Shifting shopper habits aside, CPG marketers could see a powerful business-building impact from e-commerce for three key reasons:
- Market share: Leading brands tend to have higher market share online compared to physical stores. As 1010data reports, Tide detergent has a 48% share online, versus 38% offline, and even a smaller brand like Seventh Generation scores a 5.7% online, versus 0.6% offline. Brands with strong positioning tend to win online because they are less likely to get beaten out by the private label and value brands that distract shoppers at the physical shelf. Instead, e-commerce shoppers seem more likely to pick a brand and keep it on their shopping or subscription lists. Niche brands get a boost because the virtual shelf is limitless.
- Instant refills: The convenience of e-commerce allows CPG companies to capture the “dark volume” that otherwise goes unsold when people run out of the product. When supplies are low, we take an extra squeeze from the toothpaste tube, run the razor blade over our faces one last time, or have spaghetti night without the grated Parmesan cheese. But with more sophisticated subscriptions and home delivery, all brands can grow their business. 1010data says that e-commerce increased all-category CPG volume by 1% last year. That’s amazing growth for these stable categories.
- Smarter spending: I am most excited by the potential for CPG e-commerce to transform how hundreds of billions of marketing dollars are spent. To date, CPG brands have only partially benefitted from the rise of digital marketing. Their challenge has been a lack of data that shows how spending on one more channel directly impacts each in-store purchase.
Sure, you’ll see various marketing mix models and periodic household panel studies. But unlike their e-commerce brethren, CPGs cannot see whether or not a specific Facebook post, YouTube video, or Google AdWords placement directly drove sales. Once we have a critical mass of e-commerce purchases—and retailers who allow their vendors to access and aggregate this data—it will unlock a massive migration of ad budgets to activities that are proven to work, thus driving further growth.
Companies in the CPG space pride themselves on understanding their consumers’ evolving needs and giving them new products that better meet these needs. Now is the time for these same companies to dig deep into how their consumers’ shopping habits are changing, and invest ahead of the volume curve with current and new e-commerce retailers. The future of the industry is yours for the taking!