In today’s digital age, consumer packaged goods (CPG) companies must stay up do date when it comes to e-commerce trends or risk being phased out by the competition. According to a new study conducted by the Grocery Manufacturers Association and Boston Consulting Group, companies are facing a “winner-take-all” situation, with half of the sales growth coming from digital channels.
The report, “Winner-Take-All Digital World for CPG,” identifies four factors that are shaping the market for CPG companies. First, while multiple business models are emerging, only a few will be disproportionately influential. These include models advanced by Amazon (such as home delivery and Prime) and click and collect, which has proven successful in Europe and is well suited to the lifestyles of busy, mobile US consumers. Second, the game is increasingly played by new rules requiring very new skills. Third, early-adopter consumers are already settling into patterns of digital buying behavior. Fourth, and most importantly, success breeds exponential success: Once brands establish leadership positions online, they are tough to dislodge.
According to the researchers, the most likely sector-wide scenario is for e-commerce in the US to average 5 percent of the CPG sales mix by 2018, or some $36 billion annually, which would represent about half of the overall expected CPG sector growth. As a result, companies that lack effective digital capabilities risk stagnation, share loss or, in some categories, shrinking sales. The report makes the case that major CPG players essentially need to start from scratch in digital commerce against a host of competitors, many of which have never shown up on the brick-and-mortar radar screen. It is a fundamentally different competitive set, and even small companies can be massive disruptors.
“This research shows that CPG companies must rethink everything from business models to marketing to supply chain to respond and stay competitive,” says GMA’s Jim Flannery, senior executive vice president, operations and industry affairs.
The report can be accessed here.