The retailer that seems to win at everything it attempts just added another victory last month: Amazon.com's third annual Prime Day was a rousing success. The massive sales event that had a bit of a rocky start two years ago has now come into its own, generating 60 percent more revenue than last year. Just another big win from the company that shocked some with its acquisition of Whole Foods.
The top-selling items on Prime Day were the Echo and Dot, Alexa-enabled devices that tap into consumers’ desire for ultrastreamlined shopping. Combine that with Amazon’s big push for AmazonFresh, Prime Pantry, and its private label food brand, Wickedly Prime, and it’s easy to see that the company is eyeing a massive future in food and CPG sales. With its buyout of Whole Foods having gained regulatory approval, Amazon is extraordinarily well positioned to pounce on this rapidly expanding market. In fact, two-thirds of the Alexa-only specials offered on Prime Day were for — you guessed it — CPG items.
While Amazon’s enormous customer base and Alexa technology provide enormous advantage in this space, the retailer is still limited — and vulnerable — in some very important ways. First, as slick as Alexa is, consumers will be using it at “point of known need” when the user runs out of a product or realizes they're close to doing so. As every CPG marketer knows, only 30 percent of grocery/drug store sales are planned or driven by need; 70 percent are driven by in-store product visibility. That 70 percent is vulnerable to being forgotten in this “proactive shopper” Amazon/digital model. Second, CPG brands, and really the CPG industry, are largely driven on cross-brand trial and product experimentation. It will be even harder for new brands to get into the cart when a request for, say, “chicken soup” automatically carts the same brand bought in the last order.
Partners in Opportunity
The good news is that demand for CPG items is still largely created by brands. They have decades of experience driving demand through sophisticated marketing strategies, and that has expanded beautifully into digital.
CPG brands have always faced a gap between marketing their products and consumers converting on them. All of those carefully crafted TV, radio and print ads presented risk if consumers forgot all about them once they were actually inside grocery stores. That’s why the most successful marketing campaigns typically include an in-store promotion element. It’s also why manufacturers fight so hard to obtain premium shelf space on store shelves. They know that product visibility when consumers are equipped to buy is key to closing the deal.
This is one reason that online shopping can present a challenge to marketers, because there are no shelves or physical point-of-sale tools to remind shoppers of intent. Shoppers who have moved online for convenience and saving time are much less likely to click around a website checking out new items, so they miss the chance they had to pick up a box or read a display when they were winding down aisles of a store.
What CPG brands need online is a way for consumers to act instantly (and, in a frictionless manner) once intent is created via digital mechanisms — e.g., ads, social posts, emails, etc. Typical multistep conversions don’t work because few consumers will make a special purchase for CPG items. However, smart retailers are learning to capture intent through today’s version of the old-school shopping list: digital shopping carts.
Brand and Retailer Collaboration is Key
The thing is, most people don't immediately add an item to their shopping list the moment they see an ad for it, and purchase intent fades between the moment of interest and and when the shopping list is actually written. The digital landscape can close that gap because consumers can simply click on an ad that catches their attention to instantly add the item to an online shopping cart. They probably won’t check out right then, but that intent is preserved until the consumer ultimately takes the entire cart through checkout.
Retailers that understand this behavior and forge powerful partnerships with CPG brands will win. Brands have control over which retailer shopping carts their digital ads point to, and they're looking for the shortest, simplest routes to conversion. Virtually every brand has already seen in their own data that each successive click loses 80 percent to 90 percent of their audience — driving out clicks is key. Brands will look to partner with retailers that let the brand/consumer get those items into carts as quickly and easily as possible.
As CPG shopping continues to grow online, retailers best positioned to win are those that partner with brands to simplify conversion. Those that excel at this will enjoy sales boosts driven by the marketing expertise of the brands they work with. And that could be a dose of rocket fuel in competing with Amazon/Whole Foods.
Jennifer Silverberg is the CEO of SmartCommerce, an online consumer product goods marketing platform.
Jennifer Silverberg is the CEO of SmartCommerce, the international solution helping leading CPG brands like P&G, Unilever and Nestle own and drive their customers’ online buying experiences. SmartCommerce provides unique, brand-focused solutions that help build brand-customer connections in the rapidly changing CPG marketplace.