How CPG Brands Can Win Online Amid Growing Modern Commerce Challenges
Jonathan Herman | December 5, 2019
Consumer packaged goods (CPG) brands have historically seen success selling in traditional, brick and mortar retailers. They are optimized for scale in these channels, rather than diversification and dispersion throughout multiple opportunities for consumers to buy. And, as a result, they’re struggling to keep up with the growing market online.
Pressures from new and old competitors and increasing online-only consumption patterns are forcing CPG brands to adapt or risking losing significant market share in their categories. Even the largest CPG brands struggle. What are the main issues brands should be concerned about and what can they do now to start combatting this market share disparity?
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CPG brands face significant challenges
You might be wondering, if consumer confidence is strong, and CPG brands are performing well overall, why should they be concerned about ecommerce share and digital commerce? Here are some of the challenges that CPG brands are actively facing in today’s modern commerce environment:
Rise of private label brands
Many online retailers like Amazon, Walmart, Target and CVS have launched their own label of CPG products, with offerings covering everything from clean baby products to grocery items and household essentials. These products are usually highly comparable to those of traditional CPG brands in quality, price, and ease of access.
Another growing trend in the market is the use of subscription services that eliminate the challenge of shopping brick and mortar by establishing set delivery shipments of necessary household items online. This eliminates the need for consumers to consider and “shop” for products by increasing reordering of products they already use.
Digitally Native Vertical Brands (DNVBs)
DNVBs are highly specialized companies that sell products to a specific target audience. They typically start out with no physical retailing space, but that’s not to say that physical retail can’t play a role in their strategy. They’re gaining popularity and market share quickly. It’s estimated that web-only brands grew three times faster than total U.S. ecommerce, which means that traditional CPG brands need to be prepared to compete with these brands in all arenas, but especially online.
Some CPG DNVBs to look out for are baby, beauty, and household products from The Honest Company and online grocery store Brandless. Brands like these are usually seen as honest, responsible and friendly, as well as cost-saving due to their D2C model which eliminates the middle-man markups that most traditional CPG brands have experienced since their rise.
Additionally, these brands are getting support from venture capitalists, which only indicates their increasing and continued influence on market trends and consumer behaviors.
What’s Next for CPG Brands?
While big changes are hard, there are some key themes to keep in mind that can help guide any organization forward.
Who is your target audience? Figure out who they are, and embrace them as the loyal, lifelong customer you expect them to be.
Gain their trust and keep it by continually striving to create products and experiences that demonstrate your authentic commitment to serving them. Use every opportunity to reinforce this mission through your design and messaging on your brand website, social media channels, and wherever else you appear.
Achieve visibility. Search results (both organic and paid).
Constantly refresh your product detail page to always reflect the best your product has to offer throughout the year. This may include new versions of the product, seasonal changes, or trying bundles and other offers.
Constantly measure your performance and respond. CPG brands need to experiment within the market to establish the correct strategy or risk losing market share. Once products are at the top of a category, they are constantly rewarded with better search performance and conversions, but falling to the bottom means that products quickly cease to have relevance.