Selling CPG Online: Direct to Consumer


Selling CPG online is no longer a strategic question. It is a core necessity for your business to thrive.

When 70% of sales growth for CPG products comes from online channels, you just cannot ignore the opportunity to pivot towards becoming a direct-to-consumer (DTC) brand. For CPG brands, food categories, retail, and just about everything else, online sales have been challenging traditional business models. New consumer brands are increasingly becoming digitally native. It is no longer a question about whether traditional retail, grocery, or brick and mortar sales are enough. Shopping experiences have changed. Consumer expectations had adjusted to expect a 'digital everything' world. In fact, not having your consumer packaged goods product categories online may erode your brand loyalty. Selling CPG online is no longer a strategic question. It is a core necessity for your business to thrive.

More than just Marketing Strategy

Consider that selling CPG online direct-to-consumer (DTC) adds shipping and advertising costs. You may even have to consider how to pivot your social media to serve the dual role of promoting your brand for in-store sales, as well as promoting your own online branded store. Despite the additional costs, remember that you will not have to incur the discounts offered to distributors, grocery chains, or retailers. In this regard, it is a balancing act.

In response to excessive demand, numerous consumer-goods companies are actively accelerating their e-commerce businesses. Naturally, the pandemic put all these plans into fast-forward mode, and rightfully so. As an example, a mid-2021 McKinsey study showed that US online CPG penetration grew 35% above pre-COVID levels. Selling products online has never been a higher priority.

Getting Online Fast

Without a doubt, your company has been considering selling CPG online for some time. Many CPG companies have been hesitant. It takes time, and expertise to get a direct-to-consumer play to work out. That's where technology partners come into play. Based on highly robust systems like the Salesforce Commerce Cloud platform, products like Quick Start D2C and Smart Order Refill (popular for CPG subscription services) are ideal to help start selling CPG online, fast. As an example, Quick Start D2C can help a consumer packaged goods company start selling online within 4 weeks flat! Imagine that 4 weeks after your CEO asks you to start the direct-to-consumer ecommerce initiative, you came back with a fully implemented and operating system! Imagine the positive surprise...and what that could do for your career.

Success Factors

What can we learn from other consumer goods companies that have been successful with their online techniques? Three success factors jump out:

First, CPG players who have done well online have been strict with their fund reallocations. They have been nimble about shifting resources from brand budgets to pay-to-play, physical (brick-and-mortar), and other such investments. Success here requires a strong stomach and openness to quick changes. These companies focus on measuring and reacting to pay-for-performance retail as rapidly as possible.

Second, consider the importance of understanding your marketing and sales attribution. In other words, which marketing channels and sources are creating awareness and interest that convert into the most sales? Closely monitoring and increasing the effectiveness of your attribution capabilities can make a huge impact on your sales generation—and bottom line. For this, consider advanced marketing analytics that enable your company to gain a more accurate picture of the return on your e-commerce marketing investments. This is critical to your performance and profitability. In this regard, consider solid marketing tools like Salesforce Marketing Cloud, and the hottest new option, CDP (customer data platform). CDP specifically brings all your customer data into one single place for thorough analysis, and gives you dynamic personalization of your approach to consumers. To learn more about these options, reach out for a pressure-free discussion.

Third, is that companies that are successful in the online marketplace world have a strong revenue growth management [RGM] muscle. In effect, they are much better at determining the optimal product mix and pricing to support omnichannel sales. CPG firms that have figured out RGM are focused on supply chain and marketing investments (see point two above).

Price, Promotion, Assortment…

By no means should this be a surprise to anyone focused on selling CPG online. Selling direct to consumers comes down to getting their attention, then focusing on the right price, promotion, and assortment.

First, begin with data (the CDP tool mentioned above helps tremendously) and ensure it can be transformed into analytics. It is critically important to get true transparency into pricing online as your first step. In fact, running a direct-to-consumer model with your online sales helps give you direct, hard data in this realm.

Second, get an understanding of the online shopper. Where does she shop? When shopping at a particular site, online marketplace, or your ecommerce store; what is she browsing when she stops, and why does she stop there? Is she attracted to the promotional appeal? Is it the assortment and mix of goods that bring up ideas for her? How sensitive is she to price changes? It appears that too many assumptions, rather than facts, are being used to inform decision-making in many cases. Again, a clear opportunity for tools like CDP, which brings all this rich data into one place, for deeper and thorough analysis.

Ecommerce in CPG: Here to Stay

According to a McKinsey analysis in 2019, ecommerce use among shoppers hovered around 4% of grocery sales in North America. At that time, although it was a growing channel, it was certainly considered a niche one, at best. Then the world changed. By spring 2020, ecommerce penetration catapulted to 10%-15% of grocery sales. McKinsey reported that in high-density urban centers, online sales penetration of CPG and grocery-oriented goods exceeded 20% (McKinsey, Oct 2021). Customer satisfaction has been high, with consumers expressing satisfaction with both the click and collect and delivery experiences given by grocers and CPG providers. In all categories, customers express a sustained preference for buying online. Consider that it is the 'way' of the modern millennial, and even more of Generation Z, coming up on their heels. This shift is taking place even in traditionally difficult-to-crack industries, like fresh meat and produce. In both of these categories, there has been a 5% gain in sales compared to pre-pandemic levels.

With this rise in ecommerce use, this channel has become comfortable for most consumers. Beyond that, with over two years of intermittent lockdowns and periods of isolation, this norm has become a habit. And now that the world has turned digital, there is no looking back. Selling CPG online is the future growth direction.

Don’t Get Obsessed with Granularity

Don't get too caught up in the math of estimating the incrementality of selling over the internet. Every good executive is going to want to run their own analysis. Set up their expectations, and forecast. Yet, when it comes to CPG executives, we often see an intense focus on gaining a detailed grasp of the incremental potential of e-commerce in their respective categories.

As a broad swatch, what we do know is that selling CPG online absolutely brings incremental sales opportunities for the majority of consumer packaged goods categories. Rather than becoming bogged down in analysis paralysis, focus on gaining traction and momentum. Get your direct-to-consumer project started, even if it is small or incremental experiment. Regardless of your approach, CPG firms must move—and move quickly.

Tanya Sivaeva, CPG expert and Partner at McKinsey surmises that, “from our survey, we know that the (CPG) laggards are still debating where ecommerce should sit in their organization, while the winners are reimagining supply chain, marketing, and customer experience. So, my advice would be to stop planning for perfection. Move in an agile fashion and learn as you go. That is the only way to victory.”

Charles Dimov

Author: Charles Dimov, VP of Product Solutions

Charles brings more than 20 years of experience in marketing, sales, product development, and management. With depth and breadth in varied markets, he drives the right go-to-market and demand generation strategies for OSF’s core products. A lifelong learner, he graduated from the University of Waterloo with degrees in management, business economics, and engineering. Charles also holds several certifications in leadership and marketing.