Packaged Goods – to ecommerce or not?

To set the stage, according to a recent report created by BCG, Google and IRI, online buying comprised only 1% of the $666 billion in consumer-packaged-goods sales in 2013. And with consumer-packaged goods (including health, personal care, and good) comprising only 8% of online market sales, there is lots of room for growth within this category, both from a sales and online marketing ad spend perspective. So why are the numbers relatively small?

Many brands are reluctant to abandon existing in-store marketing methods that have worked for them in the past. For example, promoting goods in free-standing inserts or in-store displays have reliable ROI metrics. With digital marketing, on the other hand, there is a perception of risk, and marketers are hesitant to shift their marketing mix.

Further, marketers may need to consider and evaluate pre-existing relationships with traditional (typically brick and mortar) retail partners. For example, P&G was punished by Target and given less favorable shelf space after it struck a deal with Amazon to ship directly from the P&G warehouses.

From an execution perspective, a minimum home delivery threshold must be met to make the service economically feasible.  With companies like Amazon and Google willing to subsidize delivery costs in favor of their larger strategic goals, however, e-commerce within the category is an appealing option for the consumer. Amazon is now offering Prime Pantry, which charges a flat fee of $5.99 for up to 45 lbs of CPG goods. AmazonFresh, available in some markets, offers same-day delivery on fresh foods. These types of innovations will require that brands stay abreast of e-commerce trends.   

Another trend emerging on ecommerce sites such as Amazon is that niche players are  sometimes beating the larger brands online by optimizing their online presence.

How can brands play the ecommerce game?  It is important for brands to get their products to display on the first page of search results. "Search rankings are the new shelf space," according to One Click Retail data. According to AdAge, in addition to these search rankings, brands should manage product pages and directly respond to negative consumer reviews. 

http://adage.com/article/digital/amazon-tops-list-google-s-25-biggest-search-advertisers/294922/

http://adage.com/article/digital/packaged-goods-marketers-wade-warily-e-commerce/294937/