In the next year, a third of US households will shop for groceries online for the first time. That is 40 million first baskets, which Amazon and other online CPG providers such as Walmart are battling for. Research shows 25% of the products that make it to grocery shoppers’ first baskets will stay there, raising the competition stakes.
However, cost-effective shipping of household and personal care items is a problem retailers have not yet solved. The high weight-to-cost ratio is prohibitive; for example, a case of coke costs as much to buy as to ship. As a result, e-commerce growth in the category has been slow. In 2013, online sales accounted for only 1% of CPG sales.
But that is starting to change, and CPG e-commerce is near a tipping point. Online CPG sales are expected to grow to 25% of category sales in the next five to ten years. Amazon’s cost-effective (at least for the consumer) solutions Amazon Pantry and Amazon Subscribe & Save are partially responsible for that growth. Subscribe & Save offers free shipping and discounts on eligible items for subscribers, and Amazon Pantry enables consumers to order from more than 2,000 Pantry-eligible products to fill up a box of four cubic feet or 45 pounds for a flat $5.99 shipping fee. Brands eligible for these programs are more likely to land in first baskets, and therefore more likely to land life-long consumers.
So far, Procter & Gamble is leading CPG enterprises with 630 products available for Subscribe & Save and 32% of its brands eligible for Pantry.
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