Could e-commerce engineer a turnaround for CPG companies?
Dive Brief:
- Nielsen data shows e-commerce is accelerating CPG sales, accounting for 1% of top line growth in grocery categories, according to Progressive Grocer.
- Nielsen anticipates grocery sales will continue to move online, noting e-commerce is projected to be worth $100 billion by 2025.
- Sales data also shows strong online sales in beauty, personal care and pet products. While in-store sales account for less than 2% of growth in beauty and personal care, e-commerce accounts for more than 10% of growth in both categories. Pet care, meanwhile, saw 80% of its increase come from online sales.
Dive Insight:
E-commerce continues to show promise as a growth engine for struggling grocery categories. The question is how will manufacturers and retailers continue to drive sales?
Direct-to-consumer transactions are one intriguing option. Although most consumers don't seek everyday products through manufacturers' websites, many will snap up limited edition products and unique creations like Bear Naked's custom granola creator. A major expansion into direct sales could be on the horizon with the news that Amazon wants to lure suppliers like General Mills and Mondelez on to its platform. If CPG companies see the same future the Seattle e-commerce giant does, the industry could experience major changes to packaging, marketing and product development as companies optimize for direct online sales.
The attraction of direct-to-consumer sales is higher margins and a more intimate brand experience. But brick and mortar retailers still have a lot to offer through their growing online services. In addition to home delivery through third party operators like Instacart, Shipt and even Amazon Prime Now, grocers are offering innovative store-pickup options. Amazon, which recently moved into the space with its Amazon Fresh Pickup stores in Seattle, can have orders ready in as little as fifteen minutes.
One of the most promising new formats is a hybrid express store that offers the groceries and prepared foods of a supermarket, the fuel and consumables of a convenience store and online grocery pickup to boot. Wal-Mart is currently piloting two Wal-Mart Pickup and Fuel locations — one in Colorado and another in Alabama — while companies such as Giant Eagle are building smaller stores that could be used for online pickup. It's a model that's driven e-commerce growth for British retailers, and it could do the same for American companies.
As companies tinker with their e-commerce offerings, it’s difficult to say what the best growth opportunities will be for CPG companies. One thing’s for sure, though: Right now, in-store sales are stagnant and those in the $600 billion grocery industry are desperate for a way to boost revenue. 
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