What are Consumer Packed Goods (CPG)?
Consumer packaged goods (CPG) are items used daily by average consumers that require routine replenishment or replacement. They include everything from shampoo to snack bars and pet food to tea bags. Consumer demand for CPGs largely remains constant and is a highly competitive sector due to its low consumer loyalty low switching costs and high market saturation.
ECommerce for CPG brands
Within eCommerce consumer packed goods have long occupied a tricky area. The industry has had huge growth but the dilemma for CPG companies lies within its low profitability in the industry.
However last year eCommerce sales across the CPG industry skyrocketed even in verticals that aren't typically sold online. Consumer behavior's has completely changed over the last year and brands have introduced innovations that were unimaginable just a couple of years ago.
To help you adjust to this period of intense change ChannelSight has pulled together some of the key CPG eCommerce trends and tactics that you need to know about in 2023.
CPG industry trends for 2023
The consumer packaged goods industry has evolved rapidly to meet changing customer demands. Technology has infiltrated many aspects of life especially how consumer packaged goods are being bought and sold online. Tech such as chatbots are creating a streamlined consumer journey and AI is helping marketers to create highly personalized experiences.
Here are some of the most noteworthy trends for CPG brands to watch out for in 2023.
The rising importance of eCommerce for CPG brands
CPG brands saw strong growth in traffic in 2020 as almost all retail moved online. Throughout 2020 this growth coincided directly with lockdown measures as consumers were forced to shop online.
The global economic situation is dominated by a surge in inflation. In August 2022 the figures were estimated to be 9.1% in Europe and 8.5% in the United States. FedEx CEO Raj Subramaniam announced that he believes we're on the verge of a global recession.
We haven't experienced inflation on these levels in the global economy in forty years but history quite clearly tells us that when inflation weakens our purchasing power consumers cut back on spending for non-essential items.
The nature of the CPG industry means that consumers trends will stay relatively consistent. However competition within the market is only going to grow as the market tightens as consumer spending power is shrinking.
Increased basket quantities
Based on the data above we extrapolate that consumers are shopping more online with more basket generations taking place for CPG and Health and Hygiene products.
Moving forward we expect this trend to continue as CPG brands roll out thoughtful product bundles loyalty program and cross-selling campaigns.
Certain products will see continued growth in 2023
With shoppers staying at home their priorities have changed significantly. Here are some categories within the CPG industry that will see continued growth this year:
- Self-care: Consumers are taking a holistic approach to self-care using a variety of products together for maximum impact on their health and wellness. 68% of consumers say they are always looking forward to self-improvement which is a salient reason why this industry will continue to grow.
- Plant-based products: Meat alternatives continue to increase their market share. By 2024 the industry is forecasted to reach $480 billion. This year consumers will be looking for sustainable high protein and immune-boosting options.
- Personalized items: As technology improves it is easier quicker and less expensive for brands to customize their products. M&M's and Coca Cola led the way in the CPG industry. Now the likes of L'Oreal and Clinique have launched custom skin care and hair colour lines. More CPG brands are likely to follow.
Demand for fulfillment flexibility will remain
According to a study from Deloitte over 50% of consumers spent extra money to conveniently get what they needed last year. Among other things they paid more for on-demand fulfillment and convenient pick up options.
Retailers and customer-centric D2C brands have managed to compete with Amazon by offering these kinds of services. As consumer expectations are unlikely to change businesses offering these services will be well placed to reap the benefits in the coming year too.
Some CPG brands also partner with retailers or third-party services to offer BOPIS. Due to COVID-19 and the various levels of lockdowns across the world this may be a challenge currently. However 'Buy Online Pick Up In Store' can be very beneficial for brands once stores reopen.
Mobile devices are driving CPG conversions
Last year most CPG conversions took place on mobile devices with re-ordering proving particularly common. But when CPG orders do take place on desktop they tend to have a higher value.
Knowing this allows brands to plan their CPG marketing accordingly. You should focusing on promoting premium products on desktop devices and retarget past customers with replenishment reminders on mobile along with lower priced items.
Top CPG Marketing Tactics in 2023
With these trends in mind here are some of the best CPG marketing tactics that brands can use in the coming year.
1. Maximize product reviews
According to a study by GE Capital more than 80% of people research online before buying in a physical store underscoring how important the power of reviews can be. Many consumers are using online channels to search for product reviews. Retailer sites like Amazon make it easy to compare one CPG product from another.
For some of the most successful brands product reviews and product ratings play key roles in their sales strategy. For example San Francisco Bay Coffee was the second best-selling grocery brand at Amazon between Jan-May 2016 with a staggering 23696 reviews on average.
2. Focus on converting website users
The traffic received on website product pages is normally very engaged and it's highly likely that purchase intent is high among these users. Having a comprehensive website with clear imagery and site hierarchy is essential for eCommerce stores to succeed but taking this one step further and linking brand websites with trusted retailers is essential for brands in the CPG market to provide a seamless consumer path to purchase.
This can be achieved with the use of a Where to Buy solution. Smart home business Tado implemented Where to Buy software enabling users on their website to click to their chosen retail and saw a significant boost to their online conversion. Check out the case study here.
3. Create an omnichannel strategy
To win the digital shelf CPG brands need to make their products available across a variety of sales channels. Think popular marketplaces retailer sites and their own D2C sites.
Retailer sites can drive large volumes of sales but D2C stores allow brands to build customer loyalty and collect in-house data on consumer behaviour. For this reason some of the most successful companies in the CPG industry are taking advantage of both.
The likes of Dove L'Oreal Colgate Coca Cola and Pepsi all use omnichannel strategies to reach customers on every channel.
CPG brands have found creative ways to make their stores unique. Coca Cola offers exclusive personalised bottles and apparel. L'Oreal allows shoppers to virtually try on their products. Pepsico has even launched two D2C websites which sell food and drink bundles. The modern consumer journey is complex rather than linear. So CPG brands can nurture conversions by allowing shoppers to conveniently make a purchase on their favourite platform.
4. Take advantage of retail media
It's always important to stay up-to-date with emerging marketing platforms. But for CPG brands who want to drive online sales it is essential they take advantage of retail media advertising.
Retail media allows brands to advertise their products to consumers as they shop. This makes it easier for them to convert.
With so many retailers offering loyalty programmes these ads can also be carefully targeted and personalised. This makes them a game changer for marketers in the CPG industry.
Right now the likes of Amazon eBay Walmart and Asda all offer retail media opportunities. But more and more platforms are following their lead so check all your retail channels.
5. Leverage social media and invest in content marketing
To see CPG marketing success this year brands need to replicate the in-store experience online. The best way to do this is with robust content.
In addition companies in the CPG industry often have large portfolios so they should focus on creating a strong digital presence for a few key products. This will help build brand recognition. Then to maximize sales companies can add cross-selling and upselling to their CPG marketing strategies.
As mentioned the growth of sales on brands' own websites was one of last year's key CPG eCommerce trends. As part of this new behaviour shoppers are looking for signs of validation. Brands can reassure them by adding user-generated content reviews and third-party accreditations to their websites.
6. Push product subscriptions
On D2C channels brands in the CPG industry have the unique opportunity to increase customer retention with subscriptions.
P&G's Native deodorant offers a 17% discount if shoppers sign up for delivery every three months while Gillette lets customers select their own frequency and gives away every fourth order for free.
Amazon's 'Subscribe & Save' feature also allows CPG brands to secure a year's worth of sales with just one click. Brands can use this alongside their retail media ads to supercharge their CPG marketing strategies.
When creating ads remember that most repeat purchases are taking place on mobile devices.
7. Make voice search part of your CPG marketing
Now that consumers are comfortable making purchases via mobile they may soon turn to voice assistants for convenience.
Buying consumer packaged goods doesn't usually require much research so a quick voice search will often suffice. It is ideal for making repeat purchases too.
In 2021 voice search became much more widespread. In the US for example the majority of households have a smart speaker. In Europe and the UK this figure is around a third. A UK survey also suggests that 60% of smart speaker owners have used their devices to make a purchase.
CPG brands will be the first to benefit from a surge in voice searches and companies that implement relevant marketing strategies now will benefit in the years to come.
8. Strengthen retailer relationships
Thriving in the age of digital CPG purchases will require that brands and retailers work together to harness consumer purchase intent.
Low-cost CPG products are rarely ordered alone due to their impulse nature and low value it makes it essential to join forces with as many retailers as possible to close the gap between ecommerce marketing and sales.
Peter Thomas Roth a leading skincare brand connects their consumers with their preferred retailers using ChannelSight's Where to Buy Solution. This provides a seamless consumer experience that can also help reduce distractions and drive conversions.
Why should brands drive consumers to retailers? Because consumers are quicker to add a low-risk impulse purchase to their shopping cart on a retailer site along with many other products rather than just buying one small item direct on a DTC store. Offering more choice of where to purchase ensures brands can convert those consumers who prefer to purchase your product elsewhere.
9. Take advantage of big data
Companies must constantly monitor their products performance test new variations of product offerings and keep a close eye on competitor tactics.
Partnerships with retailers and with the use of a Where to buy solution brands can uncover rich performance insights to be drawn right down to basket and product-level data. CPG marketers should constantly question if they're using the right channels? Can they see an end to end view of their customer's journey? Can they link brand interaction and a final sale? How are they adding value?
The future of the CPG industry
Recent years have proven pivotal for the growth of the CPG industry and eCommerce in general. In the past companies could get by without eCommerce. But now they need to aggressively adapt online strategies and channels to stay relevant.
Moving forward CPG marketing and product offerings will become more and more personalised as CPG brands begin to offer unique and convenient services to win over customers. As technology evolves CPG marketing will also become more AI-centric. Beyond this the CPG industry will continue to look to Amazon and Walmart for inspiration as they continue to set trends and lead the way in eCommerce innovation.
eCommerce will play a vital role in the CPG industry for a long time to come. While market forces can quickly change future forecasts it is clear that consumer confidence won't fully return to the physical retail experience for a number of years.
To adjust brands need to adapt new technology strategies and partnerships - and they need to do it fast.
ChannelSight has a team of experts that can help you build a robust and data-driven eCommerce strategy to help increase your conversions. Contact us today to book a demo with our team of experts.