E-Commerce Forces CPG Brands to Think Differently
By 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.
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?
Comments from the RetailWire 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.
Kiri Masters, Founder and CEO, Bobsled Marketing
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?
John Karolefski, Editor-in-Chief, CPGmatters
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.
Brandon Rael, Strategy & Operations Leader, Retail Strategist, Trusted Advisor
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.
Charles Dimov, Vice President of Marketing, OrderDynamics
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.
Lee Peterson, EVP Brand, Strategy & Design, WD Partners
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.
Georganne Bender, Partner, KIZER & BENDER Speaking
Online commerce is finding its 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.
Michael Decker, Vice President, Marketing Strategy, Medallion Retail