Dive Brief:
- E-commerce is a retail channel that CPG companies, including food and beverage, can no longer ignore: E-commerce in the U.S. is expected to average 5% of the CPG sales mix by 2018, or about $36 billion each year, which comprises about half of expected CPG sector growth overall.
- The longer companies wait to break into the e-commerce market, the harder it is to compete, according to a GMA and Boston Consulting Group report. Companies that don't invest in their capabilities for digital interaction with consumers risk stagnation, share loss, or sales declines, in some categories.
- CPG companies that succeed in e-commerce "get in early;" have "strategies and campaigns designed for digital;" aren't afraid to make "often-significant investments;" and "stay out in front and frequently increase their leads," said Gabrielle Novacek, a BCG partner and coauthor of the report, in a statement.
Dive Insight:
This is consistent with other industry thought leadership on e-commerce. A General Mills exec said e-commerce would become "mission critical" in an interview with Food Dive last year. Food and beverage e-commerce sales are expected to reach $12 billion by 2018, according to eMarketer.
The report outlines a series of actions manufacturers can take to be more competitive in the e-commerce space: "fight for digital 'shelf-space' prominence; establish a strategy for Amazon; develop the capabilities for click and collect; keep pace with new business models; retool marketing and media; and develop digital leadership." Some of these steps are more elusive and subjective than others, such as retooling marketing and media to reach an online buyer rather than an in-store shopper.
Embracing e-commerce means approaching operations and business models in an almost entirely different way. Consumers drift between brick-and-mortar retail and e-commerce seamlessly, such as buying products on Amazon while standing in a store. Manufacturers may try to find ways to integrate both approaches or have standalone efforts. Either way, the report authors agree that companies cannot assume to replace off-line share with online share and instead need to employ digital-specific strategies to capitalize on this unique marketplace.
Major and smaller manufacturers face different challenges in planning for and deploying e-commerce. Larger manufacturers may have the capital to invest in this type of operation, but with more extensive portfolios and distribution commitments, the logistics can become complicated. Smaller companies have fewer products and may work out of a smaller distribution network, so they may be more agile. But they may not have the resources to organize features like same-day delivery like larger companies could.