How to Adapt CPG for Digital Shelf Growth

A recent digital-readiness assessment found that 49% of U.S. shoppers purchase CPGs online. That rate is impressive, but even more impressive is the prediction that in as few as five to seven years, 70% of consumers will have converted, bringing 2022’s online grocery spend to a potential $100 billion.

How to Adapt CPG for Digital Shelf Growth
How to Adapt CPG for Digital Shelf Growth. Photo by Bernard Hermant on Unsplash

Because the transition is occurring at a time of shifts in consumer behavior and looming economic uncertainty, brands that’d hoped to stretch their e-commerce onboarding across half a decade had better compress their timelines considerably or risk leaving revenue in the online shopping cart.

This article will help brands wrap their heads around the challenges of omnichannel conversion. It also highlights:

  • What’s driving changes in consumer motivation, purchase incentives and last-mile solutions
  • The value of open-source, future-proofed platforms that integrate with a brand’s developing digital architecture
  • Why the human element is essential to mastering the path from search to purchase

Table of contents

Executive Summary
COVID-19: The E-Commerce Tipping Point No CPG Can Afford To Neglect
Why Omnichannel Capabilities Have Become Mission-Critical
Don’t Delay Bridging The E-Commerce Knowledge Gap
Google Optimised? Why CPGs And Retailers Must Create Digital Win-Win Relations
How Having Deep Shopper Insights Can Make Or Break CPG’s
Economic Uncertainty And How It Affects Shopper’s Sense Of Price
To Disrupt Or To Be Disrupted: The Last Mile Hurricane
How Winning Online Can Become A Routine, If Only CPGs Are Agile Enough

Executive Summary

As the pandemic hit, the retail space changed as we know it. With social distancing rules in place, consumer shopping behaviour dramatically shifted to online — and this behaviour is here to stay with fundamental implications for consumer-packaged goods brands and retailers demanding an urgent shift to focus on the digital shelf.

What does it take to win online? This article sets out to answer this question and give clear recommendations.

The 5 key insights you’ll get from this timely article:

  1. Illustration of the urgency to adapt to consumer’s shift to eCommerce as their willingness to pursue mobile transactions will only continue
  2. Portray the urgency with which CGPs and retailers will need to bridge the prevailing eCommerce knowledge gap
  3. How CPGs and retailers can create win-win scenarios for digital shelf growth together and why Google plays it’s part
  4. The fundamental building blocks for developing eCommerce strategies that will acquire and retain customers
  5. Tech stack and team workflow recommendations essential to arrest growth on the digital shelf now and in future

CPGs and retailers planning to drive growth must discard pre-COVID roadmaps and start determining the strategies and tactics to deploy now. We hope you enjoy reading this article.

Whatever brands’ opportunity assessments and strategic responses may have been coming into 2020, we can say with rueful certainty that current events have completely overtaken them.” — John Maltman, founder and CEO of e.fundamentals

According to Coresight Research’s U.S. Online Grocery Survey 2020, domestic online grocery sales grew 22% in 2019. That on its own is impressive, but even more impressive — if not downright alarming — is the prediction that online grocery sales could surge 40% by 2020’s close, bringing e-commerce’s share of the U.S. food and beverage market up to 3.5%, or roughly $38 billion.

Coresight conducted its survey on March 17 and 18, 2020, right as coronavirus stockpiling kicked into full gear. And whether that was a coincidence or not, it underscores the unprecedented shifts in consumer behaviour, as well as the looming economic uncertainty and continued disruption of retail, that promises to keep shoppers, and the grocery business, migrating online.

Thus, as John Maltman, founder and CEO of e.fundamentals, put it, “Whatever brands’ opportunity assessments and strategic responses may have been coming into 2020, we can say with rueful certainty that current events have completely overtaken them. Developments that brands could’ve drawn out over years must now compress into months. And because this ‘new normal’ is not a stable state, the omnichannel conversion will continue to develop at pace.”

So, for those CPG brands still hoping to slow-roll their online transitions: Think again, and fast-track your timelines or risk leaving revenue in the online shopping cart.

COVID-19: The E-Commerce Tipping Point No CPG Can Afford To Neglect

The seismic shifts upending retail are so transformative that even industry veterans such as Maltman are chary of making predictions. “There are few things you can say for certain about the e-commerce environment in the U.S. over the next two to three years,” he conceded. “But one thing is sure: It will change, and in ways that are hard to anticipate.”

We’re already seeing that change in consumers’ widening embrace of online grocery, which had heretofore resisted a digital makeover.

And while restrictions surrounding COVID-19 accelerated consumers’ migration, that migration began even before terms such as “social distancing” entered the vernacular. As early as 2019, the NPD Group found that the percentage of U.S. adults who shopped for groceries online within a 30 days grew from 17% in the quarter ended November 2018 to 20% in the quarter ended February 2019 — adding the equivalent of 51 million consumers to the digital grocery rolls.

And that makes perfect sense to Jon Sofield, a board advisor to e.fundamentals. “I just feel we’re at a tipping point,” he said. “I don’t think it’s going to be a revolution to the extent that we’ll see 50% of grocery going online just yet, but it’s ticking up well into the double digits. And grocery companies have to integrate.”

Focusing on key retail players is no longer sufficient. Brands are now reassigning online efforts to mission-critical status, “and conducting them at a scale no one could’ve imagined a few weeks before.” — John Maltman, founder and CEO of e.fundamentals

Why Omnichannel Capabilities Have Become Mission-Critical

Indeed, a sense of urgency is palpable among CPG brands trying to keep up with the omnichannel capabilities of their traditional retail partners, not to mention online titans such as Amazon and disruptive startups.

Consider that in the first quarter of this year — right before the pandemic hit — Maltman and his team conducted a series of discussions with director-level CPG leaders about the state of US e-commerce in food and beverage retailing. “And it was amazing,” Maltman recalled, “how those discussions changed just a few weeks later.”

What began as a dialogue largely centred on Amazon — with some attention directed at Wal-Mart and Target — turned into the realization that “focusing on a few key retail players was no longer sufficient,” Maltman said. By the time the roundtables ended, brands were reassigning their online efforts to mission-critical status “and conducting them at a scale no one could’ve imagined a few weeks before.”

And it struck me that what was missing was a set of fundamentals that could measure the answer to the questions, ‘Am I winning online? And if not, what do I do to fix it?’ ” — John Maltman, founder and CEO of e.fundamentals

Don’t Delay Bridging The E-Commerce Knowledge Gap

Yet even as brands forgo the omnichannel conversion, they’re still hampered by a knowledge gap that separates their in-store expertise from their still-developing grasp of how to achieve digital success.

As Maltman said, “Brands have created very sophisticated category-development strategies over the years with their retail partners.” Now many of those plans, and the tools used to implement them, seem built and designed for a different world.

Case in point: While consulting with a major global CPG brand, Maltman recalled, its sales leadership could quote chapter and verse about pricing, promotion, profitability, category and distribution strategies known to spell success in physical stores.

“But when you’d ask them about their online business,” Maltman continued, “they kind of knew they were growing — at least they had a feeling they were growing. But in terms of what drove that growth and whether it was sustainable or profitable, there was far less clarity. And it struck me that what was missing was a set of fundamentals that could measure the answer to the questions, ‘Am I winning online? And if not, what do I do to fix it?’ ”

For lack of a better strategy, some brands simply snapped up banner ads, hoping it would net a decent ROI. “And that might have had a short-term effect,” Maltman said. But thinking longer-term, he wagered, brands will have to answer what he called “the big questions,” such as:

  • What’s the right assortment online?
  • How do we promote effectively?
  • How can we manage search so that shoppers see the items we want them to see?
  • How do we successfully launch new products online and measure the results?
  • How can we ensure that our strategies for building the category online are being applied?

Brands can’t answer these questions alone. “Nowadays, brands have to work with their retail partners — not just Amazon and Wal-Mart, but Giant Eagle, H-E-B, Meijer, etc. — to make online a place where a category strategy works as well as it would in physical stores, if not better,” Maltman said.

Brand product info -> Retailer mismatch -> Affects Google rankings

Google Optimised? Why CPGs And Retailers Must Create Digital Win-Win Relations

While some brands consider this another problem to solve, Sofield sees it as a chance to rewrite the retail script: “For the last 40 years, retail has practically owned CPG. And I think now is an opportunity for CPG to come back harder with retail and have more leverage in their world.”

After all, retailers need to make online work for their bottom lines, too — and their CPG partners can help.

For example, Sofield explained, “people search for products by brand, item name, generic product characteristics — you name it.” And because most CPGs reach consumers’ eyeballs via third parties, brands rely on those retail partners to list this information accurately and effectively.

But so does Google, which uses that information to rank search results. So if a retailer inadvertently matches an item with the wrong image, posts an outdated description, flubs the product’s weight or serving size — even if it runs the wrong promotion against the wrong product — its error doesn’t just hurt the brand, it diminishes the retailer’s search rankings.

The upshot: A CPG brand that can serve its retail partners real-time, actionable data to help correct those errors improves its retail partners’ credibility, and everybody wins.

The assortment is another lever that CPGs can pull. When retailers rethink their assortment to improve online profitability, “that impacts brands,” Maltman said. “And brands can either let that happen, or they can try to influence it.” His verdict: “Brands that don’t try to influence it likely get squeezed and could find themselves losing distribution.”

In conclusion, Sofield adds, “CPG brands can’t control what happens inside these channels directly. But they can work with them to catch what they’ve already caught themselves” — and give retailers the heads-up they need to set things right.

How Having Deep Shopper Insights Can Make Or Break CPG’s

“The good news,” Maltman said, “is that the skills that are important in managing these matters in physical stores are the same skills you need for e-commerce. You just use a different dataset.”

Yet, you deal with a different consumer. As Sofield said, “The world is changing, and consumers will dictate how retail operates going forward.”

This has CPG brands, and retailers, wondering what makes shoppers click buy. Part of the trick lies in capturing online what consumers appreciate about shopping in-store — namely, the experiential aspects of discovery, bargain-hunting and squeezing the avocados, as it were.

At the same time, while online shopping eliminates the inconvenience of actually going to the supermarket, brands must also spare their consumers the aggravations that are as liable to happen online as in real life, such as out-of-stocks, incorrect or missing product descriptions, and subpar service. And they have to do it all while standing out on crowded online shelves.

Maltman said that while some high-involvement categories — fresh produce, deli, meats and seafood — may remain the province of an in-store purchase, the bulk of the supermarket would never go back to what it was before.

A lot of shoppers have learned that there’s a whole range of products that they can buy without physically picking them off the shelf.” — John Maltman, founder and CEO of e.fundamentals

Certain categories trigger online research pre-purchase — infant and child nutrition, for example. “When consumers go online to research these products,” Maltman continued, “they’ll likely stay online either for the convenience or because it’s a good place to explore and understand the category.” Brands can capitalize on that.

They can also leverage the fact that online grocery is fundamentally supply-driven — that is, consumers may not know what they want until they see it. By telegraphing their SKUs onto consumers’ screens, brands can fill the blank spaces and generate demand.

Hence, it’s no surprise that Maltman sees brands as having a huge role in this environment. “People expect to get information from social media, companies’ and retailer websites, then they use it to make purchase decisions,” he said. By engaging consumers online, brands can take control of so much more because of that interaction.

Economic Uncertainty And How It Affects Shopper’s Sense Of Price

None of this happens in a vacuum. Capturing consumers’ attention is only half the battle; with economic uncertainty ahead, addressing price sensitivity online and off will occupy no small share of brands’ time.

Accenture consumer research conducted in March and April of this year found that:

47% and 49% of shoppers, respectively, plan to shop more cost-consciously post-COVID-19.

And with a USDA pilot test now letting Supplemental Nutrition Assistance Program recipients in 15 states and the District of Columbia use their benefits for online groceries, yet another cadre of price-sensitive shoppers will be clicking.

Precisely how personal finances will affect online grocery is the “big crystal-ball question,” Sofield said. “But the economy is going to hit everyone’s pockets, from hourly and low-income workers to the middle class.” Some think the immediate effect will be a heated price war. As a report from McKinsey noted, many grocers have gotten away with charging premiums for online orders,4 but a push toward a more transparent pricing model may be around the bend.

And Sofield understands why. “Price is going to drive the shift to online grocery. I think we’ll continue to see startups offer services that crowdsource pricing across retailers so that consumers can compare options. And I think we’ll also see a more aggressive retailer approach to push CPGs in a way that gets consumers onto their sites and buying a lot.”

Brands must create online pricing structures that work in uncertain times, and that may mean reshaping promotions, product mix and more to meet consumers’ budgets. “I think the whole industry will have to get more sophisticated about the fact that price flexibility is more dynamic online,” Sofield said. “Because price sensitivity could, and should, happen.”

Nielsen research shows that click-and-collect now accounts for 11% of all CPG e-commerce sales, up from just 4% two years ago.

To Disrupt Or To Be Disrupted: The Last Mile Hurricane

As for the final frontier in brands’ online journeys, it may be the last mile — literally. That is, e-commerce fulfilment is one more nut companies must crack before bringing online grocery to its apotheosis.

“If you’re going to build a winning position, and in much less time than you’d expected, you have to solve fulfilment,” Maltman said. He offers Wal-Mart as an example: “CEO Doug McMillon said just a few weeks ago that they’re laser-focused on getting the last-mile economics right, because click-and-collect may be the online grocery business model that works.”

And how: Wal-Mart has already begun offering in-store fulfilment and last-mile delivery through its acquisition of Postmates, as has Target through its acquisition of Shipt, according to McKinsey4. And Nielsen research shows that click-and-collect now accounts for 11% of all CPG e-commerce sales, up from just 4% two years ago.

Maltman predicted that the rise of click-and-collect would affect everything from promotion and assortment to how the supply chain responds to spikes in demand.

One side effect he’s already noticed is that brands spend significant sums running digital promotions that effectively drive out-of-stocks on-shelf because supply can’t catch up. And with no system to monitor ranging and availability data, the effects of a brand’s equity can be detrimental “Brands need to respond quickly to make sure they’re not falling into that trap,” he said. That might mean changing a promotion’s depth or working with retailers to ensure sufficient inflows of stock when online demand promises to rise. “These are discussions brands should have, because if they’re spending money to drive out-of-stocks in-store, they’re wasting their dollars. Yet once again, what looks like an e-commerce challenge may be an opportunity — for as online fulfilment evolves, CPG brands can align or compete with emerging delivery platforms, opening up new avenues for selling across channels.

“We’re seeing big brands ramp up their e-commerce arms because retailers aren’t doing well enough during COVID. So CPGs are building their direct-to-consumer platforms,” Sofield said. Exhibit A: PepsiCo Inc. recently launched two direct-to-consumer websites — PantryShop. com and Snacks.com — and in mid-May, Facebook launched its service to help small merchants establish online shops for direct-to-consumer selling.

Yet once again, what looks like an e-commerce challenge may be an opportunity — for as online fulfillment evolves, CPG brands can align or compete with emerging delivery platforms, opening up new avenues for selling across channels.

That’s why experts advocate bursting the knowledge silos that hamper cross-functionality and keep teams from directing their resources toward an all-out online effort.

How Winning Online Can Become A Routine, If Only CPGs Are Agile Enough

Navigating these disorienting developments in what can feel like warp speed demands both a startup mentality and a swift retooling of workforces, even as brands scramble to radically cut costs.

That’s why experts advocate bursting the knowledge silos that hamper cross-functionality and keep teams from directing their resources toward an all-out online effort. As Maltman said, “Omnichannel can’t just be an e-commerce project.”

“Brands need to upskill account, revenue and growth management teams to win in the e-commerce channel just as they currently understand how to win in physical stores,” he continued.

He suggested that brands examine their overall commercial agenda and apply actionable intelligence toward strengthening it. “That could mean using online data to do assortment reviews,” he said.

That’s one way that e.fundamentals differentiates itself. We’ve built our stack in a very agile way so that we can move quickly and add elements quickly.” — Jon Sofield, board advisor to e.fundamentals

“It could mean launching new products, introducing new packaging — even developing joint business plans with key partners. By linking online development to bigger commercial initiatives within the organization rather than making it an ‘e-commerce project,’ you get better engagement across the business.”

That doesn’t mean tech teams no longer matter, of course — but it does mean that all hands must be on deck. And the actual technology that brands deploy to accomplish these tasks should be intuitive and user-friendly.

Sofield underlined the importance of building open-source, future and foolproof data-analytics infrastructures that integrate with brands’ existing systems. “That’s one way that e.fundamentals differentiates itself,” he added. “We’ve built our stack in a very agile way so that we can move quickly and add elements quickly.”

Yet no data-analytics architecture generates results on its own. It needs a human element — real, live customer-success teams — that help brands act on the most profitable insights and find the evidence that generates retailer conversations to drive change. It takes deep eCommerce expertise to mine data for these nuggets, and companies just getting started in the omnichannel will need to upskill fast to know where to find it.

Or they can work with an analytics provider staffed with experts already up-to-speed in bridging the brick-to-click gap. Such providers can share the intelligence, support and ongoing training that turn e-commerce wins into a routine that businesses can follow regularly. “These values are extremely important, and they’re why we’re different,” Maltman shared.

Ultimately, Maltman said he believed winning at e-commerce required a culture shift. “Companies need to dial up their interest in experimenting — internally and with retailers — as well as their ability to embrace failure,” he said. “And for many, that can be a challenge.”

“Brands haven’t got time to progress at the pace they’ve been making the last three years. It just won’t work. They’ve got to get on the front foot and speed up development quickly or they will lose business.”

Companies need to dial up their interest in experimenting — internally and with retailers — as well as their ability to embrace failure. And for many, that can be a challenge.” — John Maltman, founder and CEO of e.fundamentals

Source: Custom content for e.fundamentals by Food Dive’s Brand Studio

Published by Jeannette Scott

, a wellness coach specializing in stress management and quality of life. She’s covered topics from nutrition to psychology, from sexuality to autoimmune diseases and cancer.