Consumer Packaged Goods (CPG) is a highly competitive industry, and e-commerce has disrupted the traditional brick-and-mortar retail model.
In this blog, we’ll explore the strategies and best practices for building a successful CPG e-commerce brand. From identifying CPG trends to creating an engaging online presence and optimizing your sales funnel, we’ll cover all the essential steps for growing your CPG e-commerce brand.
So, whether you’re a new entrepreneur or an established CPG company, let’s dive in and build a strong e-commerce brand that connects with your customers and drives growth for your business.
What Are Consumer Packaged Goods (CPG)?
Consumer Packaged Goods (CPGs) are referred to as products that are used daily by consumers. These are items that require routine replacement, like foods, household products, beverages, clothes, and others.
CPGs have a very low stocking cycle and are accompanied by lower price tags. The consumer demand for CPGs remains constant. However, this sector of e-commerce is highly competitive due to low consumer switching costs and high market saturation. Consumers can easily switch their brand loyalties depending on the price.
How Big is The CPG Food-and-beverage Industry?
E-commerce has witnessed a booming economy with a current market cap of US$ 13 Trillion in 2021. IMARC estimates a CAGR growth rate of 27.4% between 2022 and 2028. These numbers further forecast an e-commerce market size of US$ 55.6 Trillion within 2027. As for the average estimates, e-commerce websites for the CPG industry cover more than half of the total e-commerce brand websites indicating the market size.
However, since the products are usually priced lower than their costlier counterparts, CPG and e-commerce hold a market size of US$ 13 Trillion (IMARC). A new form of customer conditioning is witnessed, where lower pricing and higher quality are becoming an imminent need. As these new-age CPG e-commerce brands can fulfill that need, the predicted market size of $US 55.6 Trillion can be expected.
What Was the Impact of COVID on the CPG Food-and-beverage Industry?
CPGs, especially the food and beverage industries, are one of the many industries that have faced the stigma of COVID-19. The onset of COVID-19 created the e-commerce rush, and the industry has witnessed a growth of US$ 4 Trillion, IMARC, from 2019 to 2022. However, CPG products mostly consist of consumables that amount to a negative curve. Some sources have even highlighted the lack of early e-commerce adoption resulting in a downfall. While both discussions highlight a fair point, as stated by Verified Market Research, the CPG industry has been able to bounce back with a revamped growth rate of 2.9% per year.
CPG Industry Trends
Stay ahead of the curve with this section on CPG industry trends. From changing consumer behavior to emerging technologies, let’s explore the latest developments shaping the future of the CPG industry.
1. Omnichannel strategies
Omnichannel strategies have been making rounds for quite some time on the internet for a well-defined reason. With several advertising platforms such as Meta, Youtube, Google, LinkedIn, and others, brands have more than one option on their platter.
An omnichannel CPG e-commerce strategy starts with selecting a single advertising platform, which then branches out to the other mentioned ones. Once the previous channel has been scaled with a positive ROI, branching to other channels is followed in the next step.
2. Subscription models
CPGs are infamously tagged as essential goods that require a routined replenishment. Food, beverages, and cosmetic products are some of the forerunners of the new CPG e-commerce trends. One can easily understand that ordering such a product after a certain time might be inconvenient, thus resulting in a loss of customers.
Subscription models are therefore considered one of the best solutions. Customers can pay for recurring subscription goods which they buy regularly.
3. Personalization
Personalization is crucial for every marketing strategy that attempts to acquire more customers. One of the important CPG e-commerce trends is focused on providing better suggestions based on internet activity. It builds brand loyalty and gains an advantage over the competition.
4. Branding
Branding has greatly benefited from e-commerce due to strict protocols. Most of the products sold in traditional commerce are outsourced, a concept famously known as drop shipping. Lack of marketing accessibility, shipping, and logistics have often been touted as the major reasons for the growth of dropshipping. However, this practice is prohibited by popular advertising platforms such as Meta, Youtube, and Google. In other words, one cannot resell a product through advertising.
Owing to the accessibility of the internet and the rise of dedicated third-party companies, the D2C market has witnessed a growth rate of 45.5%, as per the report by SAP & Deloitte. Further, eliminating drop shippers or mediators has allowed ease of branding with a lower price margin, thus paving the way for several new promising brands.
The rising importance of e-commerce for CPG brands
Some traditional buyers have always enjoyed an in-store experience, while some prefer to try the products before buying them. The in-store experience is a USP of offline shopping that has been successfully mimicked and introduced online.
The introduction and active improvement of concepts such as personalization, automated product recommendations, use of dedicated product pages, and subscription models have gradually led customers to prefer the online space.
5 Key CPG E-commerce Challenges
Discover the top 5 challenges facing CPG e-commerce brands today. From diminishing search share to fake customer reviews, we’ll explore the most pressing obstacles and provide solutions for overcoming them.
1. Diminishing share of search on digital shelves
Indexing on high authority sites or the first page of Google has grown challenging in recent years. New companies are entering the race, which results in the bid or the cost of indexing increasing without any upper limit. Brands that do not have a financial safety net are witnessing more problems in marketing budget allocation than the ones backed by venture capitalists.
2. Inconsistent product descriptions and attribute coverage
False awareness has been one of the biggest issues since the beginning. In some cases, such awareness is considered to be quite tough to break through. Since everyone can post and promote on the internet, the issue has only escalated. Brand building and revenue generation are gravely affected when a product’s attributes are poorly explained to a customer.
3. Limited product assortments and availability on marketplaces
The fast-filling online shelf has resulted in the lower availability of product shelves. As prices soar daily, e-commerce brands with limited funds have to spend more for placements. This spike has resulted in the limitation in the display of product assortments.
4. Less control over pricing and promotions
Improper financial planning and fund allocation are the biggest obstacles to scalability. During the initial phases of a company, when minimal services are required, one might not feel this sting. Additionally, this affects the profit margins, which further creates several other problems, such as poor scalability. On the other hand, it further narrows down a brand’s ability to control the product’s pricing.
5. Fake and manipulated customer reviews
Acquiring customers is difficult. To establish credibility, some brands resort to unfair means. Manipulating customer reviews is how they build a false image of their brand. Besides that, a few brands use it to devalue their competitors by forcing negative publicity.
Best Practices to Win the Evolving Online CPG E-commerce Market
Let’s checkout the best practices for winning in the evolving online CPG e-commerce market.
1. Offer a subscription model to tap into recurring revenue
A subscription-based model generates recurring revenue and provides the most accurate revenue estimation, as no assumptions are involved here. On the other hand, the customer can expect a monthly service without having to place an order every time the product expires.
2. Build a connection with your customers
Providing exceptional customer service, right from initial to after-sales inquiries, is the key to building a great connection. Companies can also consider the creation of incentivized User-Generated Content (UGC).
3. Offer an omnichannel customer experience
Allowing a customer to choose the preferred mode of communication highlights a brand’s commitment. This escalates to better customer satisfaction and a good retention rate.
4. Focus on competitive prices, assortments, and findability
As a manufacturer of the CPGs, a brand can provide the best solution in the market by providing assorted products. The primary goal is to solve the follow-up problem that the customer might face.
5. Leverage advanced data analytics and technology
The e-commerce industry is highly competitive with different products and offers. This allows a new start to e-commerce CPG brands to understand the customer’s buying habits even before they make a single sale. This data availability allows one to make better decisions fueled by real-time customer actions. An e-commerce brand that uses such data to make better decisions, without any assumptions, is likely to be more profitable than the ones who disregarded the use of data while making a decision.
6. Incorporate innovation and sustainability into your business
Sustainable practices are often viewed as a plus in a progressive society. It is also something that most customers are now looking for. Owing to several sustainable movements, highlighting a brand’s cause for a better future is often seen as the biggest USP.
5-Step DTC CPG E-commerce Strategy
1. Choose the right e-commerce platform
The DTC e-commerce brands can choose between several e-commerce platforms. Identifying the perfect platform which suffices all requirements at a competitive rate might take time and effort. To help bridge the gap, some of the must-have features are listed below:-
- Easy to edit, pre-made templates with minimum load time
- Integrated CRM system
- Should provide APIs or necessary integrations with Meta and other advertising platforms
- Integrated mailing system embedded with triggers
- Should support third-party API integrations
2. Set up a reliable logistics provider
Setting up a dedicated logistics and transport system requires a huge upfront investment that directly affects the profit margins. Several dedicated logistics service providers have a high level of control over the movement and clear transparency. Outsourcing from a reliable logistics provider saves one from the upfront investment. Furthermore, the flexibility of controls allows unparalleled CPG e-commerce monitoring.
3. Invest in a customer data platform
Data regarding customer activity concerning every product, offer, and trend is readily available. It cuts the guessing game out of the equation. Real-time data can fuel every decision made by a brand. However, with access to a huge audience base, storing and maintaining data is a huge challenge with free software. Moreover, the threat of data theft always looms in such cases. Therefore, every e-commerce brand should consider investing in a reliable customer data platform.
4. Deliver exceptional customer service
Customer satisfaction is the key driver to high retention rates in any company. To create exceptional customer service, you can imply the following:
- Prompt and accurate responses to sales inquiries
- Provision of real-time e-commerce CPG tracking during transit
- Great after-sales support
Therefore, providing a spotless service can be crucial to business growth and branding.
5. Develop a user-friendly, informative experience on your website
Awareness is often considered a double-edged sword, as it requires a certain marketing budget to educate the target customers. Providing a user-friendly experience with the required information might allow a company to save some of that budget. Furthermore, a well-designed, user-friendly website talks a lot about the brand, creating a good impression.
Conclusion
The e-commerce industry is more competitive than ever, yet many successful case studies are being witnessed. With IMARC projecting a market size of US$ 55.6 Trillion in the next four years, the scope of opportunity for any CPG brand is endless. However, one must understand that each process is equally important, and together they form the perfect equilibrium required to grow and scale a CPG e-commerce brand.
FAQs
Should CPG manufacturers go direct to consumers, and if so, how?
CPG manufacturers have more flexibility in product pricing. Even though a pricing war with an established brand is not recommended, CPG manufacturers can provide better solutions through combined packaging. The growth of dedicated third-party marketing, shipping and logistics companies allows businesses to save huge upfront investments.
How much does TikTok Shop charge for shipping?
CPG manufacturers were plagued with a lack of access and shipping options to the general public. However, with the recent advancements in e-commerce, such issues have been effectively solved. Customers can now enjoy the same product at a lower price, with the in-store shopping experience from their cellular devices.
How do CPG e-commerce trends impact brick-and-mortar shoppers?
Yes, you can offer free shipping on your TikTok Shop products. However, you must factor the shipping cost into your product prices, as TikTok Shop does not cover the shipping cost.
How can CPG brands create an e-commerce experience that mirrors in-store shopping?
A CPG brand can use product marketing and a targeted page set. The rise of sales funnels has increased the likelihood of providing an in-store experience, increasing revenue and the average order value. By selling solutions to the follow-up problem the initial product causes, higher relevance can be achieved.
Why are DNVBs popular?
DNVBs have digitally created brands that extend to brick-and-mortar locations. Most of its popularity has been attributed to minimal upfront investments, which results in lower selling prices. While breaking the stereotype of quality, a DNVB is infamous for providing high-quality products at a meager price.
How to conquer CPG e-commerce challenges with technology?
o conquer CPG e-commerce challenges, one can focus more on providing a better customer experience. This includes unparalleled personalization, fast and transparent shipping with great after-sales service.
What is CPG vs. FMCG?
FMCG or Fast Moving Consumer goods are a subset of CPGs, where the time required for product consumption is the major differentiator. While CPG is considered an umbrella term, FMCG can be termed the revamped or enhanced CPG. Products like toiletries, canned food, and milk fall under the category of FMCG. While cosmetics products that last for three months are often categorized as CPG.
