Oreo and Coco-Cola have created a strategic model by offering personalized products on their websites, but not the cult-favourite varieties sold in grocery stores.
Some CPG manufacturers such as Kraft Heinz Co., however, do not sell any products on their websites. They only offer detailed information along with coupons and redirect traffic to online retailers.
Using this tactic, the company estimated $1 billion in sales in 2018 despite not having sold directly to consumers.
The Importance of Amazon
Accounting for 40.3% of the U.S. e-commerce market in 2018, Amazon gained popularity as the go-to destination for online CPG shopping.
An online survey of 510 CPG buyers by Toluna revealed 83% bought CPG products online at Amazon, followed by Walmart at 58% and Target at a distant 33%.
Jie Cheng, head of digital and e-commerce for Campbell Snacks stated Amazon has evolved from a sales channel into a marketing channel.
A company’s presence on Amazon helps create awareness as it is often the first online location that consumers visit for brand comparison.
Moreover, Amazon’s packaging and merchandising play a big role in increasing customer appeal.
Pepperidge Farm’s Goldfish crackers, for instance, are the best-selling crackers due to their packaging which makes it easier to chip and also minimize breakage, according to Jie Cheng.
In the end, it’s hard to determine how much everyday purchasing will shift to online platforms.
With e-commerce retailers trying to improve the level of efficiency for their websites, physical stores, too, are investing money to make in-store shopping a fun and appealing process.
It’s unlikely that every brand will be able to establish an emotional connection via online selling like its digital predecessors. But certain CPG manufacturers like Coca-Cola are creating an uproar with their strategic moves.
The best way to tackle the changing CPG landscape is to embrace it and implement e-commerce solutions to provide consumers with the ultimate purchasing experience.