According to the results of the recent 1010data study of selected categories in the Consumer Packaged Goods (CPG) market, by A Mendes and J Millot, when compared to the first half of 2015, CPG online sales grew 42% across key categories in the first half of 2016. If present trends continue, 1010data estimates that online sales in the U.S. will surpass $10 billion for these categories for the first time in history.
An interest in how traditional CPG companies are coming to terms with new online competitors, as well as to examine how legacy manufacturers of consumer goods were faring in terms of in-store versus online sales, precipitated this study. Overall, the 1010data Market Insights report points to a significant shift towards online shopping, from $5 billion in 2014 to $7 billion in 2015 and to this year’s projected $10 billion in e-commerce revenue for the CPG sector. The study further shows that consumers’ in-store spending is flat and nearly all of the modest 4% annual growth in consumer spending is happening from growth in e-commerce.
These results illustrate the significant overall shift towards online shopping. Each year, online sales’ contribution to total retail sales is growing. What’s interesting, says the report, is that consumers aren’t spending less in stores, but rather that they are spending more dollars online. This suggests that the best opportunity for growth for the manufacturers and retailers of CPG is a strong online presence, says the report.
Category performance for the first half of 2016 demonstrates the power of the online market. So far, the Health Supplements and Pet Care categories greatly exceed the size of any other CPG categories. The Health Supplements category has already passed $1B in sales and Pet Care is over $700 Million. Pet Care is the fastest growing category among categories with at least $200M in annual online sales, notes the report. However, Laundry & Dish is the fastest growing category overall. Though a smaller category (approximately $40M), it’s not surprising that it is growing faster than large categories like Health Supplements. The introduction of Amazon Dash Buttons last year has helped propel some of the growth in this category.
Analyzing individual brands’ sales and growth gives us insight into where traditional CPGs are winning or losing online, says the report. Optimum Nutrition, the leading protein supplement maker, is leading in sales for a single brand so far in 2016. Half of the top 20 best selling brands are Pet Care, with Blue Buffalo leading among pet suppliers. Not only are Pet Care and Health Supplements brands leading online sales, but they are also growing the fastest.
Studying the CPG performance, the study finds that that less than 10% of most manufacturer’s revenue comes from online sales, while in the entire retail market that figure is about 20%. For new players in the CPG space, e-commerce represents an opportunity to achieve massive growth without the high up-front costs that many traditional CPG companies have incurred in marketing, distribution, and product visibility at brick and mortar stores. In many cases, brick and mortar sales are declining while minimal total sales growth is being propped up by rapid e-commerce growth.
After understanding the landscape, who’s winning, size of market, and the most important merchants, CPGs need to get a sense of how consumers shop online, what levers a brand has to increase sales, and where is best to allocate marketing and product resources, says the report.
Determining where their biggest pain points exist in the online path-to-purchase, similar to findings in the study, provides marketers with the ability to prioritize their product assortment and media allocation based on product views versus conversion rates, concludes the report,
For the purpose of this study, the focus was on key CPG categories, including Health Supplements, Pet Care, Facial Care, Cosmetics, Drinks, Baby, Hair Care, Health OTC, Oral Care, Cleaners, Shaving, Hand Body, Laundry & Dish, and Sun Care.
To sign on for the complete report, please visit 1010DATA here.