CPG/FMCG or consumer packaged goods, saw a rapid growth in sales between 2013-2018—almost 20 percent per year as compared to the marginal 1 percent growth rate of brick and mortar store sales. In fact, e-commerce now makes up 40 percent of CPG/FMCG retail sales growth. There are, however, issues that have slowed the online CPG/FMCG growth. One of those issues is that many large CPG/FMCG companies have failed to switch to e-commerce, causing weaker performances in the online arena.
In the brick and mortar world, a high percentage of CPG/FMCG sales are unplanned (like impulse aisles at the grocery store checkout). In fact, half of all confectionery purchases are unplanned. Impulse or unplanned purchases are much less likely to happen in e-commerce, therefore a dramatic shift in gears must be made by these companies. Your CPG/FMCG business likely has many tasks to complete in order to compete in the e-commerce world. There are a number of things you must understand, most notably, the highly diverse retail environments that now exist in e-commerce. Once you understand these retail environments, strategies must be developed to compete in this new e-commerce world.
The rate in which online browsers are converted into actual buyers is best achieved by a laser focus on driving traffic to CPG/FMCG products. There must be a maximization of the availability of CPG/FMCG products via an online supply chain that is both reliable and robust. Finally, your organization must have a culture of experimentation, as well as the analytical capabilities required for success. The fact is, as CPG/FMCG online sales accelerate, it will become increasingly expensive to catch up, and companies that fail to recognize the urgency of the situation could well see a drop in sales growth, diminished brand recognition, and an erosion of market shares.
What are the Challenges for CPG/FMCGCompanies?
Significant resources have not been devoted to e-commerce by CPG/FMCG companies for a variety of reasons. First, online sales in CPG/FMCG simply have not taken off in the same way as books, fashion items, and electronics have. While sales vary somewhat according to the product in CPG/FMCG sales, in the overall e-commerce realm, CPG/FMCG only accounts for about 10 percent. Many CPG/FMCG companies have also been faced with cutting costs due to slow growth for the industry in general. This means that CPG/FMCG businesses have not had the financial flexibility to devote major resources to e-commerce since they have not even had the financial resources to devote to brick and mortar sales.
While some CPG/FMCG companies have certainly made investments in e-commerce, most continue to lag, perhaps largely because many of these companies made investments in e-commerce, but those investments were insufficient to meet today’s challenges. Consider the following fact—Hershey’s chocolate is the top brand in the brick and mortar retail world, with about 12.6 percent of the market share. Yet on Amazon, the top chocolate brand is ChocZero—a brand that holds less than 0.5 percent of the market in brick and mortar sales.
Strategies for CPG/FMCGCompanies Who Want to Venture into the E-Commerce World
The entire e-commerce strategy for many companies centers around one thing—selling on Amazon. While Amazon is certainly an industry leader (with 44 percent of all e-commerce sales in 2017), there are many other e-commerce sites that are important for CPG/FMCG companies. This means CPG/FMCG companies must develop strategies for competing across the entire channel, which, in turn, means that CPG/FMCG companies must understand the specific characteristics of retail environments. This might include stocking up on bulk items; while the assortments might be more limited, the pack sizes are larger and there is a greater discount for volume buying. Further, larger sizes can encourage stock-up behavior, pushing transactions up to $10-$15. This is the point at which shipping economics improves for any given item.
CPG/FMCG might also cater to those consumers looking for items that are difficult to find, gifts, or impulse purchases. Variety might also be something CPG/FMCG businesses should focus on; in the realm of online offerings, less might not necessarily be more, because consumers are increasingly used to having a very broad offering of products and choices. As with any industry, it is essential that traffic is driven to the website and that consumers be strongly encouraged to make a purchase. Once you have the traffic, you must be able to “hook” consumers, get them to complete the purchase online, then, ideally, create such a level of brand loyalty that your customers come back again and again.
How Can ORBA Help Your CPG/FMCGBusiness Get into E-Commerce?
ORBA has vast experience in implementing e-commerce solutions, as well as a strong business background to benefit your e-commerce business. We have a team of experts who stand behind the success of the e-commerce stores belonging to industry and market leaders. We approach every project comprehensively, guaranteeing extensive support, and providing every client with the necessary tools for constant business development. Contact ORBA today for everything you need for your e-commerce needs.
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