Ready for Takeoff
According to Advertising Age and data analytics firm 1010data, CPG e-commerce sales grew 42% in 2015. Laundry detergent alone was up 85% and toothpaste up 75%. E-commerce accounts for only about 2% of total grocery sales according to Morgan Stanley, but it will grow quickly. After all, 26% of U.S. consumers say they will try grocery shopping online this year, versus 8% who said the same last year.
To paraphrase William Gibson: The future is here, it’s just waiting for a business model. While previous attempts to crack the code on CPG e-commerce have come and gone, a combination of both technology and business model innovation has unlocked the potential. The technology transformation stems from the rise of smartphones and software that make it simple to browse, purchase, and pay—whenever and wherever.
The new business models to support CPG e-commerce are multiplying and being adopted quickly. Amazon Prime has made online orders pain and guilt-free (well, except for all of that cardboard), and the company’s “Subscribe & Save” product is responsible for 20% of e-commerce last year, according to 1010data. Kroger, a client of ours, is building excitement around a service called ClickList that allows customers to order online and pick up groceries on the way home. And don’t forget startup models such as Dollar Shave Club, which are spawning copycats in many categories.
As these companies join the land rush to defend core businesses while capturing rare growth, consumers continue establishing new habits and locking in product and store preferences. Retailers’ marketing and innovation investments will drive further market awareness and excitement.
The interesting thing is that once people get used to buying online, they tend to want to do so more often. At some point, it becomes easier for us to shop for anything online, and that time spent traveling to and from a physical store feels like a painful waste of time. We’ll reach a tipping point soon when e-commerce becomes the default for any purchase. CPG products are primed to be the next dominoes to fall.