People love to shop, and advances in online retail now let consumers shop anytime, anywhere. This access is unprecedented—and not just for shoppers; retailers also have 24/7 access to their consumers. As a result, e-commerce has transformed the business model and changed how shoppers approach retail. Despite its momentous effect on shopping behavior, however, e-commerce is far from revolutionary; it’s simply an evolution. Many retailers and manufacturers have simply recognized the opportunities created by new technology.
But some categories haven’t capitalized on these opportunities as well as others. For example, consumer packaged goods (CPG) purchases online have generally trailed categories like apparel, electronics and media. Still, the segment has been growing over 20 percent annually, and we expect online to account for 4-5 percent of total CPG sales in 2015. E-commerce can help CPG manufacturers and retailers boost sales by engaging with shoppers in new ways and providing unique shopping benefits through their online models.
The Internet provides retailers and manufacturers the opportunity to create a direct relationship with shoppers, which ultimately can influence both online and offline purchase decisions. Unlike with brick-and-mortar shopping, where consumer engagement is limited to advertising and the in-store experience, online allows for 24/7 engagement via websites, emails, social media, product reviews and many other avenues. However, different shoppers use the Internet differently, and understanding your core shoppers and their key points of engagement online are essential to build stronger relationships with them.
Retailers and manufacturers must ask themselves: How should I use digital to best reach my shoppers? Much of online shopper’s CPG engagement, for instance, is centered around gathering information and saving money:
However, unlimited access isn’t enough for shoppers: Consumers look to purchase goods online only when there is a perceived benefit versus traditional brick-and-mortar stores, such as convenience, assortment or lower prices. Therefore, e-commerce is a natural step for retailers and manufacturers as they plan to grow their businesses, as digital technology offers unique benefits to online shopping. And as with digital consumer engagement, retailers and manufacturers need to build their strategy by asking: What online shopping benefits are most important to my shoppers?
E-commerce offers a number of conveniences to shoppers: auto-replenishment reduces the need to plan regular purchases for products like diapers, vitamins and diet aids; shipping allows shoppers to never have to make a physical trip, as well as avoid the need to carry home heavy goods such as pet food; and saved shopping lists let consumers shop more quickly for the goods they buy most often. In addition, the unlimited shelf space afforded to online retailers provides the potential for a much broader product assortment than in brick-and-mortar stores and can draw in consumers looking for hard-to-find products. And some companies such as Heinz are going so far as selling new products online from the start, skipping the shelves altogether. Lastly, while online pricing for consumer products has not yet shown significant advantages versus brick and mortar for many categories, as online purchasing grows, economies of scale will likely make e-commerce more competitive on this front as well. The rate of price changes online (about weekly) is already significantly more frequent than the rate of price changes in-store.