When Walmart entered the grocery business in the 1990s, it became one of the world’s largest grocers seemingly overnight. Some retailers are still recovering from that shock, but as it turns out, that shift may turn out to be nothing compared to the impact of CPG products’ massive move to online shopping.
The online giant Amazon finished its third annual Prime Day sale 60% ahead of its revenue from the same event last year, and their special offers included many high-velocity CPG products. This deserves the attention of other grocery retailers, given Amazon’s push into the grocery business with Amazon Fresh, Prime Pantry and even its own private label food brand Wickedly Prime. Assuming Amazon’s purchase of Whole Foods is approved and goes forward, Amazon will become one of the largest grocers practically overnight, similar to Walmart’s rise.
The difference is that Amazon is not simply a new competitor in an established space. The company’s rise represents a complete overhaul in the way consumers discover and buy CPG products traditionally sold at grocery and drug retailers. Retailers that fail to respond to this change in buying behavior will find themselves struggling to catch up with Amazon and other e-tailers that have been introducing new services that make online CPG purchasing virtually frictionless.
CPG brands are driving purchase intent online
Competing in the online space may seem overwhelming to retailers that do not have decades of experience marketing there, but there is a wealth of knowledge, experience and opportunity waiting for them in their CPG brand partners. These manufacturers do have decades of experience successfully marketing their products online, and they are in need of partners that can convert interest into conversions.
CPG brands are eager to close the gap between their online marketing campaigns and sales. The buyer interest that these brands are so adept at cultivating online is easily lost when consumers do not have an easy path to conversion. Most consumers don’t remember the online advertisement for that new product they were so interested when they are wandering the aisles of their favorite grocery store a few days later. That’s why CPGs also fight so hard for prime shelf space and in-store advertising.
However, CPG brands have realized that’s extremely difficult to do with consumers that are shopping online more and going to stores less frequently. All of the purchase intent they work so diligently to generate online can be lost when consumers cannot be reminded of it when they are actually shopping. Instead, CPG companies are finding ways to help consumers either convert immediately or “save” their intent digitally.
Partnering with CPGs gives grocers a marketing edge
In the past, one of the behaviors CPG brands could hope for was to be added to a shopping list once they cultivated interest. The digital analog is the cart, and online shoppers typically use their shopping carts as digital shopping lists. Once they see an item that captures their interest, they are quick to add it to a shopping cart, perhaps buying it later when they decide to convert on the entire cart (low-cost CPG products are rarely ordered alone). But how do they get that item into an online shopping cart? Most consumers are quick to abandon any process that takes more than a couple of clicks.
Consumers are quick to add low-risk impulse purchases to shopping carts as long as the process is simple. It’s just like in a physical store: when consumers see something that they think looks interesting, they toss it into their carts. But if it’s locked behind a case, they will not search for a manager who has the key and wait for the case to be unlocked just to buy it. That same principle applies online, and the retailers that can provide the easiest path to conversion from CPG partners will win.
Thriving in the age of digital CPG purchases will require that brands and retailers work together to harness consumer purchase intent. Today’s consumers want a fast, efficient and seamless path from intent to conversion, and will simply abandon a path that puts hurdles in their way. Grocers that work with CPG brands to provide this ease of purchase are well-positioned to compete, as grocery shopping behavior accelerates its move online.
This article originally appeared in Food Dive.