5 Predictions For The 'Year Of eCommerce'

by Brian Cohen , Danny Silverman , February 6, 2013

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.

commentary, cpg, ecommerce, retail

1 comment about "5 Predictions For The 'Year Of eCommerce'".

Check to receive email when comments are posted.

Mark White from content26, February 6, 2013 at 5:26 p.m.
It's true, Amazon is pushing hard to make a splash with CPGs, and it's true that CPGs are jumping on board the Amazon platform. Our agency's biggest growth is with CPG's looking to build out their entire brand catalog on the Amazon platform. The Amazon product page is (or, until recently, was) one of the most effective ways for a brand to extend its online/ecommerce awareness. However, Amazon is pushing their weight around on how companies can use the platform to brand themselves and merchandise their products, and all companies, including CPGs, should consider the issues carefully before jumping on the Amazon platform.
Case in point: In many departments, Amazon is now taking their content creation (enhanced "A+" pages) in house, and charging slotting fees of up to $2,500 for that content. Companies should think thrice before allowing Amazon to do this, for several reasons:
1. When Amazon creates the content, they own it. Brand no longer has rights to that content. They own the images, they own the written content.
2. Amazon does not offer brand any review/approval process for the content creation, which should be reason enough for any company that cares about their marketing, or who has legal or regulatory issues to contend with, to pull back.
3. To date, Amazon has not delivered on deadlines with brands. You will be severely challenged to control the timing of your marketing campaigns or product releases if you rely on Amazon content creation as part of that process.
4. Amazon controls the co-op/marketing of your competitors. Can you be assured that the value you get from Amazon's content process is of equal value to your competitors, even if your competition has a higher co-op spend, or is giving Amazon more points?
5. Amazon has it's own brand: Amazon Basics. Enough said.
In full disclosure, we work with many large CPGs and hundreds of brands across several verticals for their online product content, so Amazon's move does affect our ability to do business with our clients. However, the negative effect on marketing budgets and plans that these Amazon changes are having on many CPGs is significant, regardless of who builds the content.
CPGs will determine if Amazon product page real estate is worth $2,500, and the price will adjust over time.
But in the meantime, anyone doing business on Amazon should be fully aware of the consequences of having a retailer take full control of your brand messaging. If nothing else, ask the right questions and get the answers you want before jumping on board with your brand.
Reply