Quick Stats

Quick Stats

    You are here

    Expert Column: The Manufacturer’s Role in Click-and-Mortar Strategies

    Redefining the consumer packaged goods industry

    By Paul Weitzel, Willard Bishop

    Consider this scenario:

    Your competitor just launched a promo offering an aggressive price point for online purchases. And for even greater savings, they offer a super-aggressive price point if the shopper signs up for their “auto-replenish” program. This means no more stocking up or “pantry loading.” The consumer’s purchase cycle is conveniently aligned with his or her consumption cycle. In essence, that consumer has been removed from the marketplace, at least for that given product or category — for a given time frame. To make matters worse, your competitor has now engaged with your target consumer in a digital, one-on-one relationship. Through this relationship, your competitor can transform the shopper from a transactional buyer to a bona fide brand disciple — one that eagerly stimulates new trial through their social media networks. 

    In addition to the loss of market share and the reduced chance of success for new products, there’s a missed opportunity to capture insights. Your competitor, now digitally engaged with your former consumer, extracts new learnings and insights that further improve their competitive position. It’s a cycle of continuous improvement that is driven by data. While data-driven insight is certainly not new to our industry, eCommerce requires new datasets, as well as new mindsets.

    Lessons from the Past

    eCommerce, having redefined a number of industries including travel, books and music, is set to redefine the consumer packaged goods industry. The digitization of consumable purchases has lagged behind the services and durable goods segments; however, eCommerce is rapidly becoming a growth channel. So much so that some CPG manufacturers say that more than 40 percent of their growth has come through digital commerce. While supermarket sales for many manufacturers have been flat, those with an active eCommerce strategy are the beneficiaries of this new-found growth.

    On the other side of the early-adopters are the laggards — companies that are taking a wait-and-see position as eCommerce continues to unfold. eCommerce for consumer goods, which currently accounts for approximately 2 percent of total sales, will grow steadily, with some categories seeing exponential growth. Overall, we expect eCommerce to command 10 percent ACV (all commodity volume) in 10 years or less.  

    Despite its low-base volume, growth (and change) in eCommerce will occur at accelerated rates. I remember discussing Walmart, during its infancy, with CPG manufacturers. As with eCommerce, many manufacturers took a wait-and-see approach to this new format coming out of Northwest Arkansas. And those that were slow to embrace the mass channel, more specifically Walmart, spent years trying to regain market share as their early-adopting competitors leap-frogged their brands. This same story held true, albeit to a lesser degree, as the club, limited assortment and dollar formats emerged. But growth in brick-and-mortar channels/formats takes massive amounts of capital and time. eCommerce presents a much more efficient and timely growth proposition. However, this ease-of-entry will further widen the performance gap between the early adopters and the laggards.

    Engaged or Endangered?

    Today, eCommerce is similar to the wild, wild west — it’s moving fast and the rules have yet to be established. However, make no mistake, eCommerce is impacting every area of consumer goods retailing including shopper behaviors, purchase cycles, new item introductions, assortment, merchandising, pricing, trade spending, store layouts, unsaleables, and many others. Consequently, those with a data-driven eCommerce strategy in place will be positioned to capture market share at the expense of the laggards. And market share is just the tip of the iceberg. Armed with the right mindsets and datasets, astute manufacturers will build brand loyalty through digital engagement. This electronic connectivity will facilitate R&D, and be particularly beneficial for new item introductions, promotion planning, and increasing brand loyalty.

    Chart, Collaborate, and Conquer

    Charting an effective eCommerce strategy will require new levels of collaboration. Manufacturers should become students of emerging and evolving models that address the “last mile” in the shopping cycle. Trading partners must mine data in order to orchestrate a seamless shopping experience, while understanding how click-and-mortar behaviors differ from traditional formats.

    Conquering eCommerce does not mean having all the answers. Conquering, at this stage, means the organization has developed an eCommerce strategy, knowing that the plan must be malleable. It must change as new insights are revealed and as the organization’s capabilities expand.

    It's important to remember that there are 35,000 supermarkets in the country, and most are five miles or less from their customers. This puts local grocers in a unique position for delivering a seamless shopping experience. Manufacturers jointly developing insights-driven strategies will out-perform the laggards and they will be rewarded with short-term growth and long-term brand loyalty. 

    Related Content

    Related Content