Shifting the balance of power

With the pace of digital commerce in packaged goods expected to accelerate, consumer packaged goods (CPG) companies cannot ignore online sales channel anymore, says a Deloitte report. According to a Deloitte study comparing consumers' and CPG executives' views on e-commerce, 92 per cent of the executives agreed with the statement that the online was a strategic sales channel for CPG companies. Yet only 43 per cent of the executives thought their company had a digital commerce strategy, indicating a gap between e-commerce's perceived importance and companies' readiness to execute. The report says with online shopping, CPG companies have the opportunity to shift the balance of power with brick and mortar retailers in their own favour.

Today, brick and mortar retailers often have the upper hand over CPG companies (for example, retailers have the ability to preferentially allocate shelf space to store brands), and the cost structure for CPG companies to serve retailers is often high (for example, due to slotting fees, promotions, distribution, and retailer-specific SKU etc). However, in the online world, CPG companies have an advantage over e-retailers, who need CPG companies' brands to entice consumers. If executed well, a CPG company's e-commerce strategy holds the potential to make the online channel cost favourable, not just now, but into the future.