The Amazonification Of CPGs
If you manage a large brand in a low involvement category the stakes have never been higher. Many brands are still latching onto big retailers to help them hit their quarterly numbers, but to me this is no different than Blockbuster enjoying its steady DVD rental business in the early 2000s
Consumers will continue to shift their purchases of CPGs to Amazon
Once powerful CPG brands can no longer rely on their powerful big box distribution to drive volume
Private label pressure is mounting both from Amazon (through Amazon basics) and big box private label (Walmart’s Great Value brand.
Here are a few new paths I’d be looking to pursue:
Create or buy on-demand services for consumers to collect first party data and direct sales channels (Wag, Glam Squad, Handy)
Create multi-category subscription services bundled with content to differentiate
Buy or build in-home hardware (Washing Machines, Vacuum Cleaners, Dishwashers) to use as a loss leaders to drive intravenous selling through proprietary smart home integrations
This is all new territory for an industry that has largely stayed constant since the days of the Ed Sullivan show in the 60s, but this is what true innovation means.
Transcription:
E-commerce is now the de facto way to purchase things. Amazon bought a company called Whole Foods, so now they're getting in the groceries and low-involvement categories. Basically anywhere that consumers are, they're going. It used to be if you sold detergent or soap or toothpaste, that your brand actually mattered and as long as you can get Walmart or a big mass retailer to buy your stuff, you'd be fine.
But in a world of Amazon, that model actually doesn't exist anymore. And what Walmart is starting to is create its own brands. So, if you're a consumer, what are you going to spend more money on? Great value, the Walmart brand, or French's mustard when you don't really care about the brand of the mustard. And Amazon now is creating its own private label brand called AmazonBasics and they're going into low-involvement categories and I think they're really going to start to wipe out a lot of these CPGs. Now, it doesn't mean that Coca-Cola is going out of business tomorrow, but they best be looking to evolve their model.
