Navigating the Digital Commerce Revolution: Opportunities and Strategies for CPGs

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The Consumer Packaged Goods (CPG) industry is currently witnessing the largest channel proliferation and a seismic shift in consumer-manufacturer relationships. This change is driven by the digital revolution that's redefining commerce. This presents a pivotal opportunity for CPGs to re-evaluate their roles and harness the potential of digital commerce for transformative growth.

Based on Insider Intelligence data, in 2022, nearly 10% of grocery sales in the US were conducted via eCommerce, as per our projections. However, a significant disparity exists within this category. For instance, pet products have achieved a substantial 36.0% eCommerce penetration, whereas food and beverage lag behind.

Even though the rate of eCommerce adoption for food and beverages isn't as high as other retail sectors, its growth remains robust. However, for #CPG categories, the extent of #eCommerce penetration is largely determined by the efficiency of last-mile delivery. These are indispensable products that consumers expect to receive promptly and without any additional shipping charges.

The Challenges and Trends in Digital Commerce for CPGs

1. Increasing complexity: The increasing number of channels and touchpoints are creating a complex landscape for businesses to navigate. From online marketplaces and social commerce to direct-to-consumer platforms and brick-and-mortar stores, CPGs must juggle multiple channels effectively.
2. Evolving consumer behavior: Consumers are seamlessly moving across digital and physical touchpoints, demanding a unified shopping experience. This necessitates a deep understanding of the omnichannel consumer journey.
3. Increased competition: The lower barriers to entry in digital commerce have led to increased competition, with new players entering the market frequently.

Opportunities for the C-Suite, especially for CMOs, CDOs, and CIOs

CMOs and their teams can only produce and deploy hyper-personalized content and offerings by utilizing a deeper understanding of customer needs and segmentation -- by collaborating with their internal data leaders, CIOs, and CDOs.

Especially CMOs and CDOs can drive significant change by focusing on areas like:

1. Data-driven insights: Leveraging data analytics to understand consumer behavior and inform strategic decisions.
2. Brand experience: Crafting a seamless and consistent brand experience across all channels.
3. Personalization: Utilizing AI and machine learning to deliver personalized experiences and products to consumers.
4. Social commerce: Leveraging the power of social media platforms to reach consumers directly and drive online sales.

Areas of Focus for High ROI

The C-suite should focus on:

1. Investment in technology: To remain competitive and cater to the dynamic market, companies must invest in technologies that enhance their ability to understand, reach, and serve consumers.
2. Customer-Centricity: An in-depth understanding of customer needs and behaviors can inform effective strategies for engagement and retention.
3. Agility: The ability to respond to market changes rapidly can help companies seize emerging opportunities and mitigate risks.
4. Sustainability: More consumers are prioritizing brands that demonstrate a commitment to environmental and social responsibility. This presents an opportunity to build brand loyalty and drive sales.

What does all this mean to C-suite?

Here are some questions C-suite can ask. Remember, these questions serve as a guide. The specific answers will depend on the company's unique circumstances and market conditions.

CEO/COO

• "What capabilities do we need to drive profitable growth?"

This would include developing a strong digital infrastructure, a keen understanding of customer behavior, and agile operation capabilities to respond rapidly to changes.

• "How do we raise our digital commerce IQ and acquire and retain talent?"

Upskilling current staff, hiring digital experts, and maintaining a learning culture are critical. Partnerships with digital platforms or agencies could also be beneficial.

• "How do we become a more data-driven, systematic, and agile organization?"

Investing in the right technologies to gather and analyze data, fostering a culture of agility, and developing systematic processes driven by data insights.

CMO/CDO

• "What percentage of our customers’ shopping is online—and in which channels?"

This requires thorough data analysis and market research to understand customer behaviors and preferences.

• "Are we keeping pace with social commerce trends?"

Monitoring social media and market trends, using social listening tools, and being proactive in adopting emerging social commerce opportunities.

• "Do our operating model and roles support our brands’ online presence?"

Evaluate the current model and roles and realign them to focus on enhancing the online brand presence, if necessary.

CSO

• "Which channels/partners should we prioritize by the market?"

Analyzing market trends and customer behavior to identify the most profitable and promising channels and partners.

• "How do we digitize the fragmented trade route to market for growth + efficiency?"

Identify bottlenecks in the current process and invest in digital solutions to streamline and automate these processes.

• "How do we evolve our RGM (Revenue Growth Management) strategy to support digital commerce?"

It involves revisiting and restructuring the RGM strategy to accommodate the shift to digital commerce, focusing on areas like dynamic pricing, personalized offerings, and more efficient supply chain management.

CIO/CTO

• "How do we design our commerce architecture for growth?"

A commerce architecture that is scalable, flexible, and capable of integrating with various digital platforms and systems would be key.

• "What delivery model supports our brands’ B2C, B2B and B2B2C needs?"

A thorough understanding of the different requirements of B2C, B2B, and B2B2C scenarios is needed to devise a versatile and adaptable delivery model.

• "How do we build our talent strategy using both internal and partner resources?"

This involves identifying the digital skills gaps in the current team and filling them either through training, hiring, or partnering with agencies or platforms.

7 Tactics to Fuel CPG Growth with Digital Commerce Revolution

1. Capitalize on Price Growth through Strategic Planning

Despite the anticipated decrease in CPG volume due to increased consumer mobility and inflation, CPG growth between 1% and 5% had been projected for 2022, primarily due to price increases. Manufacturers and retailers can enhance net price realization by employing advanced analytics for elasticity measurement, novel technologies such as machine learning and automation, and diverse datasets encompassing shopper, consumer, and point-of-sale data. This enables real-time adjustment of price gaps, detailed comprehension of consumer price sensitivity, and targeted promotion implementation.

2. Refine Your Portfolio to Excel in Both In-Home and Out-of-Home Consumption

With flexible work schedules maintaining higher levels of at-home consumption compared to pre-pandemic levels, combined with increased consumer mobility bolstering restaurant #sales , there will be a heightened demand for on-the-go products.

3. Enhance E-Commerce Capabilities for Superior Shopper Experiences

Improving the range of products offered digitally versus in-store, enhancing online delivery speed, and refining the overall customer journey are key areas to focus on. Enhancements in these aspects are expected to sustain e-commerce growth across food and beverage as well as nonedible CPG categories.

4. Capitalize on Impulse Purchases

The return of customers to frequent store visits witnessed by mid-2021 created a fertile ground for impulse purchases. With consumers spending more time in stores and becoming more price-conscious, these impulse purchases could be a crucial #growth factor. Maximize these opportunities through third-party delivery apps and real-time, in-store promotional offers aligned with shopper requirements.

5. Leverage Product Assortment for Growth

Despite rising prices, the demand for premium products will persist. Manufacturers should strive for growth balance in their portfolio across price tiers, encompassing mainstream, value, and private brands. Offering a diverse price/pack architecture can cater to this varying consumer demand.

6. Invest in Tailored Marketing Strategies for Digital Channels

Investing strategically in digital #grocery , direct-to-consumer sales, third-party delivery options, and retail media networks can yield high returns. This can be achieved through strategic audience segmentation and personalized offers.

7. Utilize Insights and Analytics for Rapid Opportunity Identification and Action

Understanding behaviors driving demand in 2022 and meeting them with the right products and services was crucial for 2023 planning. Trends like the shift to suburban living, return to in-person work and school, self-care habits, and a preference for premium indulgences with strong and novel flavors continue to rise. Consumers seek ways to break the pandemic-induced monotony, and innovation in products, delivery/pickup methods, and experiences can help deliver this excitement.

Take care, and smile...

Sources: IRi Omnichannel CPG Report, BCG, Insider Intelligence, Kantar Data, eCommert

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About Mert Damlapinar

Mert Damlapinar has been in director roles for eCommerce, digital marketing, and sales; he's currently the Principal of CPG Digital Commerce Acceleration at EPAM Continuum. He holds a master's degree in Applied Business Analytics from Boston University, executive management degrees in Integrated Digital Marketing from Cornell University, and Applied Data Science and Digital Transformation from Massachusetts Institute of Technology.

He published his second book, Agile Analytics for Startups, in October 2022, and he's currently working on his 3rd book.