How leading CPG brands are increasing market penetration by focusing online

CPG Brands in ecommerce

Online growth is a huge opportunity in retail right now, particularly in the grocery sector. 

 

Already the fastest-growing channel, soaring demand for online groceries outstripped supply during the recent pandemic as home-based consumers flocked online. It has remained high as customers recognise the convenience of online shopping.

For CPG suppliers there has never been a more important time to invest in gaining a deeper understanding of ecommerce. Success in digital retail is about close retailer partnerships and optimising the basics of areas such as availability, search, promotions, reviews and content accuracy. Success is often about incremental gains in each of these areas.

 

More than $2 trillion growth potential by 2025

 

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Although ecommerce represents a bigger opportunity than any store based channel, investment made into the channel often does not match its potential for growth. Our Edge analysts forecast that global online sales will almost double to reach a staggering USD4.7trn by 2025.

That represents a growth opportunity of USD2.08trn in ecommerce sales globally over the next five years - more than the growth in all other store channels combined. 

In order to succeed online, brands need to partner closely with retailers to really understand how the channel works. Performances online do not necessarily mirror the offline environment. Sometimes smaller brands can find a niche to succeed online, meanwhile larger brands must ensure that they engage fully in the channel, set goals and measure success.

 

Leading brand manufacturers are investing to accelerate growth

 

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To make the most of the growth forecast to come within this fast-moving channel, brands must ensure that they plan ahead. A successful ecommerce strategy requires coordination, focus and investment across functions, including sales, marketing, product development and supply chain. 

Crucially this buy-in and investment needs to come from the top of the organisation and filter all the way through, becoming a collaborative effort for the entire organisation rather than a stovepipe.

The world’s leading CPG organisations already recognise this and have been investing heavily into the channel. P&G grew ecommerce organic sales by 40% in 2020 and the channel is the fastest-growing part of its business, accounting for more than 10% of total group sales. 

Jon Moeller, COO and CFO of Procter & Gamble, explained that as a result of its increased focus P&G’s market share is now “slightly higher in ecommerce” than in bricks and mortar stores, with margins “similar across the two channels”. 

Likewise, Nestle has seen strong growth momentum in ecommerce on the back of its investment into the channel. During the first three months of 2021 ecommerce sales grew by 39.6%, reaching 14.5% of group sales. Strong momentum was seen across most categories, but particularly for coffee, pet food and culinary.

CFO Francois-Xavier Roger explained that the company has grown market share online ahead of its offline share. He said, “In about 60% of our business sales online, we have improved and maintained our market share, and in about two-thirds of the cases, we have a better market share online than offline.”

As part of its digital acceleration Mars’ global chief digital officer Sandeep Dadlani recently told Retail Week that the organisation has adopted a “Find, solve, automate, deliver” strategy to identify problems and solve them at scale. Under a programme dubbed internally ‘100x’, all of the company’s 126,000 associates have been encouraged to put on ‘digital armour’ and get involved in finding and solving issues to improve the experience for customers. 

Digital analytics are used to help with this process and over the past three years the company has instigated more than 500 sprints to make incremental changes to improve the experience for customers.

Pullquote can go here: “To solve problems, we need data” - Sandeep Dadlani, Global Chief Digital Officer, Mars

 

Ecosystems account for a larger share of growth

 

The biggest beneficiaries of the consumer shift online are the leading platform ecosystems such as Alibaba, JD.com and Amazon, which are taking a larger proportionate share of growth. 

Edge anticipates that just five leading platforms will account for two thirds of global ecommerce sales by 2025. Whilst they present a huge growth opportunity for brands, dealing with ecosystems is often much more complex than working with other retail partners.

For brands to succeed they must gain a deep understanding of these platforms, including the ability to decipher and optimise the algorithms that drive each sale. Brands also need the ability to set targets and measure success, which involves tracking and optimising product performance as well as benchmarking within the category overall.

Some of the key factors that can impact a brand’s online performance are simple things such as availability, content accuracy and search, but these all add up. Every week that an SKU is out of stock online accounts for an average of 22% lost sales. Meanwhile, SKUs that are well presented and content compliant can generate an average sales uplift of 31%. Ensuring  that your brand and product appears at the top of customer searches is essential. By moving from 20th to 10th search position, brands can grow sales by an average of 21%. 

 

Getting the most out of monetised platforms

 

A growing number of retailers are now monetising their platforms, requiring brand spend for advertising as a growing source of revenue.

This practice was popularised by Amazon across the Americas and Europe, but is now requiring new brand spend, as they rely on advertising as a growing source of revenue.

Amazon now has 2.9bn visits to its platform in the US and generates revenue through its Amazon Advertising ad network. Similarly, Walmart uses Walmart Connect to capitalise on advertising opportunities from its 718.6m monthly visitors. Many other retailers including Target, Home Depot, CVS, Walgreens, Instacart and Kroger are similarly leveraging advertising opportunities on their platforms. 

For brands, this presents both opportunity and complexity, as they must work with each platform to understand the ad spend opportunities and master the intricacies of how the platform works. Winning brands are investing in trade spend across digital formats to win search rankings and online market share. 

Test and learn is often the best way to get the most out of this investment, constantly monitoring results and impact.

In addition to digital spend with retailers, brands must also assess where to invest in the multitude of intermediaries such as third party delivery, social commerce platforms and Google, which all have their own spending requirements. This means that brands must prioritise as they are forced to stretch digital budget across many players in the ecosystem. 

Placing the right bets in the right places is key to accelerating growth and this can be achieved by taking a data-driven approach to the online channel, making the most of the huge opportunity in order to deliver for customers.

 

Edge can help

 

As retail consolidates, Edge anticipates that just five leading platforms will account for two thirds of global ecommerce sales by 2025. 

We can help you to :

Understand which platforms will be the most significant for your business
Decipher the algorithms that power each sale
Track and optimise your products to power performance in these key retailers
 

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