Trends driving CPG commerce growth: Part 1
By Garner Andrews, Senior VP Digital Experience, Epsilon
In this three-part series, “Trends driving CPG Commerce Growth,” I will discuss the trends driving competitive consumer packaged goods (CPG) industry growth and how CPG brands can overcome the challenges they face. First, let’s explore how CPG marketers can focus on commerce, particularly selling direct and collaborating with retailers, to develop and engage customers.
In today’s world, customers want control and choices when interacting with your brand. You need consistency between how you communicate your brand and how your customers experience your brand. This requires optimizing all the primary functions that influence the customer experience, including commerce. For the highly competitive CPG market, marketers need to focus on commerce to develop and better engage their customers.
“Without Commerce efforts, CPG marketers have limited ability to develop direct relationships with customers, drive loyalty and advocacy, or collect immediate insights. Spending on Commerce gives CPG marketers the building blocks to complement their indirect channel strategies with direct-to-consumer (D2C) engagement.”
Source: McKinsey Study, 2016
Sell direct to customers, with or without retail partners
Fear of disintermediation is being replaced by collaboration. In the past, many CPG brands were so concerned with maintaining their relationships with big-box retailers, that they lacked a Direct-to-Consumer (D2C) strategy. But customers want relationships with their favorite brands. Customers expect convenience, personalization, accessibility and next-level digital experiences. On top of that, they expect brands to talk directly to them, in their preferred tone of voice.
CPG multinationals face ever-growing pressure to counteract the success of direct-to-consumer CPG brands, such as Dollar Shave Club and Harry's. Take the example of Procter & Gamble, which launched an online, D2C, subscription business for Tide Pods in 2016. While the “Tide Pod Challenge” illustrates the threats and opportunities that come with e-commerce disruptions, e-commerce is now a $3 billion annual business for P&G.
Break down barriers to collaborate with retailers and technology partners
Since retailers are often still involved in fulfilling D2C campaigns, CPG brands needs stronger collaboration to gain additional shopper data. CPG companies have to constantly monitor their product performance, draw new insights and test variations of their offerings, all while keeping an eye on the competition. Regular access to shopper data across key retailer websites is challenging and can require a combination of methods.
Rich data helps brands draw relevant insights about their offerings and thus understand which products and programs drive incremental sales. Since this data lies with retailers, CPG companies need to build relationships. One way is to invest in online e-commerce specialists who work closely with online retailers or are even based in the same location. Leading data-driven companies, like Epsilon, package data in more sophisticated ways to help brands overcome inherent data gaps to get closer to their ideal consumer. By using Sitecore Experience Commerce™ for more consumer and transactional data, and creatively using second- and third-party data with existing first-party data, brands can now drive insights and deepen consumer understanding and ultimately revenue.
Increase access to data to optimize e-commerce
According to McKinsey, CPG e-commerce winners applied 2.4 times more resources to working with online retailers in 2016 than those who were not as successful. By coordinating with retailers, CPG companies run more effective promotions online and can tailor offerings to different consumer segments. For example, CPG brands and retailers can collaborate on push notifications to consumers on the retailer’s website (based on cart contents and shopping history) to drive sales of related products.
But it is not just data from the retailers that makes winners. Partnering with technology companies that leverage modern web technologies is another way to access significant data across retailer websites. Business intelligence on product findability, product content quality, out of stock products, competitive pricing, and best-selling products is as valuable as gold for companies that are ready to act.
Since the majority of CPG sales still come via retailers, pushing the boundaries of “perfect product pages” across retailer websites should be a top priority. Modern consumers expect to be “wowed,” which requires rich product content with high-quality product images and videos, product comparisons and consumer reviews, as well as unique guided selling processes.
CPG companies should not forget about creating a buzz and driving discoverability. Social media and commerce presence is key. Winning e-commerce requires prime digital space on retailers' websites, especially the homepage. Whether it’s recommendations to consumers for the next-best purchase, inclusion in favorites lists or in bundled deals, CPGs should tirelessly negotiate to push their products.
As Forbes noted in 2017, traditionally, CPG has lagged behind other industries in the jump to e-commerce. However, with advancements in supply chain management, mobile technology, and personalization, selling CPG direct-to-consumer (D2C) is now a reality.
Join me next week for part two, where I will explore how CPG brands can exploit new models of selling depending on their market.