How Can CPG Brands Establish a D2C eCommerce Channel?
Last Updated: November 3, 2020
Until recently, consumers depended heavily on store-based retailers to frequently replenish consumer packaged goods (CPG) like soft drinks, beverages, and food supplies even as online shopping grew into a near-existential threat.
But now, especially since the onset of the pandemic, consumers buy these everyday CPG goods online from leading eCommerce retailers, making eCommerce the fastest-grow in sales channel for CPGs.
The consumer packaged goods (CPG) industry is a goliath, representing nearly 10% of the national GDP. According to BCG, online sales snowballed from 2013 to 2018—19% annually versus the anemic 1% growth rate of in-store sales. All told, e-commerce now accounts for 40% of the growth in CPG retail sales.
CPG brand opportunities evolved sharply during the pandemic. Mondelez International reported “unprecedented demand” in eCommerce during the time and worked to meet that demand.
Why is it important for CPG brands to sell directly to customers?
Consumer Packaged Goods, or CPG, essentially are large businesses that operate as an umbrella company with several product offerings under them – think Coca-Cola, Nestle, and Procter & Gamble.
According to Investopedia, CPG products are typically household names, and “they make up one of the largest sectors in North America, valued at approximately 2 trillion dollars.”
Yet, as consumer behavior continues to evolve, CPG brands are facing three significant challenges –
With direct-to-consumer marketing, CPG brands promote their products directly to their target customers, bypassing intermediary channels such as third-party retailers. Although D2C marketing is nothing new, it is picking up rapidly in 2020.
For instance, Coca Cola customers do not typically go onto their website to order Coke’s case; they usually get it at a grocery store or an eCommerce store. In recent weeks, Kraft Heinz and PepsiCo are some of the largest CPG brands that have taken the plunge to adopt digital methods.
Here are four reasons why CPG brands must switch to an eCommerce channel –
1. Stronger personalization
CPG brands already have a selling channel through sites like Amazon and Walmart, but they typically do not get access to retrieve first-party data unless they directly reach out to the customer.
Consumer data helps CPG brands understand their customers on a deeper level to influence their product offerings, product assortment development, and even programmatic advertising.
By making use of NFC tags or QR Codes on product packaging, CPG brands can leverage this to their advantage to learn more in-depth about consumer behavior and preferences by analyzing the scans or taps on the product and allowing them to communicate with the product directly.
Steady branding is critical in communicating with existing and potential customers to help establish a strong base.
Whether it is to stay ahead of the competition, expand portfolio offerings, or even shape marketing tactics, consistent branding is essential to build out to D2C brands.
Unilever is a classic example of this. The company has several brands, such as the Dollar Shave Club, to name a few, to keep category disruptors from stealing market share.
A content strategy with engaging creative assets to boost brand awareness across various devices and channels is necessary for any business’s success.
To boost brand awareness, make use of QR Codes and NFC tags on product packaging that, upon engaging, redirects the customer to play a game, solve a mystery, or even help them find their matching purchase to complete their existing purchase.
Effective branding builds a robust identity for customers to latch onto, ensuring that the company is represented effectively on an aesthetic level.
As crucial as brand loyalty is to CPG brands, extending that loyalty to eCommerce and direct purchasing is something that most CPG brands struggle with.
When products are sold through brick-and-mortar retailers to customers directly, few approaches help understand customer preferences and what might help bring them back.
With the help of digital tools like QR Code-based loyalty programs and NFC tags, the digital experience that powers product commerce helps brands establish a direct relationship with consumers by encouraging them to scan the product with discount coupons and loyalty programs.
PepsiCo’s Frito-Lay built off its initial direct-to-consumer success by unveiling more than 60 new potato chip bags that featured 31 Everyday Smilers. Consumers could learn more about the initiative by scanning a QR Code on the back of the pack to unveil an augmented reality experience.
The direct-to-consumer eCommerce channel for CPG brands has changed the way brands interact with customers by including interactive technologies on the product packaging that helps them engage with their brands further via gamified experiences, freebies, and discounts.
QR Codes and NFC tags can help CPG brands understand their target audience better to help launch products and services in line with their target market.
Although major brands such as Hershey’s and Wrigleys distribute their products to brick-and-mortar retailers, they typically do not showcase diverse products on their shelves as opposed to eCommerce retailers.
One of the most common mistakes CPG brands make is believing that physical retail success can be directly and easily attributed to online success and that by selling the exact product configuration both online and offline.
But, indeed, it is not.
In the same regard, effectively selling products on eCommerce platforms and offline retailers requires a re-evaluation of the brand’s product offerings.
To create a successful eCommerce shelf, create exclusive product offerings with the following strategies –
1. Varying packet sizes
Create a variety of product sizes for both eCommerce channels and offline retail outlets based on customer profiling. This can be analyzed by making use of QR Codes and NFC tags and testing which size sells the best on which platform.
2. Offer different bundles
By offering different bundles on the eCommerce channel than the retail outlet helps CPG brands garner more sales. The different bundles could be a variety of packs, multi-packs, travel sizes, complementary products, and more.
Beauty products are a classic example of this. For instance, the Sephora store does not sell their best range of moisturizers in travel sizes, but on their eCommerce channel, they do.
3. Exclusive local offerings
Name retail partners with exclusive local offerings on the website that differentiate themselves between the eCommerce channel and retailers. Add a QR Code or NFC tag on the product packaging that redirects the customer to the brand’s official website with retail partners listed.
If a customer wants to purchase a product immediately, they can simply scan or tap the product to learn about the retailers in their neighborhood and buy it in an instant.
4. Early access to new products
Make use of eCommerce channels to unveil new products before it reaches the physical retailers. Learn about the product by adding a QR Code or an NFC tag by encouraging customers to leave a review.
QR Codes and NFC tags have the potential to help CPG brands and customers connect seamlessly over multiple channels.
CPG brands that are genuinely omnichannel allows customers to connect with them through social media, website, email, and even text messages. To do so, CPG brands must embrace technology that helps their businesses automate the process.
Forrester Research found that 54% of brands that sell directly to customers have also seen growth in sales via their channel partners. Digitalized product packaging helps connect with customers easily by embedding QR Codes and NFC tags on them.
For instance, a skincare product XYZ has its own eCommerce channel with an embedded NFC tag on it. When a customer purchases the product, the brand can communicate with the customer every time they tap on the product. They can help them purchase a new product, learn about its ingredients, method to apply the product, and even learn new things to use it.
Being available on multiple channels makes it easier for both the brand and the customer to accelerate their customer experience, customer service resolution, and even help establish a strong relationship with the customer.
#3 Discounts and loyalty programs
65% of a brand’s business is initiated from the existing customers.
Besides, increasing customer retention even by 5% boosts profitability by 25%-95%.
Implementing technologies such as QR Codes and NFC tags on consumer packaged goods can help brands and businesses boost sales and retain customers with loyalty programs.
Loyalty programs can help brands identify their customers, their likes, pain points, and dislikes, to increase sales and generate a positive ROI for the company.
Place QR Codes or NFC tags with coupons and loyalty programs on product packaging and encourage customers to scan or tap the product. Link them to the brand’s eCommerce website that lets customers preview any new product, get a discount, or even a freebie if they refer somebody new.
This approach helps not only customers but also the CPG brand owners. 67% of loyal customers spend more than fresh customers.
#4 Understand your target audience
According to MarketingWeek, Glossier attracts “a legion of hardcore fans with its straight-talking approach to beauty that shuns ‘stale retail’ in favor of complete customer-centricity.”
CEO Emily Weiss takes a unique approach to building the products, making each product decide a conversation between the brand and its fan on its website.
This has helped Glossier understand their audience clearly by channeling a real-time feedback loop and ensures its customers have an authentic, direct relationship with the brand.
Consumer packaged goods especially have an innate need to learn more about their target audience to sell efficiently.
The direct-to-consumer marketing proposition needs to be compellingly different, though likely complementary to existing channels.
Embedding QR Codes and NFC tags on product packages can help CPG brands look beyond traditional data to learn more about its customers’ behaviors, motivations, and purchase history.
When a brand learns “why and what” factors, they can genuinely communicate with its customers and understand the unique value without the need for a middleman.
#5 Tailor the user experience
eCommerce personalization is all about creating individualized interactions and experiences for customers.
Although eCommerce giants like Amazon have set personalization standards, it is no match to brands that develop tailored experiences for their customers that focus solely on their needs to see the results.
Collecting deep consumer insights helps CPG brands build up a picture of their customers, enabling them to offer tailor content and products that meet their needs and expectations.
The advantage of direct-to-consumer marketing is its flexibility and open communication with customers.
Embedding QR Codes and NFC tags can help CPG brands learn exclusive data about their customers and look into granular data to identify how to cater to their efficiency with deals, rewards, personalization, and service they want.
According to BigCommerce, direct-to-consumer eCommerce channel KPIs should focus on –
Average order value
Lifetime value of revenue
CPG brands with a direct-to-consumer model are wholly set to take off to new heights this year with legacy brands such as PepsiCo, Kraft Heinz, and Nike grabbing a piece of the pie alongside other popular brands such as Glossier and Dollar Shave Club.
Selling directly on an eCommerce platform provides a clear advantage of creating a captivating customer experience. Retail partners do not have the same capabilities to provide rich content for every brand they offer on their digital shelves.
Because an eCommerce channel can include enhanced imagery and videos, brand history, and additional product information, customers can feel more connected to a brand than brick and mortar stores.
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