The COVID-19 pandemic shocked the world into realizing two things. First, how important a robust and stable supply chain system is, for the entire world. Second, the crucial importance of the consumer packaged goods (CPG) industry to all of us. Specifically, CPG manufacturers play a pivotal role in our lives. This was seldom thought pre-pandemic. Whether from social media, the news, or other sources, there is a new appreciation for the industry.
Pre-crisis, CPG, grocery, quick-serve restaurants, and most of the retail world were gradually moving to online sales and order taking. During the crisis, there was a mad scramble to set up online channels. Online grocery stores became a 'thing'. Online shoppers began ordering food and beverages, pet food, cosmetics, and many other goods online. CPG brands have become prominent on the digital shelf of online retailers. But what is the next step for CPG in e-commerce? Are CPG categories relegated to grocery e-commerce sites only? Has shopping behavior changed permanently, or will there be a return to physical commerce sales? What are the next steps in the industry for which you need to prepare?
What is the next normal?
McKinsey Consulting in 2021 highlighted three post-pandemic consumer trends that will impact CPG and become the new norm:
- Greater attention to wellness & hygiene
- Nesting at home (as the new ‘going out’)
- E-commerce shift in buying behavior
The first trend is not at all a surprise. After the self-isolations, masking, mass use of hand sanitizer, and continual hand washing, people are now more conscious of and in the habit of considering wellness and hygiene. This isn't just important to that respective portion of the CPG market. Wellness and hygiene will grow into other retail goods markets. Don't be surprised to see more clothing and travel goods advertising their germ-resistant features.
Although 'nesting' isn't new, consumer research points toward its' growth as a new cultural phenomenon. Nesting is the overpowering feeling that some expecting mothers have, to prepare their home for their new baby. A broader sweep from this is that more consumers will clean, decorate, and take greater care of their home environments, and stay home for entertainment—more than in the pre-COVID era. With more in-home hosting taking place, there is a greater opportunity for the CPG industry to focus attention on how their goods support event hosting and in-home intimate gatherings. The opportunity is to keep this in mind with new offerings, the focus of product pages, and goods development.
Finally, regarding the e-commerce shift: during the pandemic, restaurant closings accounted for 10-20% of the growth in grocery markets in Western countries,. This online spending rate on grocery goods will drop but will remain several percentage points higher than the pre-pandemic market share. As such, grocers need to continue driving a greater online selling agenda. Moving forward, CPG companies will be expected to support these efforts even more.
What is a CPG to do?
First, don’t wait for your partners and grocery chains to ask you for participation in their online store or marketplace. This has probably already been happening. But if not, be proactive about it. Reach out to them to start these discussions if you are not already doing so.
Transforming your company to include digital isn’t without challenges. Be prepared to need your marketing and merchandising teams even more in the digital realm. These teams need to power up on creating digital assets and content to support your goods and brand. Agencies and outsourced service providers can help CPG companies getting into this side of the business Whether you try to start real-time, direct to customer sales or sell online through your partners' marketplaces, CPG in e-commerce is definitely the future of the industry.
Direct to Consumer
As you step deeper into the digital realm, consider the option of directly transacting with your fans, advocates, and consumers. It is great to build a solid partner relationship with various grocery chains and retail stores for distribution of your products into physical stores and in their online channels. But sometimes your group of partners has excellent reach into one territory or region, but not others. That's where your own online presence can become a saving grace—helping your brand extend its reach into new market regions.
After spending time in the market to grow your brand, you have an opportunity to create direct relationships with buying consumers. An evolution for CPG in e-commerce is exactly that. Building a direct e-commerce engine to generate and grow direct relationships with your fans, advocates, and buyers. As a plus, this allows your business to extend the brand to the full online world, outside of the direct reaches of your partnerships. That means capturing additional sales that you would not otherwise be able to lock in.
If your organization is considering this option and has not delved into the online sales world yet, then consider a Quick Start option. These solutions are pre-packaged, industry-specific products that are deployed on a Salesforce Commerce Cloud foundation. Our example OSF Digital solution is Quick Start D2C. In this case, this package gets a CPG client into the online market in two weeks flat! Best of all, support for running the system for three months is included. That gives your staff enough time to learn about CPG in e-commerce, what the techniques are, how to run the system, and what to do in different scenarios.
Imagine telling your CEO 2 weeks after they green-light your e-commerce business, that you already have it up, operating, and selling orders!
A CPG Marketplace
Let's push this concept of CPG in e-commerce even further, and talk about marketplaces. If your brand already has an online commerce site running on a Salesforce system, where can you go from here? Think now about extending your brand and leveraging your growing customer base. At this point, consider a marketplace to offer your customers goods that complement your own.
A branded marketplace by a cheese manufacturer might offer goods from partners, such as cutting boards, cheese cutting knives, specialty dinnerware, fondue goods, and other foods that complement your cheeses. Customers often gravitate to a brand, wanting and expecting that the brand will recommend complementary goods that work well with the core brand's offering. Best of all, your organization increases your overall sales, grows your profits, and takes on no additional inventory or returns risks: win—win—win.
If that catches your interest, consider another OSF Digital offering called Tealkart Marketplace.
CPG in E-commerce Play
All told, CPG's presence in e-commerce is here to stay. Now that consumers have experienced the ease and convenience of digital shopping and ordering, the world simply is not going back to pre-pandemic experiences. Whether it is for hygienic products or items for entertaining guests in-home, today's consumers expect CPG products to be just as easy to find and purchase online as in a physical store. CPG in e-commerce? The future is now.
