At a recent meeting with the Heads of Brand of a major CPG client, everyone around the table was asked to name their favourite online shop and the reason why.
The usual suspects were mentioned – Amazon (“I’m in love with Prime”), Asos (“Their returns policy is incredible”), alongside lesser-known companies (a tile brand was namechecked for its simple sampling; a bike shop for its depth of product). A large and diverse range.
Of forty attendees, how many do you think gave price as the primary reason?
Not a single person mentioned price as a motivation. All reasoning revolved around an entirely different factor: the convenient experience offered by these stores.
Convenience is hugely powerful. The consumer businesses that have dominated the last two decades all essentially offer convenience at their core. Apple enabled us to carry 10,000 songs around in our pocket. Uber provides cabs to our door without needing to lift a finger or even speak to anyone. Prime Now will deliver wine and beer for those upcoming World Cup celebrations or the lipstick you need for your night out – within the hour.
Yes, cost is crucial. But when it comes to choice, consumers are motivated by cost of effort, not cost of currency. You could be selling Ferraris for £1.50, but if your showroom is at the bottom of the ocean, you’ll likely find few customers willing to make the trip.
So what does all this mean for the Consumer Packaged Goods industry? The sector is self-assured that it gets convenience – the model is based around easy replenishment and retailers have invested heavily in ecommerce, trying to snag leadership in the fast growing sector. CPGs themselves have tinkered with digital business models – testing Direct To Consumer approaches, personalisation, and other tactics – but have yet to truly focus their considerable muscle at making shopper’s lives easier. For all our talk about e-commerce convenience, picking up a CPG product in-store is often easier and more immediate than ordering online.
Welcome to the Convenience Gap.
We coined “The Convenience Gap” to describe the difference between how easy it is to buy in-store as it is to buy online, measured by the global difference in shopper spend.
The online grocery market is forecast to reach a very respectable $170bn by 2020. It sounds like a big number, and it is – but it starts to look like peanuts when you consider that by the same year, the global value spent on grocery shopping for both on and offline is predicted to be £6 trillion.
That’s a whopping $5.8trn difference between online and offline spending. Why is this important? Because to get a slice of it, all brands need to do is make shopping their products more convenient than the rest. To paraphrase an old joke, you don’t need to be faster than the bear – you just need to be faster than the brand next to you.
Those who put the work in now will reap the rewards in just a few short years. Forward-thinking CPG brands can buck the predicted timeline and snap up a significant portion of that difference for themselves by making it easier for customers to purchase their products online.
It’s a question of when, not if, a brand comes along to innovate their way into bridging the Convenience Gap. The advances made in foundational technologies like machine learning, robotics and manufacturing are significant: technologies which seem almost tailor-made to make the online buying, delivery and supply chain process more convenient and immediate. When you consider their implications, the gap suddenly starts to appear much narrower.
Also consider that the vast majority of the next billion new online users are expected to be from developing nations. A mixture of poor literacy rates and increasingly accessible internet infrastructure means this fresh wave of digital consumers are perfectly inclined to voice-activated or augmented reality browsing – two formats that have been front-of-mind for shoppable tech developers. A whole new generation of internet users who are entirely comfortable with shouting demands at a voice assistant is powerful motivation for a brand to push forwards with innovation in voice-activated, immediate and convenient shopping.
In the past, CPG brands have been slow to innovate both in tech and business model, to their cost. Gillette would have never adopted a bargain subscription service, leaving them utterly unprepared for Dollar Shave Club to swoop in and snap up market share. Large CPG needs to recognise how its industry is fragmenting, with new players emerging. And with a £5.8 trillion dollar opportunity on the table over the next decade, CPG can’t afford to tread softly – it’s time to get adventurous. Disrupt business models. Re-evaluate how new tech lets you accelerate or dispel old truths. Imagine what Coca-Cola might have done with its ‘within arm’s length of desire’ mission using today’s technology? Adapt ahead of the changing needs of consumers. Be present when demand arises naturally, rather than solely buying media to create it.
If you don’t? Your brand may wake up in 2020 to find your competitors have jumped the Convenience Gap – and taken your customers with them.