We're All E-Commerce Companies Now

The day of e-commerce is finally here. Online sales of everyday items — soap, orange juice, toothpaste — more than doubled between 2006 and 2010, and are expected to double again by 2014. Nielsen estimates that online CPG sales in the US will reach 25 billion by 2014. A staggering figure, to be sure, but I believe this growth is grossly underestimated, because when it comes to CPGs, the e-commerce we are seeing today is not the e-commerce we were expecting just a few years ago. Traditionally, e-commerce has been viewed as buying or selling a product online with direct delivery. It was a simple business model distinction — either you sold online, or you sold in store. But over the past few years, with retailers increasingly moving their inventory online, the landscape has become more complex. Online shopping now comes in three different forms: national ship (e.g., Amazon.com), home delivery (e.g., Fresh Direct), and pick-up in store, which many retailers will be launching this year.

For CPGs, reaching consumers at point-of-purchase is no longer simply a battle for shelf space, but a war to connect meaningfully across a wide range of digital platforms and delivery mechanisms. The sheer diversity of companies entering the online shopping space, coupled with the evolving segmentation of the e-commerce model, renders the traditional definition of e-commerce obsolete. It is time to look at a new definition of what it means to be an e-commerce company. We need to decouple the concept of e-commerce from the actual back-end business process behind it, including the logistical delivery of the product, the infrastructure and supply chain. Now, e-commerce is not so much a business model as an essential approach to engage consumers. If your company sells a product online, regardless of how it's delivered, you are an e-commerce company. But because CPGs have never traditionally thought of themselves as "e-commerce companies," sales and marketing teams are being challenged by their customers to move into the space. So the question is: how do CPGs build the capabilities to compete in online shopping, across all its forms? In store, CPGs look to drive purchasing through couponing, calculated product placement, bundling, and other promotions. But online, CPGs have the opportunity to record every customer transaction and track consumer behavior and sentiment. We have the ability to run millions of permutations resulting in a real understanding of what our consumers are purchasing in bundles (such as a soda and a bag of chips), how to get into their online carts, and how to become part of their repeat purchase cycle. This is the first time we are able to get this level of specificity in our sales figures; we will then be able to take the insights from online sales try to apply them in-store. For this to happen, marketers in CPGs need to learn to think like e-commerce marketers and apply our deep consumer knowledge in a new, digital context. The CPG of the future will rely on a sales ecosystem that integrates online interaction with in-store marketing. That will require sophisticated digital capabilities throughout the business, across all functions, including marketing, sales, R&D and supply chain. The companies that win will be the ones that aggressively exploit e-commerce models, integrating digital deep into their businesses to do so.