Online CPG sales have tripled since 2004 and are estimated to hit $16 billion, almost 3% of total e-commerce sales by 2012. The main categories driving online CPG sales are pet products, food and beverage and OTC medicines. These areas outperformed popular categories such as apparel, auto parts and consumer electronics.
A number of factors are responsible for this growth, including online capabilities and increased consumer online usage. The advent of broadband has played a major role, eliminating the hurdles caused by a slow connection. It makes a 45-item grocery list far less daunting than it ever was before. In addition, the retailers are connecting the online usage with their brick-and-mortar store fronts, allowing for online ordering with fulfillment in the local stores. When 74% of consumers are saying that the ability to get in and out of the store quickly is a factor in store choice, e-commerce can serve as quite an advantage.
Even with a rapid growth in sales, the CPG market is not immune to the drawbacks of e-commerce. Shipping cost is the leading barrier to purchasing groceries online, according to a 2009 Nielsen poll. In addition, tactics such as introducing new products, cross-merchandising, encouraging impulse purchases and meeting immediate need suffer in an online environment, especially certain CPG categories like beauty care and cosmetics. But when it comes to convenience, the search for high-end products or specific health demands, online can exceed the service of storefronts, which is causing the increased online purchasing power from upscale shoppers and working moms.
Overall, the CPG e-commerce growth rate is increasing, but it’s predicted to slow in about three years, encouraging CPG e-tailers to be active but conservative about expansion. Success in this area will, as always, take a delicate balance of anticipating online consumer needs in combination with CPG creativity.
Photo credit: sean dreilinger