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Today’s consumer packaged goods (CPG) companies are facing a winner-take-all world in which about half the sales growth—more in certain categories and markets—is coming from digital channels. This report finds that companies have to earn their online market positions with new approaches and skills tailored to digital sales.
The Winner-Take-All Digital World for CPG identifies four factors that are shaping the market for CPG companies. First, while multiple business models are emerging, only a few will be disproportionately influential. These include several models advanced by Amazon (such as home delivery and Prime) and click and collect, which has demonstrated success in Europe and is well suited to the lifestyle of busy and mobile US consumers. Second, the game is increasingly played by new rules requiring very new skills. Third, early-adopter consumers are already settling into patterns of digital buying behavior. Fourth, and most important, success breeds exponential success: once brands establish leadership positions online, they are tough to dislodge.
The report makes the case that major CPG players essentially need to start from scratch in digital commerce against a host of competitors, many of which have never even shown up on the brick-and-mortar radar screen. It is a fundamentally different competitive set, and even small companies can be massive disruptors. In category after category, many such new competitors have already discovered how to win and have created substantial leads.
The report lays out the basic digital building blocks for CPG companies. These include developing an integrated strategy, revisiting category management by channel, rethinking supply chain configuration, and building an adaptive organization. Companies that want to finish first need to take action in six ways: fight for digital “shelf-space” prominence; establish a strategy for Amazon; develop the capabilities for click and collect; keep pace with new business models; retool marketing and media; and develop digital leadership.
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