Executives with consumer packaged goods (CPG ) companies admit they have underestimated how quickly consumers have become acclimated to purchasing food, household and personal care items online. A recent study by Deloitte found many CPG companies may be missing out on a substantial market opportunity.
The research includes an online shopper survey as well a poll of 43 executives in digital commerce positions at CPG companies and in-depth interviews with selected executives.
Executives expect 35% growth in e-commerce sales in the next year and 76% growth by 2017. Conversely, consumers surveyed expect their online purchases to increase 67% in the next year, ramping up 158% in the next three years.
Research co-author Pat Conroy notes that consumers are becoming more comfortable with ordering consumables online, from diapers to vitamins and pet food. Sometimes it’s bulk pricing that attracts them and other times it’s merely the convenience having those products delivered to the front door.
Data show that CPG companies are not as prepared as they need be to take full advantage of this growing opportunity. The study also found that 92% of CPG execs agree that e-commerce is a strategic sales channel, there is a disconnect between the expressed opinions of the executives and the readiness of their companies to execute. Only 43% of CPG execs think their company has a clear, well-understood digital commerce strategy.
Digital commerce could drive incremental sales for CPG companies, yet there is a disparity between executives and consumers that further suggests the channel may be more significant than executives believe, according to the report.
The CGP execs surveyed said only 2% of the past year’s e-commerce revenue came from brand new sales — those which would not have been made otherwise. Consumers said 10% of the online food and personal goods purchased over the past year were completely new. This finding regarding initial e-commerce purchases is a sign to CPG companies that there is opportunity for them to take market share from competitors and increase consumption.
An advantage for CPG companies is that 41% of consumers have no personal attachment to buying items at a supermarket. With the right incentives, this group could be likely be lured away from traditional retailers, the study notes.
“I purchase CPG products online because I can do it at 3 a.m. when I am thinking about it,” according to one consumer survey respondent.
The biggest factors wooing consumers to purchase food and consumables online is free at-home delivery, competitive pricing, and the option for free in-store pick-up. Another consumer surveyed said, “Most of the products I buy online are only available online, or their availability is not consistent in local stores.”
To gain a competitive advantage, transformative opportunities exist for CPG companies across all areas of possible consumer interaction. Not only do 90% of executives see digital commerce improving brand awareness and driving product initial purchase, but it also has an important role in driving repeat purchases and reconnecting with lapsed consumers.
Conroy notes there are a number of critical steps CPG companies can take to capital of the e-commerce channel. First they need to establish a clear and well-understood digital commerce strategy. He also said it is important to collaborate with retailers on social media platforms to build a single view of the consumer.
Lastly, Conroy said having dedicated talent in the digital area is crucial.