E-commerce forces CPG brands to think differently

Discussion
Photos: P&G
Jan 04, 2019
George Anderson

Consumer packaged goods companies have always had to adapt their businesses to meet the needs of retail customers as new and growing channels of distribution (dollar stores, warehouse clubs, etc.) emerge. This is certainly the case over the past 20+ years as brands have been challenged in previously unforeseen ways by the development of digital commerce.

CPG giant Procter & Gamble is a clear case. The brand manufacturer is among the first to dip its toes into the direct-to-consumer space while also working with new customers (Amazon.com) and established ones (Walmart) on a variety of fronts. One example of this is P&G’s Tide Eco-Box, an ultra-concentrated liquid detergent contained in a cardboard box designed to be shipped to consumers’ homes. The detergent is currently listed for sale on Amazon, but not on the Target or Walmart sites.

P&G says this new lighter but sturdier option eliminates the need for bubble wrap and other precautions that distributors typically use to safeguard liquid detergent for home delivery. Because the item uses less water and plastic, it is also lighter and less expensive to ship. The packaging design also takes up less space than bottles in the back of delivery vans, meaning more SKUs can fit.

“We know that the ‘last mile’ remains the biggest challenge both economically and ecologically in eCommerce,” said Isaac Hellemn, brand manager for eCommerce innovation in P&G’s fabric care group, in a statement.

Sundar Raman, vice president of P&G’s fabric care business in North America said the Eco-Box uses “a fundamentally different approach than we’ve taken in the past and represents our relentless obsession with delighting consumers — wherever they want to purchase our brands.”

While the arguments for the Eco-Box seem straightforward, concerns have been raised about the packaging design, which has been compared to boxed wines. In recent years, P&G received criticism by consumer advocate groups and in the press when young children became ill after eating detergent in the form of Tide Pods.

DISCUSSION QUESTIONS: How do you see online commerce affecting the CPG industry over the near-term and further out? Which CPG brands do you think have been most effective to date in adapting to the changing demands of online shopping?

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"As more household shopping moves online, particularly on replenishable items, it's great to see CPG companies are now responding to the unique demands of the channel."

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21 Comments on "E-commerce forces CPG brands to think differently"


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Jeff Sward
BrainTrust

As soon as a specific CPG product falls into “replenishment” mode, it falls off my brick and mortar shopping list. I know the brand. I know the product. I know the end use. I don’t need any new information. I don’t need to see, feel or touch. No emotion, no new thinking. When I’m running low, I reorder. Just make it easy. Sustainable packaging? Even better. At some point this has to mean less shelf space for this kind of product at the local store.

Evan Snively
BrainTrust

Agreed Jeff — the two e-commerce purchases that have most changed my overall buying habits are baby supplies and dog food. Both happen on a regular cadence so I automatically get re-orders after initially setting up my preferences. Big upside for the diaper/wipe/formula brands I buy from as I stay brand loyal. However, there is actually a downside for the dog food brand as I was never going to switch brands but now I don’t go to the store as often to buy ancillary products like treats, which I know is a reason that some major pet food brands are hesitant to really get into the DTC space.

Jeff Sward
BrainTrust

I’ve embraced this whole scenario as a win/win. I’m in the store two to four times a week no matter what. I LOVE fresh sourdough and veggies. If I need ancillary items, I visit the aisle I often ignore. In the meantime, schlepping dog food is off my list. Thankfully the UPS guy is very good-natured about it.

Gene Detroyer
BrainTrust

Despite my opinion that e-commerce is the retail future, I have been reluctant to “subscribe.” I am dipping my toe in with up to three subscriptions. We will see how it works. If it does, there will be more.

But notably, in my behavior, I was not enticed by the discount but by the convenience.

The answer to the question is yes, they will adapt — and there will be a tipping point within the next one or two years.

Brandon Rael
BrainTrust

With the emergence of the DTC model, CPG brands have evolved and transformed to the point where they are now less dependent on retailers. We have seen that CPG brands such as Kellogg’s, L’Occitane and Covergirl are doing an outstanding job with their online presence, but have also penetrated the retail scene with new flagship stores. Experiential shopping has also emerged with Coca-Cola., Unilever and Nestle experimenting with pop-up retail locations.

Within the growing segment of direct-to-consumer brands disrupting the CPG industry is a trending curated subscription-based model. According to a study by McKinsey, subscription e-commerce brands like Dollar Shave Club and Blue Apron are experiencing enormous growth.

We should expect both traditional global CPG and smaller direct-to-consumer CPG firms to continue to evolve and adapt to the changing consumer shopping preferences.

Charles Dimov
BrainTrust

Great example of CPG adapting to e-commerce. For many goods that are ordered online, there isn’t the need for the beautiful or shapely bottles. Focusing on efficient, recyclable, and compact materials is a good move. With all the environmental concerns, taking these steps will endear the CPG firms with this growing group of customers.

Unfortunately, P&G is the only one that truly resonates in my mind — among the large CPG players — with an effective/different online approach to their product. These are still early days, and I expect to see more from the other big names in CPG.

Gene Detroyer
BrainTrust

I think about my product manager days and all the time that was spent on graphics and packaging — all the research, what to say and how to say it. Now take those resources and put them into e-commerce friendly packaging.

We will see very effective developments by the CPG companies.

Frank Riso
BrainTrust

The changes being made by P&G and soon additional CPG brands are just more steps in this new grocery sector, home delivery. The need to reduce cost, improve productivity of the work force, and increase sales are all part of any retail business so why not the home delivery sector? Brands such as P&G, General Mills, and Heinz are all looking at the transition to lower cost packaging. That will be the real challenge to the industry if they decide to enter the direct-to-consumer sector and take on retailers as competitors. Let us hope now that they and others continue to be in partnership with all aspects of the retail food industry.

Bob Amster
BrainTrust

This is going to cause an ongoing debate and source of friction between retailers and CPG manufacturers, as it can between haute couture and retailers. When the manufacturer starts competing with its former channel of distribution, we are going to have either a problem between the two. It creates a yet-to-be-defined paradigm as to who sells what products to whom. What will develop out of this competition? Maybe retailers will stop selling certain products but, in doing so, they will have to identify supplementary sources of revenue to make up for the voids. Wait and see…

Georganne Bender
BrainTrust

Eco friendly, lighter packaging, sustainable, direct to consumer – all great things. What’s missing here is responsibility to the consumer. After the horrors of little kids eating Tide Pods last year, thinking they were candy, you’d think P&G would stop packaging poisonous chemicals in a manner that is similar to foods. I know you can’t police the world, but you certainly can be thoughtful about it.

Michael Decker
BrainTrust

Online commerce is finding it’s sweet spot with CPG now — going after the staples that consumers buy every week or month without a second thought. There is no “shopping” for these items per se — so Amazon and e-commerce must innovate with delivery rather than with product development. And so Tide looks for cheaper, more environmentally sound and more efficient ways to ship a load of product via an “e-shopping cart” rather than via the metal one with real wheels in the grocery store. Physical stores will eventually become showcase venues for the products that customers need to touch and feel before they buy.

Dave Wendland
BrainTrust

P&G certainly is an excellent best-in-class example. However when Unilever acquired Dollar Shave Club, the bar was set mighty high.

Streamlining the supply chain to reduce distance between the CPG product and consumers is an essential goal in today’s market. Here’s a wild prediction: imagine consumers “manufacturing” their own personal CPG products in their homes with ingredients provided by a brand company. Sci-fi or a real possibility? You decide.

Kiri Masters
BrainTrust

There are a few problems these brands are solving with their move to lighter, smaller packaging:

  1. Reducing risk of Amazon “CRaP”: Amazon drops products from their website which cost too much to ship (“can’t realize a profit”);
  2. Improving margins: lighter, smaller products have lower shipping expenses. Tide’s box can actually ship in its own container, reducing cost even further for online retailers. The packaging may also cost the company less to produce.;
  3. Responding to consumer demand for less waste: Tide’s new packaging has 60 percent less plastic and uses 30 percent less water in its soap.

As more household shopping moves online, particularly on replenishable items, it’s great to see CPG companies are now responding to the unique demands of the channel.

Lee Peterson
BrainTrust

Although online sales will affect CPG companies in terms of packaging, size and probably price, AI will effect them even more. “Alexa, show me whitening toothpaste.” What does Alexa choose? CPG must now market to Alexa (aka Amazon), Google, etc. AND to customers directly, and who’s ready for that? All in all, DTC, in whatever form, is likely to become a huge margin buster for CPG. Let’s just hope, for their sake, that it doesn’t also effect product quality, which would be a death knell.

Joanna Rutter
BrainTrust
4 months 19 days ago

The entire retail world has a distribution waste and emissions problem, all the way down, from manufacturing to packaging to delivery. CPG. FMCG. Fashion. Beauty. It’s everywhere. We now know more than ever that it’s the responsibility of corporations to adjust these practices now or create drought, widespread poverty and rising coastlines, and the responsibility of the consumer to fervently demand them as if their lives depended on it, because it does. I am Team Anything that reduces this waste. If it looks like boxed wine and becomes a meme, so be it.

Harley Feldman
BrainTrust

As consumers become more comfortable ordering retail products online, it is natural for consumers to want to order products direct from CPG companies just as they do other retail products. The challenge for CPG companies is they are used to selling and delivering in bulk to retailers. As P&G has done with the laundry detergent, selling and delivering products to individual consumers can be challenging. It likely changes the cost equation for manufacturing and delivery of the product, and the product still needs to be sold at a price consumers will pay. Not many CPG companies have been successful in attempting this transition to direct-to-consumer sales. This is evidenced by the limited trial being done by P&G, one of the largest CPG companies.

Ralph Jacobson
BrainTrust

There are a number of CPG brands globally that have made successful D2C efforts for several years. Sure, the majority of product volume goes through retailers, however the opportunity has never been better for CPGs of all sizes to leverage the multiple channels available including D2C.

David Naumann
BrainTrust

With the effectiveness of online commerce, CPG and other manufacturers (particularly clothing) are blurring the lines of retail and becoming retailers. Cutting out the middleman (retailers) offers these companies higher margins and the ability to garner more information about customers. We will continues to see more CPG and manufacturers expanding into retail. This is not good news for retailers selling commodity items and it will definitely create friction between retailers and manufacturers. In the end, traditional retailers will get the short end of the stick.

John Karolefski
BrainTrust

This is another smart step into D2C by a savvy consumer products leader, which launched its Tide Wash Club for pods in 2016. Subscriptions for products that need to be replenished on a regular basis make a lot of sense, especially for heavy items like bags of dog food, cat sand, and laundry detergent. I expect more D2C by other CPG companies. KIND Healthy Snacks sells its fruit and nut bars D2C through the KIND Snack Club. Snack bars need to be replenished regularly, right?

Cate Trotter
BrainTrust

This is an area where we’re only going to see more growth. When it comes to products like detergent, how many of us are wedded to the traditional method of buying? The idea that we can stock up online and have it delivered to home is an attractive one and that gives these brands room to play with packaging concepts that may not work as well in a store. For the likes of Amazon it’s also a positive development in terms of encouraging customers to shift their stocking up to online. Any move towards more sustainable packaging and delivery is a positive one and I’m excited to see what innovation might come next.

Kenneth Leung
BrainTrust

I think that as the population that is used to e-commerce ages, they will shift to online fulfillment of supply type products like detergent, especially when they start driving less. I see e-commerce being used for basics fulfillment and shopping trips to stores for fresh products and experiences. I still wonder about the economics of it all in terms of shipping costs and also increased environmental impact of all the delivery vehicles, but I guess the next economic downturn will determine the winner/loser of that.

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Braintrust
"As more household shopping moves online, particularly on replenishable items, it's great to see CPG companies are now responding to the unique demands of the channel."

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