The digital future of consumer-packaged-goods companies

After lagging behind other sectors with rocketing online sales, consumer-packaged-goods players are at an e-commerce tipping point. Here’s how they can succeed.
While e-commerce has disrupted retail with vibrant new marketplaces and shopping tools, one sector was for a long time blissfully above the blast area: consumer packaged goods (CPG). In fact, CPG had so few online competitors that in 2013, online accounted for less than 1 percent of total sales in packaged food and about 3 percent in nonfood areas, according to Euromonitor.
Those days appear to be over: some of the most innovative experiments in e-commerce are now occurring in the CPG sector. In the past year alone, for example, Amazon has rolled out tests of Amazon Pantry, which lets its Prime users fill a box with selections of more than 2,000 products and ship them for a small fee; Prime Now, which offers delivery to the home within one or two hours; and the Dash Button, an Internet-connected device placed anywhere in the home that provides a one-touch way to order refills. And it’s not just Amazon that’s blazing a digital CPG trail. Regional grocers are finding success with “click and collect” pilots in which products are ordered online and picked up in stores, and Campbell’s is customizing soup packages for millennial shoppers.
So what’s driving the sudden acceleration in CPG e-commerce? The emergence of mobile devices for Internet access, for one. US mobile devices account for 60 percent of total Internet usage, and earlier this year the number of mobile-only Internet users topped desktop-only users for the first time. Mobile-device owners engage in online research and purchases at higher rates than the overall population, according to McKinsey’s 2013 iConsumer survey, and another McKinsey survey on digital consumers showed that CPG categories are particularly popular: for example, the online-research rate among purchasers of cereal is 45 percent, while for soap it’s 55 percent and cosmetics 65 percent. It’s no wonder, then, that the results of our 2014 Customer and Channel Management Survey, which polled more than 50 leading CPG companies, bore this out. In the survey, online commerce was ranked as the second leading driver of change over the next five years—above other likely game-changing influences such as the rise of value-conscious shoppers, the growth of private labels, and the use of big data. McKinsey – Read more…