Digital disruptors like Amazon have forced more traditional brick-and-mortar businesses to rise up and adapt in a variety of ways.
Last year alone, CPG online sales in the U.S. totaled $58.6 billion, which accounts for 11% of total CPG retail sales. And, online sales made up 64% of total 2018 growth.
Not only has the CPG industry shown exceptional growth in the past few years, but the rate of CPG sales growth is expected to continue to increase year over year.
CPG Industry Trends
The CPG industry may appear to be one of the most accessible verticals to understand given their ubiquitous in daily life, yet there is enormous disruption in the space given growing ecommerce opportunities. We’ve illustrated below some of the top five strategies one can utilize to help move with the motion of the CPG industry in 2020.
1. Omnichannel strategies.
It’s important to present a fully unified experience across every customer touchpoint. A customer spends time with your brand digitally and offline and expects consistency in their experience, no matter where they are.
A fully unified, cross-device customer profile in your customer data platform (CDP) is essential. In addition, all messaging should support an ongoing and consistent conversation with the customer.
2. Subscription models.
Subscription models enrich and streamline the transaction process for both online retailers and consumers. The increase in consumer demand for CPG product subscriptions can be credited to saving time and money through automation of the purchase process.
On the business side, it allows you to maintain a consistent form of revenue from ecommerce sales, making inventory easier to manage and reducing the cost of sale. However, to attain this model, CPG brands must be prepared to offer an exceptional product and easy end-to-end experience, and to build loyal relationships with their shoppers to keep them aboard.
Personalization ultimately leverages data to control the conversation and experience of content being delivered to customers throughout their journey, across all digital channels — and even beyond.
With a better understanding of your customers’ wants and needs, you can more readily fulfill them through the digital experience.
It’s important to introduce a CDP and complete a personalization maturity audit to gain this 360° perspective of your business.
Consistent brand identity is critical in communicating your brand to potential and existing online shoppers. A content strategy with engaging creative assets that seamlessly flex across devices and channels is necessary to the success of your business.
Furthermore, effective branding builds a robust identity for consumers to latch onto, ensuring that your company is represented effectively on an aesthetic level.
Strategies to Initiate CPG Sales Growth Online
Ecommerce opportunities in the CPG industry have ballooned in past years thanks to the rapid growth of retail titans such as Amazon and Walmart. The former’s acquisition of Whole Foods and entry into same-day delivery groceries has become its fastest growing category at a 40%+ clip. With that in mind, here are four notable CPG strategies to help capture in your commerce offering to initiate CPG sales growth online.
1. Offer a subscription model to tap into recurring revenue.
Subscription models can help the purchaser save time and money, and reduce the effort needed to remember to buy these regularly purchased consumer goods.
Most CPG products are purchased in periodic intervals. For example, the average consumer may need a new toothbrush and toothpaste every two months or a box of tissues every month. Committing to a subscription model is very attractive to some consumers, as it can save money on bulk pricing and save time with less frequent check-out. They also get the peace of mind that they’ll receive their consumable goods in a timely manner without complication.
Given that a consumer knows they need these CPGs regardless of circumstance, subscriptions can be leveraged to personalize a direct-to-consumer (DTC) relationship and capture a year’s worth of purchases in one click.
The cyclical nature of CPG sales make subscription models a powerful vehicle for consumer brands’ ecommerce offerings, and most disruptors have already made serious in-ways in conquering the subscription model. For any successful DTC business, taking the thinking out of any routine rooted in tedium will go a long way in conversion and sales.
2. Pick your best brands and double down on content.
CPG companies face the classic conundrum in economics: scarcity. The average CPG company may have dozens of products under their business, but giving each and every brand an equal amount of marketing and promotion can be an unnecessary, budget-bloating expenditure.
Instead, pick a direction to specialize in a few brands, and have them flagship your company. For example, focusing on your strongest brands and establishing a strong digital presence and rich content offering is a no-brainer. These strategies have the most direct impact on consumers and will help maintain relevancy and brand recognition.
However, an alternate — and equally viable — path is to test the market for products that are not widely distributed. Invest in these brands and charter guerilla marketing campaigns that disassociate from your main brand. This can lead to unique, distinguished offerings that capture niches and demographics beyond your current scope.
3. Use your mission to your advantage.
The claim that there’s no such thing as bad publicity is not unfounded — however, while bad publicity may increase brand recognition, it is also likely to plummet sales and hurt your business overall.
A strong brand comes with a strong mission that tailors well to your consumer’s ideals and ethics. You only seek to gain by ensuring your CPGs are sustainable and ethical — with ethical products, you’re much less likely to fall victim to a boycott or other bad press.
4. Build a connection with your customers.
Personalization plays another key role in providing soft power to your CPG brand. Pet food is a product category that is using compelling personalization strategies, offering a wide variety of options based on consumer preference.
By genuinely connecting with your customers, you have a strategic advantage over those brands who do not.
Benefits CPG Companies Get From Selling Online
1. Lower overhead.
CPG companies making the plunge to an ecommerce offering can enjoy direct control over their distribution and shipping – while building out a viable ecommerce offering may seem daunting, selling D2C removes the middleman and helps lower overhead over the long term.
2. Stronger personalization.
Personalization efforts are redoubled as well through the power of an online experience. The amount of data obtained through a middle-man pales in comparison to the power of cookies and browsing history, ensuring you can better tailor your experience to the expectations of your consumer.
3. Rapid innovation.
It is easy to run into roadblocks when experimenting with one’s brand or product when only working offline – you have middlemen that are innately risk-averse and are prone to balk at rapid adaptations. Having stronger creative control through your own distribution enables you to circumnavigate through disruptions and stay ahead of trends.
4. Robust CX.
Ensuring that your products have their own site and brand to espouse on the internet establishes a more robust CX and omnichannel experience. Your consumers have more touch points to interact with your brand with, and have an online presence devoted solely to their brand, over being surrounded by other competing products in a retailer.
5. Buyer and brand loyalty.
Waiting on a retailer’s review and feedback on your product can be time-consuming and ineffectual. Online user reviews have transformed commerce by giving your consumers a voice to both your business and the community at large, enabling you to take feedback and adapt accordingly. Your buyers and brands will strengthen as you establish a direct channel to your consumer.
How CPG Ecommerce Trends Impact Brick-And-Mortar Shoppers
While the fate of brick-and-mortar is subject to hot debate, the impact of CPG ecommerce on brick-and-mortar shopping is undeniable. The average retail shopping experience has changed — and will continue to change.
Here are a few ways CPG ecommerce trends are disrupting the brick-and-mortar experience:
1. Polarizing the in-store experience.
At this stage in ecommerce, the largest advantage of a brick-and-mortar store over an online offering is the shopper’s ability to experience the look and feel of a new product. But with consumer packaged goods, once a shopper has tried the product or has come to trust the brand, there’s little incentive to visit a retail location to experiment further or deepen their understanding of the product.
In that way, brick-and-mortar stores have more incentive to lock in a consumer through either a unique and memorable experience or convenience — ease of access and use. Brick-and-mortar, as a result, ends up deeply polarized, providing either rich in-person experiences or stripped down, affordable and easy-to-use services.
This is why department stores and expansive catalogs have suffered, and brick-and-mortar shoppers end up gravitating towards online shopping for those experiences.
2. A decline in cross-selling.
With fewer shoppers entertaining brick-and-mortar as a whole, cross-selling is in decline as well — especially when it comes to consumer packaged goods. It’s uncommon to leave a convenience store with only the item you intended to purchase. But that’s not such a rarity in the sphere of ecommerce, where the allure of an additional product isn’t quite as strong.
In that way, brick-and-mortar can emphasize that unique niche and promote deeper cross-sell to distinguish its offering from the online experience.
3. Increasing the need for in-store data capture.
The value of brick-and-mortar is no longer totally tied to the sales per square foot — there is additional utility in gathering data and providing an omnichannel experience.
The power of data in ecommerce is enormous, as it enables a platform to effectively target ads and capture demand that would be long lost. Brick-and-mortar experiences have recognized the need to offer incentives that help capture customer data to push a sale later in the pipeline.
Shoppers are now not only incentivized to purchase products, but also to sell their data to fuel an omnichannel pipeline.
Examples of CPG Brands Going Direct-to-Consumer
Brands such as Dollar Shave Club and Boxed are flagships to the new model of CPG Brands entering D2C – through the advantages afforded by a D2C offering, they can invest more into marketing and customer experience of their brand. They can circumvent the existing rules of their vertical by innovate at a rate faster than their peers to the point where even existing titans such as Gilette are forced to adapt and play catch up.
1. Ramping up digital content and addressing organizational structure.
This example from Myles Shipman, vice president of business development at BORN, demonstrates some of the differences between selling B2C/B2B and going DTC:
“In our experience, the lack of customer-facing content when taking a past client to DTC was a huge hurdle. The digital content required for DTC is a stark contrast to that made for B2C and B2B. Organizing that overhaul is an intensive process that requires utmost oversight.
“Furthermore, change management and the structure of an organization is challenged in the transition. The organizational structure of a company must both maintain its B2B, and also add DTC with a relevant team at its head.
“Friction emerges when deliberating who manages that front — normally, supply chain handles distribution, but would they do so for an online store? Or would it be IT, given their understanding of the technology? Or marketing, given their ability to push brands? Each CPG brand is unique in this endeavor and must assess its best options for spearheading a DTC transition.
“With those two hurdles cleared, however, our client enjoyed great success, and worked with the currents of disruption instead of against them. A well-stylized and organized DTC addition only served to aid the brand.”
2. Optimizing customer satisfaction through personalization.
This example from Paula Gadsby, vice president of client services at BORN, addresses some of the benefits of a strong personalization strategy:
“In our experience, helping one past client with their DTC platform revolved around two key factors — personalization and optimization.
“Given this client’s juggernaut status in B2B and B2C, they were subject to smaller, more nimble disruptors nibbling at their market share. The client built an effective ‘sales moat’ by ensuring a rich detail of personalization — providing them with a distinct advantage.
“This ability to tailor to customers’ unique needs helped increase customer satisfaction with their product and ensured that competitors did not have a niche to abuse against them.”
The Importance of Voice Commerce for CPG Brands
Voice commerce is a powerful tool for CPG brands looking to increase their ecommerce sales. Given that purchases of consumer packaged goods typically require less research and investment than the average good, it’s more likely that a consumer will be willing to complete a purchase using a quick voice search or to renew a subscription over voice.
The advantages of voice commerce, including its speed and ease of use for consumers, make it a perfect addition to a CPG online retailer’s digital offerings.
While voice commerce is still far from fully honed for widespread use, it is projected to be one of the great trends of commerce moving into the next decade. It can leverage data from a person’s home, car, or device to facilitate shopping in a conversational way and simulate the experience a customer may have with a specialist at a retail store.
Furthermore, by analyzing and mastering customers’ shopping patterns, voice commerce can make a reorder simpler and faster than virtually every other form of commerce available. In that capacity, voice commerce is unrivaled and will be a huge disrupter that CPG brands should account for when considering new technologies.
Thinking Even Further Into the Future
However, going beyond the scope of voice commerce, the CPG industry is prime for disruption upon disruption as it matures into the ecommerce space. Below are a pair we find relevant.
1. Demographic shifts complementing D2C.
With a rapidly aging and tech-savvy population globally, the unique functionalities and convenience of a D2C experience looks to trump conventional CPG methods of distribution. Untapped markets have now enjoyed rapid expansion in eCommerce due to the proliferation of mobile users.
2. CPG experiences.
While few think of consumer packaged goods as products able to rapidly personalize and make into robust customer experiences, brands have done the impossible and begun to set it as a standard. This evolution will deepen even further into the future.
All in all, the D2C disruptions in the CPG space are a space by which businesses can enjoy rapid growth and connection with their consumer base. The plethora of services and functions that D2C can accomplish where other mediums lag make it ideal for any expansion in the vertical.