Despite clear consumer preferences and major digital disruption in other industries, well-established CPG companies have been slow to embrace e-commerce. Technology innovations that make online CPG shopping convenient and viable, such as Amazon Fresh and Prime Pantry, Peapod and Instacart, are emerging to meet digital consumer demand. The CPG industry is fast approaching a digital tipping point that represents a huge opportunity for early movers and a real threat for those that do not move.
CPGs can no longer afford to ignore e-commerce
The majority of CPG brands have been slow to implement e-commerce strategies for many reasons. Most importantly is the inherent channel conflict that exists between well-established traditional retail relationships and e-commerce relationships that tend to be direct to consumer or with Amazon.com. Large CPGs are also built to support the traditional retail channel and not equipped to support the online channel. AdAge accentuates this point, saying, “No longer is it about promotional spending and free-standing inserts; the e-marketer operates in a world where search is the new shelf space and the online retailer controls the consumer relationship.” Smaller brands, which have typically been priced out of obtaining physical shelf space, are leveraging their nimbleness and tech savviness to gobble up virtual shelf space and gain market share against the larger, established CPG brands.
In 2018, online sales of CPG products will skyrocket to $35 billion, up from $8 billion in 2013, according to a report from the Grocery Manufacturers Association. The report states, “Digital’s current 1% penetration of the U.S. CPG market will likely expand to 5% by 2018 and could accelerate to as much as 10% soon thereafter.” Said another way, digital will account for nearly one-half of CPG growth over the next five years.
The digital stakes are high for CPG companies and they would be wise to place their bets on online HIspanics.
U.S. Hispanics are ideal targets for e-commerce
Much has been published in this column validating the fact that U.S. Hispanics are extremely active online and over-index the general market when it comes to mobile and social media. This passion for all things digital translates directly into online shopping. U.S. Hispanics are more likely to buy online across product categories including consumer packaged goods. In 2013, Experian Marketing Services found that:
A recent Univision study, “The Why Behind the Buy,” found that 50% of Hispanics (and 60% of millennial Hispanics) have bought a grocery item online in the past year vs. 40% of U.S. market. The study also found that Hispanics have a thirst for new products that can be quenched online at the click of a mouse. The following data illustrate the importance of new product to Hispanics vs. the general market across CPG categories:
Recent data from Nielsen further illuminate a clear opportunity for personal care brands to target Hispanic men and women online, as they are driving sales in this category and we expect more and more of these sales to move online.
For CPG brands debating what move to make when it comes to e-commerce, we think the right move is with U.S. Hispanics.