The Grocery Manufacturers Association (GMA), The Boston Consulting Group (BCG), Google and Information Resources Inc. (IRi) recently joined forces to publish a report titled, “The Digital Future: a Game Plan for Consumer Package Goods.” The insights revealed across the 36 pages are valuable not only to Consumer Package Goods (CPG) companies, but also to all businesses looking to survive in the new era of digital consumerism.
In this series of four blog posts, we’re excited to share some of our favorite learnings from the paper with an added marketing perspective. And we’re starting with how digital innovation is changing the way consumers shop for and buy CPG products.
1-5-10 on the Horizon
The CPG industry has traditionally lagged behind in terms of digital penetration, but that doesn’t mean it’s not heading in that inevitable direction.
According to the report, it’s likely to soon hit a tipping point: “Companies need to plan for a ‘1-5-10’ market in the U.S. over the next five years, in which digital’s current 1 percent penetration most likely expands to 5 percent, but could quickly accelerate to as much as 10 percent with breakthrough innovation in delivery models. The 5 percent penetration rate represents nearly one-half of total CPG-sector growth, meaning that companies without an effective digital capability risk stagnation, share loss or even shrinking sales.”
So what does this 1-5-10 shift mean for CPG brands? It’s time to go digital or get left behind.
Technology to Drive Growth in CPG
Going forward, technology will drive growth in the CPG sector. In fact, digital channels already have the most influence when it comes to impacting in-store purchases of home care and general food products – and that importance is only expected to increase in the next few years.
Online penetration won’t happen evenly across the board, however. Younger and more affluent households (who tend to be early technology adopters) are more likely to make the switch sooner. Experts expect the U.S. CPG market to follow other early market leaders, such as the UK, South Korea and France, which have online penetration rates of 5, 4 and 3 percent, respectively.
Of course, certain categories within CPG will reach the digital tipping point faster than others. Some shelf-stable categories, like diapers, are already there, with more than 10 percent digital share. And while more experiential categories, like meat or produce, may lag behind, we will continue to see them gain digital traction through the onslaught of new services and apps built specifically for these types of products.
Nay-sayers who insist consumers will always want to hand-pick their cuts of filet or Honeycrisp apples in store need only remember that it used to be unheard of to buy a bouquet of flowers without seeing it in person first. This category now has an online penetration of 15 percent.
Focus on the Future
So from our perspective, what should your business be doing today to prepare for the continual increase in digital marketing penetration? Here are the top five tips from our team:
Embrace and invest in technology. Fifteen years ago, you could walk into a CD store and buy an album or walk in to a movie store and rent a VHS. Today, these stores cease to exist. As technology evolves, the way consumers shop will change. The only way to succeed is to embrace this change and invest in the technology that supports it.
Think mobile first. When thinking digital, the mindset has always been desktop first, mobile second. No more. ComScore reports that mobile has overtaken fixed Internet access worldwide. The smartphone is the gatekeeper to the modern consumer’s online activities. It’s the hub for all the apps, accounts, networks, emails, data, downloads, online purchases and more. Today, our online mindset must be mobile first.
Follow the leaders. Look to major digital shopping leaders like Amazon and Walmart. Analyze what they’re doing to innovate and evolve. See what’s working and copy those strategies for your own business.
Focus on the discovery phase. According to the report, “Almost 40 percent of off-line shoppers and more than 30 percent of online shoppers reported that technology’s impact is greatest during the discovery phase.” Consider what your digital presence has to offer consumers in this phase of the purchase lifecycle. How can it be improved to move potential customers down the funnel?
Create real-time purchase options. As more and more devices join the “Internet of things,” the idea of weekly shopping trips or even the shopping basket itself will go away. The fridge will tell you that your milk is about to expire and order a fresh gallon. Purchases will be made in real-time as the need arises. Smart CPG businesses will look at how they can enable this type of purchase behavior today.
Of course, those five recommendations are just the tip of the iceberg when it comes to staying relevant and profitable among the digital revolution that’s reinventing the way consumers shop. And it’s also just the beginning of the insights we learned from The Digital Future: A Game Plan for Consumer Package Goods. Look for more of our top takeaways in upcoming posts.
For more information on The Brandon Agency’s digital capabilities for CPG clients – or any other industry – please contact us or leave a comment below.