5 Predictions For The 'Year Of eCommerce'
Nearly all CPG marketers have been faced with the same business challenge in recent years: How to plan for the evolving eCommerce landscape.
- "It’s a small percentage of my sales"
- "Our organization is not equipped"
- "I don’t know the size of the opportunity or the appropriate investment"
If this sounds familiar, take comfort in one simple truth: you’re not alone. Save for a few industry leaders, marketing through eTailers such as Amazon.com and Walmart.com has been viewed as a nuisance -- a necessary evil with sales too low to justify dedicated resources or head count. So eCommerce gets buried in a "specialty" sales group, and forgotten.
But CPG continues to be the fastest-growing segment within eCommerce, and retailers are starting to invest. Peapod continues to grow annually; Walmart has aggressive global eCommerce goals, and Amazon is adjusting to focus on everyday essentials. Amazon.com in particular is driving more change than any other. To quote Morgan Stanley: “Amazon is expected to report revenues of $49 billion (U.S.) this year (2012), an eye-popping 43% year-over-year increase that beats Walmart’s memorable 1991 performance.”
The stage is set, and the indicators are clear. 2013 is the year that CPG marketers will begin to take eCommerce seriously. As a result, we predict a shift in the following areas.
1. Amazon.com will be in the shopper marketing conversation
A CPG brand’s Top Five accounts typically start with Walmart, Target, and Kroger, with the final two spots reserved for a combination grocery, drug or club banners. This is the reason that CPG eCommerce has been a sales-focused task to-date. Amazon is about to change that… and it’s not about sales. As shopper pre-planning continues to rise, the industry is realizing the importance of Amazon. A recent study indicated that 30% of all product searches online start on Amazon (not Google!). Price comparisons and brand varieties, are searched on Amazon to help aid -- and sometimes guide -- a shopping trip. And don’t think Amazon isn’t aware. If you don’t know what A+ Detail Pages, Amazon Posts or Amazon Pages are, you will.
2. Affordable same-day delivery will propel shopper participation
Fast and free delivery has become the cost of doing business online.
With online shopping achieving scale, and the technology to coordinate highly sophisticated logistics a reality, same-delivery is rapidly expanding. A recent study indicated that shipping costs/time as the biggest roadblock to participation. Not surprisingly, free shipping is the greatest incentive.
The impact on CPG will be significant. Imagine a dual-income family with a legitimate same-day grocery option in their pockets, effectively solving their 4:00 dinner dilemma from the boardroom.
3. Resource reallocations will be made in a race to be “first”
We will begin to see dedicated head count beyond sales expand into marketing activation and innovation. To quote the head of global eCommerce at a major CPG company: “We need to be there because that’s where shoppers are. We don’t view eCommerce as incremental or cannibalistic. It as being available where shoppers shop.”
What’s upon us today is opportunity -- to forge the right relationships with eTailers, to help define categories, and to influence the conversation at the new point-of-purchase.
4. Price matching will create new pressure on manufacturers
Target’s announcement that it will price match Walmart.com and Amazon.com reveals just how large the showrooming issue has become. This trend will accelerate, as retailers will resort to price-based tactics to remain competitive.
As a result, manufacturers will receive pressure to better regulate their pricing across the retail landscape, and we expect marketplace management and price disruption/protection programs to be a key focus this year.
5. The FDA and other governing bodies will begin to regulate
Grocery/HBA products are widely available at deep discounts online. Unfortunately, many of these products are stolen, damaged, expired, counterfeit, etc. A recent audit for a major CPG product revealed that over 70% was unfit for retail sale. Unfortunately, with almost no regulation, the brand is left to police this alone.
We predict that a governing authority will take action.
CPGs are realizing that eCommerce is no longer something to be dealt with in the future. If they don’t act now, they will be left playing catch-up.