CPG Brands Vulnerable to E-Commerce Onslaught, Research Finds

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Business360, Inc. announced today that its research shows the world’s top personal care brands are poorly prepared for the upcoming e-commerce onslaught. Few brands are making the investment to engage and serve consumers online and, instead, are too freely ceding the consumer relationship to nimbler players, weakening their consumer franchise and endangering their future competitive position.

As the battle for consumers moves online, brands could recapture some influence over consumers, but research by Business360 shows few of the world's top personal care brands are making the investment to engage and serve consumers online. E-commerce is about to hit consumer packaged goods (CPG) companies and established brands will see their competitive position erode as nimbler players capture the consumer relationship.

SHIFTING ECONOMICS PUTS CPGS IN THE CROSS HAIRS

Long protected by low margins and high weight-to-price ratios, CPG categories were for years unattractive to e-tailers. Online activity still generates less than 1 percent of sales for most CPG categories – the lowest penetration of any major consumer category – and many retailers and suppliers expected to remain largely untouched by e-commerce.

But shipping and pricing innovations and the sheer scale of some online retailers means CPG can now be delivered profitably, and the industry is set to be disrupted. Sanford C. Bernstein expects online sales will account for 25 percent of all CPG purchases in as little as five years. And a 2014 study projects a marked switch between in-store and online sales, with in-store store sales in the U.S. of personal care products falling $6 per month on average and online sales increasing $9 in just three years.

AMAZON LOOMS

Amazon is gunning for CPG – it declared CPG a target category and is rolling out initiatives and innovations – and is casting a long shadow, influencing all category players.

Since 2013, AmazonFresh has offered same-day grocery delivery (including some personal care products) to a small number of US markets, but more significant is Amazon Prime Pantry, which for $6 delivers up to 45 pounds of goods for its Prime members, an offer that covers many personal care products. Along with other e-tailers, Amazon is moving aggressively to lock down consumer relationships with subscription models and repeat order programs.

PERSONAL BRANDS SITTING BACK, FAILING

Against this backdrop, you’d expect brands to do their best to engage consumers online, meet their needs, build bonds and shore up their competitive position. But Business360’s review of the sites of over 30 leading personal care brands in each of the top 10 e-commerce markets worldwide shows this isn’t happening. With few exceptions, personal care brands are mostly failing to engage consumers or build relationships to help ensure online sales.

Of the four companies reviewed – L’Oréal, P&G, Unilever and Colgate – L’Oréal is the top performer. Its brand sites are more popular and they engage consumers better. Often the difference is stark.

L’Oréal’s brand sites, for instance, have many more links-in from external sites. Against the average in the study sample, L’Oréal’s brand sites have 222% more links-in, while Colgate has 94% fewer. And visitors to L’Oréal’s brand sites stay longer (22 seconds more than the average of 1 minute 32 seconds), while visitors to Colgate’s brand sites leave 11 seconds sooner than average. Still, personal care brands generally fare poorly – the average visitor to Nike.com spends nearly 4.5 minutes on the site.

Personal care brands are also failing to build a sales relationship with consumers. Some sites offer no e-commerce, some link to sites that do (usually retail partners), and others offer full direct-to-consumer (DTC) functionality so consumers can buy products without leaving the site. Brands are slowly moving to offer more and better e-commerce functionality but progress is slow. Of the sites of 32 brands reviewed across the top ten e-commerce markets:

  • 25% had no e-commerce functionality and didn’t even link to sites that do
  • 70% linked to third-party e-commerce sites
  • 5% offered DTC e-commerce

By failing to build their online franchise, personal care brands, and CPG brands generally, are missing the chance to engage consumers at the easiest point of contact, and a growing body of research shows that offline success rests on online engagement. Losing online means losing offline and personal care brands are already late to the game. It’s time for CPG companies to get serious and join the fray.

To build a better understanding of what personal care brands are actually doing online, Online Engagement and Direct To Consumer Strategies in Personal Care (http://business360.com/?p=e-commerce) provides detailed insights with a deep-dive into the top personal care brands of P&G, Unilever, L’Oreal and Colgate to find out what they are doing with e-commerce, and especially DTC sales.

ABOUT BUSINESS360, INC.
Business360 is a specialist research and insights company that delivers a range of knowledge services to the world’s largest companies. It works in over 20 languages, leveraging a global team that is used by all five of the top personal care companies and four of the top five food companies. Learn more at http://www.business360.com

http://www.personalcarebusiness360.com/
http://www.e-tail360.com/
http://www.foodbusiness360.com/
http://www.retailbusiness360.com/

STUDY SCOPE
This is the first of four planned studies. The others cover Beauty, House & Home Care, and Food & Drink.

Each study covers ten countries: United States, China, Japan, United Kingdom, South Korea, Germany, France, Brazil, Australia, and Canada. These countries represent the top 10 according to AT Kearney’s 2013 Global Retail E-Commerce Index.

PRICING
Executive Report (29 pages): $850
Executive Report with Market Review (51 pages): $1,250
Market & Brand Reviews per Company (19-31 pages): $600-$800 each
Full report (124 pages): $2,950

To purchase or for supplemental studies: contact us
U.S: John Marchant, +1 212 866 4680
U.K: Roger Sharp, +44 (0) 1304 613474

See the Table of Contents here, http://business360.com/?p=e-commerce

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JOHN MARCHANT
Business360
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