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Featured Topics: Omnichannel StrategyDigital CommerceEcommerce Strategy

How CPG Brands Can Win Online Amid Growing Modern Commerce Pressures (Clone)

Maria Lisac-Ramirez | October 10, 2018

Consumer packaged goods (CPG) brands have historically seen success selling in traditional, brick and mortar retailers, but struggle to keep up with the growing market online. With new pressures and increasing online-only consumption patterns, CPG brands are facing the challenge of competing online or risking losing significant market share in their categories. Even the largest CPG brands struggle online, with many of the industry’s largest players trailing 13 market share points when compared to their brick and mortar share. 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 are Under Attack

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:

1. 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 grocery items, baby, cleaning supplies and all other household staples. These products are usually highly comparable to those of traditional CPG brands and their quality, price and easy access means that traditional CPG brands need to step up their online presence or risk losing market share to those same retailers they are trying to win in.

2. Constant Introduction of “Startup” CPG Brands

While the concept of a “startup” brand might not seem like it fits in this industry, we have seen a growing trend of local, digitally native and online-only brands that have started offering a different range of CPG products - appealing to a different but powerful audience. These brands 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.

3. Subscription Services

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 - effectively eliminating the need for consumers to “shop” for products. This reduction in shopping and increase of ordering means that CPG brands need to have an impactful and appealing online presence if they want to capture recurring online conversions, inadvertent customer loyalty and digital market share.

4. Digitally Native Vertical Brands (DNVBs)

Brands that focus solely on retailing online, sell highly specialized and targeted products and have no physical retailing space are known as DNVBs - and they are gaining popularity and market share quickly. It is estimated that they are growing 3x faster than ecommerce itself, 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 The Honest Company, online grocery store Brandless, and shaving subscription service Dollar Shave Club.

What’s Next for CPG Brands?

While there is no doubt that there are many modern commerce pressures that are forcing traditional CPG brands to become more ecommerce and technology savvy, there are a few simple steps that they can take now to reduce the risk of becoming obsolete:

The first is understanding that personalization is key to winning the consumer online. It is not enough to show appealing content and lifestyle images, digital shelf marketing excellence is dependent on the optimization of every touchpoint within the customer’s purchase journey. Website, social media, search results and any other interaction with brand content must be optimized to deliver a compelling purchase decision.

Other steps are to always ensure timely product detail page updates to cater to shoppers’ seasonal needs, testing product combinations, bundles, and offers to constantly gauge performance and edit accordingly. CPG brands need to experiment within the market to establish the correct strategy or risk losing market share, especially considering that once products are at the top of a category, they are constantly rewarded with better search performance and conversions but being at the bottom means that products can quickly become invisible and obsolete.

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All Topics: Omnichannel Strategy , Digital Commerce , Ecommerce Strategy

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