eCommerce Models for CPG Manufactures

In today’s world, if a company has not considered eCommerce as a strategic distribution channel, then their existence in the future is highly questionable. Online sales have accounted for more than 21% in 2020, compared to 16% in the previous year. Online sales have doubled every 5–6 years and continue to grow in the future. The retail industry has benefited significantly through online sales in the last decade, but most of the CPG manufactures are caught in the dilemma of channel cannibalization and differentiation.

The biggest interest for CPG in online sales is not the sales revenue but importantly the consumer data. In the brick-and-motor model, the manufactures had no chance to understand the purchase behavior of the consumers in the store. But in the brick-and-click model, the data is available in digital formats but unfortunately not accessible in its pure form. Let’s explore some of the models, the CPG manufactures can adopt to drive the top-line growth directly or indirectly through online sales and at the same time get access to the value consumer information.

eCommerce channel distribution has 5 business models — B2C, B2B, C2C, C2B, and B2A. And each model can have different types of websites and revenue share components. Let us explore the possible combinations relevant to CPG companies

B2C — Business to Consumer

CPG companies directly selling the goods to the consumers through the online channel. It is direct competition to the retailers, so to avoid the distribution channel conflicts, the companies must either differentiate the value or sell at premium market prices. This model enables the companies to get the 1st party consumer data.

Value Added Services

Premium services to the consumers through 1–1 online consultation and services like the online retail outlets. ShopCuup.com offers A+ content, detailed instructions, and a personalized fitness consultation through a 1–1 video and audio chat. Such services are difficult to be provided by retailers and consumers would be ready to pay premium prices for such personalized services.

Customized goods

Personalized or mass-customized goods, which are normally not available in retail stores. They are several fulfillment partners available in the market, who offer label printing and fulfillment services. For example, myhersheysbar.com offers a customized wrapper for your favorite chocolates, which can be gifted or shared on any special occasion.

Dropshipping

Platforms such as AliExpress, Doba, etc provide the marketplace for the suppliers to dropship goods. The external eCommerce stores can sell your products and send the orders to the supplier for shipment. Marketplaces offer OOB integration with the standard eCommerce platforms such as Magento, Shopify, etc.

Third-party (3PL) seller in the marketplace

Sells goods in the online marketplace such as Amazon, Walmart, etc, and completely manages the logistics. In this case, you manage the inventory, shipping, and customer service. Amazon offers both Fulfillment by Merchant (FBM) and Fulfillment by Amazon (FBA), and in these cases, the seller will be the brand. Example: LiveKey products are sold by the company but shipped through Amazon.

B2B — Business to Business

Sell the goods to a business such as retailers, 3rd party sellers, wholesales\distributors, and to the convenience stores. Though they may not get the consumer information, at least they have granular level 2nd party sales data, which can be used for the marketing arbitration.

Digital Shelf \ Wholesale \ 1PL

One of the most common strategies that CPG companies execute today. In addition to shipping the products to the retailers, they also supply the rich A+ content, which can be displayed on the retailer eCommerce stores such as Walmart, Amazon, Kroger, etc. The inventory and shipment are managed by the retailer and CPG only supplies the goods & contents. Platforms such as channeladvisor.com, salsify, and productsup.com offer syndication services for the product information.

E-Tailing

Enable the product display pages on your brand sites, with online conversion capabilities. The services like channel advisor provide the online buy now capability, which links the products to 1 or more online retailers for the consumers.

3rd Party warehouse sellers

Tired of managing content for different retailers and marketplaces? No problem, contract with the 3rd part sellers such as pharmapacks, Medino offers services for CPG to sell goods on marketplaces and also manage the inventory

Stores for distributors

Platform to facilitate the supply of goods to the small convenient stores through the distributors. Hershey launched a C-Store online platform for the small stores to place orders to the distributors and also get benefited from the loyalty programs.

C2C — Consumer to Consumer

How a business can benefit from C2C eCommerce? It is one of the interesting channels for the CPG to take advantage of, with growing social adoption and decentralized content productions. It has become necessary for brands to leverage social influencers and build brand equity.

Social selling \ Personal Commerce

The key opinion leaders in the social platforms, build trust among the followers and have the ability to influence a specific segment of consumers. For instance, fitness instructor, dietician, beautician, or sports figure. One of the outcomes of establishing a CDP or social analytics platforms to identify and connect with the KOLs to build brand equity. Brands such as Brooks, Aeromat uses platforms such as Plazah to enable personal commerce.