BrainTrust Query: Can Mobile Break Retail’s Grip On CPG Sales?

Jul 17, 2012

Through a special arrangement, presented here for discussion is a summary of a current article from ScreenPlay InterActive’s blog.

Today, although consumers can buy CPG items online, physical retailers aren’t feeling much of a pinch from those sales. But what if a more enhanced/convenient form of selling in the m/e-commerce space was to arrive?

Is it hard to imagine that if CPG products became ultra-convenient to buy with a couple of taps on a phone drug/supermarket/discounter sales might truly get hurt?

The internet is a disruptor to many business models, affecting and destroying business/commerce platforms that were once immovable. And while retailers place a lot of faith in the fact that people like visiting a store and touching and feeling product, there are two scenarios where experiencing physical product is not important to the sale: repeat purchases and commodity items. That sounds a lot like CPG.

Consider an early example that may have legs: Dollar Shave Club.

Razor blades are a necessity that you pick up on a regular shopping trip or, in an emergency, when you’ve run out. Dollar Shave Club is trying to change that thinking and it has acquired funding to do so. Their model is predicated upon automated recurring monthly shipments based on your anticipated regular usage for as little as a buck a month (plus $2 shipping). Time will tell if this start-up will catch on with consumers, but here’s the take-away: it’s a simple model that’s vying against a very old purchasing pattern.

And … it’s not the only innovative model for CPG’s to open their minds to.

In a ubiquitous mobile future with one-touch payment capabilities (practically upon us), imagine how easy it would be for a virtual packaged goods seller to offer an app that lets you order a replenishable item for delivery the moment you realize you want it, anytime, anywhere, competitively priced with retail stores. If the app (or mobile ads) tied single item purchases into lifestyle/location patterns in a tap-and-go purchase scenario that took only seconds, it could seriously change the perception and buying habits of CPG consumers — at the expense of physical retail.

Arguably, the two biggest changes to retail CPG sales in the last 50 years have been the family pack and the convenience store. So is it really so unimaginable that new thinking, targeting new audiences, might just reshape another industry as subtly as the wrecking ball (a.k.a. the internet) has devastated bookselling, travel, music and much more?

Discussion Questions: Will direct-to-consumer CPG sales models become viable through m/e-commerce? In what other ways do you see online potentially chipping away at retail’s grip on CPG categories? Are there any CPG categories that are particularly vulnerable versus others?

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15 Comments on "BrainTrust Query: Can Mobile Break Retail’s Grip On CPG Sales?"

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Dr. Stephen Needel

So we have one store that does razor blades, meaning another will do toothpaste, another deodorant, ad infinitum for the 500 or so products I regularly keep in my house. Expecting me to partake of 500 e-retailers is silly. Now, consolidate this into one vendor, and you’ve made my job easy. And if you deliver to my house at a price comparable to my local stores, I’m all in — what a great idea!

Wait — isn’t this what lots of defunct companies have been trying to do for years (R.I.P. Webvan etc.)? Technology in search of an application rather than technology serving a need.

Richard J. George, Ph.D.

No reason to think otherwise. Internet sales are currently viewed as paper cuts by food retailers — a bit painful, but not currently mortal. Online sales take some business and some margin. More importantly they reduce store visits which negatively affect high margin impulse purchases.

However, going forward, the “digital natives” will change the CPG shopping paradigm. I am reminded that Noah started to build the ark before it started to rain. For traditional food retailers it is drizzling. Take heed.

Zel Bianco

I think this could work in certain categories and certainly will work with razor blades. The blade category is so ripe for this as about $20 bucks for about 5 blades is just too much. This is also a category that needs to be replenished on a regular basis and would be more convenient through a delivery mechanism like this.

Max Goldberg

Companies like Quidsi have feasted on selling CPG items to consumers. They offer good (not great) prices, great customer service and easy interaction on a variety of products. The ease of use and time savings more than compensate for not having the absolute lowest price. And by the way, they are owned by Amazon. CPG retailers should be concerned.

Tony Orlando

There is no stopping the future of certain CPG categories thriving on the internet, as bricks and mortar stores will continue to get pounded. If you want a great steak, then I still have a business, because the cost of delivering a really great quality steak (Lobels, Omaha Steaks, Fleming) are outrageous.

Anything durable, and non-perishable, will find its way to consumers online more and more every year. How stores adjust to this reality is going to be very interesting, as in my opinion, the big box stores will become much smaller in the future.

Mark Heckman

While I agree with other panelists that CPG commodity items will likely be sold more frequently direct to the customer as technology and processes improve, I find it hard to envision the day when the majority of consumers have the TIME to foster a relationship with individual brands. Even with product aggregation such as with Amazon, where many brands could offer their products on one site, buying pet food, paper, detergent and the like online for home delivery has a nebulous future. It represents an incremental effort and expense that could be included during the consumer’s bricks and mortar trip that they will likely continue to make for fresh and specialty items.

I have learned over the years through research and observation that buying groceries is inherently a visceral, contact sport. Folks want to squeeze the Charmin, smell the bread, and thump the watermelons. I have not seen online shopping simulation crack the code on these elements yet!

gordon arnold

If I can get pizza, flowers and a meal delivered, why can’t I get anything I want at an acceptable price delivered right away? As the price of fuel continues to escalate, the economies of scale will force slow-to-respond retailers to view this as an opportunity which may happen too late for some to stay around. Consumers will continue to minimize their travel more for necessities only and allow the desire for leisure travel to diminish even further, as we continue towards $5.00 per gallon, $10.00 per gallon gasoline, or even more.

It is easy to see CPG sales models being the bread and butter of consumer e-trade. Retailers with limited or restricted IT resources are the main obstacle holding back growth here. This very fact opens a large window of opportunity to start-ups and established manufacturers willing to venture into electronic retail. Ready or not, e-trade is here and demand is forcing it to grow.

Ben Sprecher
Ben Sprecher
4 years 11 months ago

This is as much an issue of changing the end-to-end supply chain as it is of changing the consumer’s purchasing mindset.

I agree with the other panelists about the convenience that mobile/online purchasing and subscription models present. However, the good ol’ bricks-and-mortar store has one killer feature: supply chain efficiency. Stores solve the “last mile” distribution problem of getting product to consumers’ homes by leveraging the labor, time, and transportation of the consumers themselves. In most cases, you simply can’t match those prices when you have to individually package, ship, and deliver products in 1’s and 2’s to the customer at home.

Will some products (such as razor blades) migrate towards online distribution? Absolutely. But until someone figures out how to fundamentally alter the economics of delivering low-value, high-volume or high-weight product to a consumer, the most price-sensitive shoppers (and that’s a lot of the population nowadays) will continue to buy their Cheerios and bottled water at Walmart.

Ed Dunn
4 years 11 months ago

I cannot help but reflect on my days as an infantryman getting a MRE (meals-ready-to-eat) box and stuffing the pre-packaged package in my rucksack. Probably had the same look as any astronaut in space getting their dehydrated space food before take off.

Nobody wants to be delivered the same CPG stuff every month because it is bland. I do not want the same lotion brand with the same scent, the same toothpaste and toothbrush brand and so on. I like to go out in the real world and shop for these things to appease my my primal hunter/gathering instincts.

Ralph Jacobson

D2C is already very viable. Several CPGers are selling to consumers via the web and specifically via mobile, and have been for years. I just spent last week in Europe with a large CPG company and they are very much going the D2C route to market.

D2C exhibits far more agility for the CPGer than brick stores. Social channels can be used to identify and create trends. It’s a winner for CPG.

Herb Sorensen
There is something else going on here that is bound to have a huge impact on this business, and it is related to WHO actually owns the customer, that buys the stuff — CPG in this instance. Mobile commerce is a huge wildcard in addressing this issue. When someone is on the internet or mobile internet, they can shift around with lightning speed, making ownership there dependent on building a MUCH broader relationship than any brand is likely to manage. The problem for the bricks and mortar retailer is that shoppers bring their mobile purchasing devices with them into the store. These devices have made cameras (scanners) ubiquitous in stores, smashing a standard retailer no-no, to shoppers: no unauthorized photos in the store. This is just one example of how, so far, retailers have sought to control the shopper’s relations in the store — with growing failure. Retailers are attempting to preempt this openness of communication/relations in their stores through having their own apps for their stores. But apps that can work across multiple stores — without retailer permission — will grow in significance. And those apps will NOT be brand apps. A super-app is coming! I submit that stores’… Read more »
Craig Sundstrom

“Is it hard to imagine that if CPG products became ultra-convenient to buy with a couple of taps on a phone, drug/supermarket/discounter sales might truly get hurt?”

Imagine, no, but I don’t think it will happen…and it’s not hard to see why. The aforementioned “Shave Club” seems as streamlined as can be, and yet it will have a shipping cost fully twice the cost of the product! If consumers hate paying cc transaction fees (see other discussion), I think they will tire even faster of this kind of ratio.

Kenneth Leung

I think that works for personal items where either there is tremendous brand stickiness like bespoken clothing (custom sizes or materials), or items with fixed attributes/consumables that can be fulfilled by subscription model (Jenn Air offered me a subscription model for the water filter for my fridge). In general, when it comes to CPG, only a certain segment have the discipline treat restock shopping rationally. Those sodas and candy by the checkouts are placed there because people do buy on impulse.

Vahe Katros

We may be entering a period where ‘what we don’t know is what we know’; transitions are like that. I can see a scenario where I scan at home, build a list and batch the order, perhaps with others — why not? Socially-enabled bulk purchases … perhaps I’ll pick them up from a farmers market while I shop for locally grown, in-season products. On the demand side, perhaps I will make my order from a bloggers site whose opinions and knowledge I value. I am seeing more content driven commerce pinterest-like products and tools coming out of the incubators or being pitched here in the valley. But retailers will find a way to survive and I look forward to experiencing how they figure out how to add value to my life.

Tom Redd

CPG companies are structured from the ground up to manufacture and store large batches, and to deliver to stores or DCs in bulk quantities. To do B2C, they need to invest not only in front-end systems, but also in their supply chain network. Although exciting prospects may be positioned ahead, there are lower hanging fruits for CP companies to work on, but retail still holds the grip on the key categories.


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