Executive Briefings

In Digital World, Even Strong CPG Companies Must Know How to Compete with Amazon

Does a CPG company with a strong brand, solid market share and good growth really need to adjust its strategy for Amazon?

In Digital World, Even Strong CPG Companies Must Know How to Compete with Amazon

The point that CPG companies need to understand is that about half of all growth in the U.S. market is likely to be online, and strong brick-and-mortar market share does not necessarily translate to the digital world, says Gabrielle Novacek, BCG partner and managing director.

“CPG companies should plan for a '1-5-10' market in the U.S. over the next four to five years, which means that e-commerce’s current roughly 1 percent to 2 percent grocery penetration will most likely expand to 5 percent but could quickly accelerate to 10 percent, or more in certain categories and geographies,” she says. “As digital channels grow, companies can’t rely on the skills and approaches they’ve used in traditional channels if they want to win in digital—which is critical to continued overall growth. They need an effective digital capability to avoid stagnation, share loss, or, in some categories, shrinking sales.

An effective digital strategy has to address Amazon. The e-tailer is not only the biggest U.S. online store, it is also where shoppers in traditional stores go to compare products, deals and prices.

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The point that CPG companies need to understand is that about half of all growth in the U.S. market is likely to be online, and strong brick-and-mortar market share does not necessarily translate to the digital world, says Gabrielle Novacek, BCG partner and managing director.

“CPG companies should plan for a '1-5-10' market in the U.S. over the next four to five years, which means that e-commerce’s current roughly 1 percent to 2 percent grocery penetration will most likely expand to 5 percent but could quickly accelerate to 10 percent, or more in certain categories and geographies,” she says. “As digital channels grow, companies can’t rely on the skills and approaches they’ve used in traditional channels if they want to win in digital—which is critical to continued overall growth. They need an effective digital capability to avoid stagnation, share loss, or, in some categories, shrinking sales.

An effective digital strategy has to address Amazon. The e-tailer is not only the biggest U.S. online store, it is also where shoppers in traditional stores go to compare products, deals and prices.

Read Full Article

In Digital World, Even Strong CPG Companies Must Know How to Compete with Amazon