Impulse Buying in an e-commerce Environment
One of the biggest challenges for Consumer Packaged Goods (CPG) companies, is how to tap into impulse buying in an e-commerce environment. In traditional retail, this has been a key driver of CPG sales, and brands invest significant amounts into merchandising product placement, especially next to the cashier to grab on the way out.
In e-commerce, however, they haven’t totally figured it out yet, and it could be the difference between being at the forefront of the e-commerce revolution or falling way behind.
The Numbers Are Huge
Online CPG sales are a big deal. The segment grew 36% between 2015 and 2016, reaching $10.4bn in sales, led by health supplements, pet care, and cosmetics, with each generating more than $1bn in sales during 2016. Overall, CPG sales grew twice as fast as total e-commerce sales for the year.
Online purchases represent only 2 percent of food and beverage sales, compared with 12 percent of total retail — which just goes to show the massive growth potential of this market.
Most people are familiar with the “Retail Apocalypse”, that has seen household names like Toys ‘R Us and The Limited all but disappear from the retail scene. A number of factors contributed to this trend, however, the rise in e-commerce has been the dominant contributor to brick & mortar brands struggling to keep going. While the retail sector was hard hit and may only now be recovering, it’s the CPG brands that are nervous about being left behind as e-commerce continues to dominate.
In fact, when it comes to an apocalypse, companies like Coca-Cola and Pepsi could be next. Sales of soft drinks by volume have dropped for 12 consecutive years in the US alone, and with consumers increasingly shopping online, companies such as these are losing out on the impulse buys that come with the easily accessible products at the physical checkout, and in-store promotions. In fact, up to 30% of beverage sales are impulse buys.
The key for brands like Coke and Pepsi will be triggering impulse buying for online shoppers. As fewer consumers visit the grocery store and choose to shop online, impulse purchases, and therefore profits, are at risk.
What’s Being Done
Brands are fighting back, however, and some are taking a smart approach that seeks to work with, rather than against, the e-commerce trend. It means being smarter, leveraging access to data, and understanding customer journeys and paths to purchase.
Some innovative tactics companies are using to be competitive online and stimulate impulse purchases include:
Providing different products or package sizes than those that are available in-store. Without the squeeze on aisle space and storage, brands can offer a much wider range of products, including dimensions not typically stocked in physical stores.
Boosting impulse buys by integrating with deliveries. Often shoppers, especially non-Prime users, will be slightly short of the threshold to receive free delivery. Brands are capitalizing on this and offering to fill the gap with a 6-pack of Pepsi, gum, or candies. This “1 more purchase to get free delivery” has been highly effective at becoming the latest iteration of the impulse buy.
Another strategy being used is offering dinner and recipe ideas that include certain products, or a product bundle. “Meal Inspiration” is a growing trend, and videos placed correctly can drive significant sales for CPG brands. The prolific social media channels of companies like Tastemade and Tasty attest to the popularity and engagement potential of such content.
Finally, Brands are using data to deliver targeted ads to the right users. Users that prefer a particular drink or candy will be targeted, and in a few clicks can have their favorite snack in their online basket. Adding “shop now” buttons, which often direct users to brands’ products on Amazon, increase the likelihood of shoppers impulsively buying products they have a weakness for.
Furthermore, big companies may actually be best equipped to tackle this shift. It has been shown that when it comes to shopping online, if you’re not among the top results, it’s almost infinitely tougher to matter.
With most people buying items on the first page, and sponsored ads allowing brands to “muscle their way in”, it is easier for big brands to push their products in front of consumers. Just like in physical retail, getting the best spots often involves buying them, giving big companies a massive advantage and making it tougher to compete for everyone else. This means that online businesses have to play smart, leverage data and understand customer journeys and paths to purchase to compete.
Amazon Is In The Game
Of course, Amazon is a central player in this key area of the future of retail, and nowhere is this more apparent than with the “Amazon Go” concept store. This store of the future combines the latest tech with a real-world feel, offering the convenience of a checkout-free experience with the greatest impulse-buying temptation possible. As Bill Murphy Jnr puts it, “Amazon Go feels less like going to a store and more like just raiding your own pantry. That means people potentially pay less attention to the cost of what they’re buying — and make more impulse purchases.” Whether this will be rolled en masse remains to be seen.
Will the CPG market be the next to experience an “apocalypse”? The answer is that it will depend on brands’ ability to innovate, think out the box, leverage data, and truly understand paths to purchase in order to tempt consumers with their main weapon — impulse purchases — at the perfect time and place.
This is consistent with what all e-commerce businesses are experiencing. In order to compete, and win, leveraging data and understanding paths to purchase is critical. Market Beyond can give you in-depth path to purchase data, complete with actionable insights, in real-time, across categories and down to product level. A platform like Market Beyond can be your ticket to success, leaving the apocalypse, and competitors, way behind.