• by Ali Nehme , Op-Ed Contributor, September 15, 2020

As we approach the end of the year, the impact of COVID-19 continues to reshape social structure and the global economy, all while accelerating consumers’ reliance on ecommerce.

According to eMarketer, the top five markets are expected to reach $3.9 trillion across retail ecommerce by the end of 2020. For perspective, that’s greater than the UK’s GDP and represents only a 3.2% share increase of total retail sales from last year. Mostly driven by the U.S., but fueled by global consumer acceleration, the ecommerce channel has achieved its projected three-year goals in only a few months.

The retail world has changed, and it’s never going to be the same.

Nimble, consumer-focused D2C brands backed by deep VC pockets have risen to meet the accelerated demands, forcing larger brands to try to compensate for slow ecommerce growth, but major consumer product manufacturers are not taking this seismic shift laying down. Ecommerce is a top priority for the CEO agenda across all industries.

In the CPG category, we see average overall sales stagnation or decline during H1 2020 with ecommerce growth up by 50%. Unilever recently announced a 49% ecommerce growth in H1 versus a sales decline of 0.1%.

It’s not a story of new market growth, it’s a factor of consumer need, which is turning into consumer demand. This major shift has caused manufacturers to rethink how they can approach what has become their only growing sales channel.

Three questions are key to ensuring companies are ready for tomorrow.

How can I maximize my sales with eRetailers and marketplaces while fighting back margin pressure?

According to Euromonitor, more than 95% of CPG online sales occur on an eRetailer site because consumers are attracted to the diversity of products available and they continue to ask for more – more value for money and personalized experiences.

To capture consumer volume, eRetailers are improving their user experience and lowering product pricing. This, in turn, ultimately places the pressure of securing profitable margins back on their manufacturer – something that was not part of the linear brick and mortar retail world where price promotion equates to higher volume and in most cases, access to more shelf space.

The revenue model that manufacturers had built their business around now has more value pressures than before and they occur in real-time, across 100+ variables, and on top of the commercial deal, making it harder for manufacturers to control their own path to growth.

CPG brands must bet on partners that are going to bring them the highest volumes while extracting additional value. This doesn’t mean that you can’t test and learn across smaller partners, but rapid growth, taken at scale is critical to not only show organizational progress, but also to exceed growth trajectories.

What is the role of D2C in my channel strategy?

D2C in this category is somehow nascent. In recent years, we’ve seen large manufacturers acquire new digital brands. And why not? There is a lot that CPG giants can learn from the fast and nimble D2C brands, and there is a great collaboration story around increased profitability. But most importantly, who doesn’t want to stop a growing brand – a brand built for the agile future – from becoming a threat when they scale as significant competition? Nobody wants to look back on their own story and realize that in the retelling they have become Yahoo when Yahoo had the option to buy Google.

Channel conflict is something every CPG brand needs to be comfortable with. Remember, Unilever’s massive growth against declined sales? It’s not a story of new consumers, it’s a story of new channels, conflicting channels, compounded by the addition of D2C.

With growing business pressure, it’s imperative for manufacturers to start planning an overarching ecommerce strategy where eRetailers and the D2C experience coexist. D2C can become a major sales channel for CPG brands and bring a new view into consumer insights and sales intelligence.

It’s an end-to-end testing ground for innovative experiences and yes, a major sales channel. It all depends on the appetite for investment, brand potential, and consumer behavior in your category.

Bottom line: it’s never been a more important time to explore D2C. Keep in mind, sales will not shift on Day 1, but gaining consumer insights and slowly divesting from the pressures of indirect channels is a necessary move to win our new retail playing field.

How do I structure to win and grow exponentially?

Vision sometimes stays on slides. Every industry has seen brilliance die before it’s actioned. This is usually due to the lack of connection between the vision and the operational plan required to bring it to life.

Shifting a complex multi-market, multi-brand business is never an easy task and with this, the playing field has less initial control and can become daunting. Ecommerce today spans multiple units: sales, marketing, digital commerce and IT to name a few. Manufacturers have tried multiple variations to get to the optimal structure, but it’s difficult given the heritage of corporate silos.

Ecommerce is the future (and present) of CPG players and the key to success is fluidity. A fluid structure with forced cooperation confirming that every unit is able to deliver on its KPIs ensures the success of the rest. The line between trade and marketing blurs so it’s crucial for each organization to set the groundwork for cooperation in order for the vision to make it off the slides.

A bold, comprehensive vision is needed to drive each organization towards one common goal and structure must force a focus on collaboration and investment across the right areas to drive growth.

COVID-19 heavily accelerated ecommerce growth in literally every market. The post COVID-19 world will continue to put pressure on CPG players to meet consumer expectations and win in a new digital world. eRetailers will continue to invest to drive their customer base, D2C on the other hand will become more and more crowded.

To survive this new world, set a bold vision, understand where growth is coming from and then make sure you have the right organization, resources and most importantly focus to achieve that goal.