Most consumer packaged goods (CPG) brands are household names, which isn’t too surprising considering this market brings in $600 billion annually. Some of the world’s top CPG brands — like Dove, Knorr, Pepsi, Lays and Coca-Cola — are now not only fighting against each other for customers, but they are also facing up against online retail giants. You might have even heard of some of these digital brands: One is a little-known company named Amazon. While that competition can be good for consumers, it has proven difficult for many CPG brands. For example, the grocery channel share of packaged goods sales in the United States is expected to drop from the current 45 percent to about 37 percent in 2025. And that’s perfectly fine with online retailers like Amazon Fresh, Google Express and FreshDirect, who are picking up that extra business.
Even in countries like Japan and China—where CPG companies are growing—brands are still finding themselves up against thriving e-commerce businesses. In China, e-commerce is now responsible for about 15 percent of the total consumption, which is up from 3 percent in 2010 . With online retailers clearly here to stay, what are CPG companies doing to claim their shares of the market?
If You Can’t Beat ‘Em
Why not join ‘em, right? Some of the big CPG brands are opting to join the perceived competition. From selling their products directly through online retailers to working with stores to provide an online-ordering option, more and more CPG companies are joining the digital movement to reduce the steps it takes to reach the consumer. The result is more consumers are seeing these CPG brands available on sites like Amazon and through retail and grocery stores’ online pickup or delivery services. And Amazon is all for this movement. They actually had a meeting with some of the top CPG brands last year, encouraging them to sell directly to consumers — on their site, of course.
Following that advice can help these brands win over new consumers. With roughly 65 million Prime members worldwide, Amazon definitely has a desirable audience. (It is interesting to note, though, that Amazon recently opened a brick-and-mortar grocery store with no cashiers in Seattle. So, even they see some value in having a physical location.) However, this Amazon partnership approach can cost brands the chance to build relationships with customers, with the lowest prices and best reviews ruling these sites. The face of the company gets lost with a dollar sign. So, is there a middle ground between sticking to brick-and-mortar stores and going all in with online retailers? That takes us to the next option.
Direct Access to Customers
Instead of going through a site like Amazon, many CPGs have begun to offer subscription options for customers through their platforms. Subscriptions are especially suited for companies that offer items that need to be replaced or replenished often — like soap, razors, detergent and regularly used grocery items. A giant player in the CPG market, Procter & Gamble launched a direct-to-consumer online subscription — called the Tide Wash Club — for its Tide Pods. This model still allows the company to interact with its customers, while competing with other online sellers. P&G also created its Gillette on Demand subscription service, which includes a loyalty program and rewards. Not typically something CPG brands are known for offering, this loyalty program gives customers every fourth order free. L’Oreal is another one with a loyalty program, giving customers five points for every dollar spent.
One of Gillette on Demand’s competitors, Dollar Shave Club is a great example of how to make CPG products successful with a subscription model. This company started out with a $100,000 investment in 2012 and was then purchased by Unilever four years later for $1 billion. The proof is in the pudding — or razors in this case — that subscriptions can work for this market.
Blending the Old with the New
Not all CPG brands are made to go on Amazon or even offer a subscription. But that doesn’t mean they have to stay in the Stone Age and completely ignore the direction the market is going. They just have to find the best online niche for their brand. For example, creating an online marketing campaign — covering everything from social media to newsletters — can help keep their brand top of mind with consumers and also build engagement and relationships. Those are elements often lacking from online retailers, but extremely important when it comes to retaining and converting customers again in the future.
Some of the top CPG brands killing it on social media include Gain, Kleenex, Pampers and Hefty. Sharing quality content, videos and images helps a brand set itself apart. And it can’t be overstated how important it is for brands to respond and interact with its followers. Remember, relationships are key. You can also use all of the data and insight you collect from the social pages to better target and reach customers going forward.
Final Round: Who’s Going to Win?
The CPG market isn’t going to step aside to let online retail newbies claim all of their customers. But to ensure this multi-billion-dollar industry stays ahead of the game, they have to take note of what these ecommerce sites are doing well and find ways to incorporate those practices into their business. Consumers want an easy, quick shopping experience, so the CPG brands that will have the best results are going to be the ones that change their business models to exceed those expectations. Whether that’s through joining forces with Amazon, creating subscriptions, offering loyalty programs or some combination of options, CPG companies need to find the shortest path to reach and convert the consumer.