How Legacy CPG Brands Can Adapt To eCommerce
Rob HolthauseAugust 14, 2019
In our ever more connected world, consumers increasingly turn to eCommerce to purchase their favorite products. eCommerce sales were up about 15% in 2018, accounting for just over 14% of all retail sales. Online sales of consumer packaged goods (CPG) were up 35% in the same period, with gross revenues of $60 billion. Not as nimble or as digitally-native as their smaller competitors, large legacy CPG brands have struggled to gain traction in the eCommerce space. This previous blog post highlights the benefits of CPG companies selling online. The question now shifts to how: how should legacy CPG brands engage their customers where they are – online?
Turn to Amazon
Love it or hate it, Amazon has tremendous influence on the way things are bought and sold online. According to this content here report, 9 out of 10 Americans have made a purchase from Amazon. It may not be the end-all for online shopping, but it is certainly significant that more than half of all product searches start on Amazon. With nearly 50% of all online sales occurring on Amazon, its power as a sales channel cannot be overlooked. It’s almost a requirement that CPG brands make their products available on Amazon. While choosing to offer your products through the Amazon marketplace is not an efficient long-term strategy, it’s hard to dispute that selling there wouldn’t be an effective starting point for legacy CPG brands that need to get their foot in the eCommerce door.
Go your own way
For companies who don’t like the idea of a shared marketplace or who want more initial control over their product sales (and all ultimately should,) conducting eCommerce on one’s own site is a fantastic long-term strategy. While site development can be a more time-consuming and costly option, a brand with their own eCommerce site can tailor the user experience to their needs. Additionally, interacting directly with their customers means that they have access to the customers’ data and preferences. Any customer service issues are handled directly as well, ensuring a positive outward image. This also means that new products can be rolled out and tested quickly – a big advantage that smaller brands have over larger, slower companies.
If you can’t beat them, buy them
These large legacy CPG brands have tremendous resources at their disposal when it comes to figuring out how they should break into the online shopping space. If building their own eCommerce site proves impractical in the short term, they don’t want to be a part of a shared marketplace, or they are yet to have a competitive product ready to sell online, one solution is to simply buy up established digitally native vertical brands that have had success – as Unilever did with Dollar Shave Club. This is actually kind of a win for both parties – the DNVB suddenly has massive marketing power and capital backing them up, while the large brand that purchased them has a foothold in the eCommerce space (and all the data, market hype, and experienced employees that come with it.)
As eCommerce sales continue to increase and take an ever-larger chunk of revenue from traditional brick-and-mortar stores, expect legacy brands to explore more unique approaches to increasing online sales and presence. They have no choice but to follow their customers.