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The way consumers shop for everyday products continues its transformation toward the Web. In 2008, online retail accounted for approximately 7 percent of total retail sales in the United States, with 1.5 percent of consumer packaged goods (CPG) spending done on the Web.
In the future, your children will likely conduct the majority of their shopping online. While online shopping accounts for a modest percentage of today’s sales, it’s growing rapidly -- Nielsen estimates that online CPG sales alone increased 25 percent to 30 precent between 2004 and 2008. And there are compelling reasons to believe that growth will continue, as overall online sales are projected to increase almost 200 percent between 2008 and 2012.
Shopping Evolution Centers on Convenience, Choice and Value
Shopping has evolved along three dimensions, with each new phase increasing consumer convenience, choice and value -- the three main reasons consumers shop online today. Online shopping redefines convenience and choice and equips consumers with unprecedented way to seek value.
Convenience: Online is a simpler, faster, more hassle-free way to shop for frequently purchased products
Choice: Online offers more variety, which services like Peapod’s “endless aisles” clearly demonstrate
Value: While value isn’t the primary reason most consumers shop for “everyday” products online today, it will become increasingly important as e-commerce becomes more mainstream. Tools to rapidly compare product prices already exist and online coupon sites have become the rage in the down economy
Smaller, Niche Retailers Can Reap the Benefits of an Online Presence
Whether searching for solutions to a specific need, directly accessing retailer Web sites or deciding to click on an advertisement or link, consumers have far more control over what they are or aren’t exposed to online than offline. This offers smaller brands the opportunity to generate an online presence that’s effectively larger than their big-brand counterparts are, while serving up compelling messages and undercutting leading-brand prices -- all at the point of purchase.
Take the beauty care category as an example. Boutique retailers with fewer stores and lighter foot traffic than the large offline chains are as readily accessible on the Web as a Walmart or Target, which sometimes don’t carry the leading offline beauty care brands on their Web sites.
What’s interesting to note, though, is that the online commercial challenge for leading consumer brands has less to do with the “long tail” than with the collapse of physical structures that literally help distance leading brands from smaller brands offline. It’s not the number of brands available online that matters, but that there is less separation between them, which levels the playing fields, creating a flatter, broader marketplace for everyday brands.