COVID-19: How the Consumer Product Industry Can Adapt

As of April 2, more than 90 percent of Americans are under government-issued stay-at-home orders designed to curb the spread of the coronavirus, forcing consumers to stay indoors and practice safe social distancing. This rapid change has resulted in a dramatic shift in consumer shopping behaviors, who must now seek new ways to make sure they have the supplies they need.

While stores selling essential goods remain open, consumers are relying more on online channels to stock up on groceries and other goods. According to research firm Brick Meets Click and ShopperKit, 31 percent of U.S. households, or roughly 40 million consumers, used online grocery services including home delivery and pick up in March. In a survey by Grocery Dive, 26 percent said they used an online grocery service for the first time – more than double the number average number of monthly online users reported in August 2019.

The challenges with the availability of mass brands is also leading to an increase in business for small DTC brands, particularly those who make and deliver bathroom tissue, health products, and household essentials. For example, Peach, which makes high-end, eco-friendly bathroom tissue saw new customers increase by 279 percent in the last two weeks of March, while hand sanitizer brand Touchland sold out of its products and amassed a waiting list of over 10,000 orders.

Though America is hoping for a slow return to normalcy over the coming months, shopping trends established now are likely to change the way consumers shop in the future. According to Grocery Dive, 43 percent of shoppers noted that they were likely to continue online grocery shopping after the pandemic ends. To prepare for this “new normal,” consumer packaged goods (CPG) companies will need to accelerate toward digital transformation by opening new routes to market to meet these dramatic – and likely long-lasting –  shifts in consumer needs and behaviors, while taking control over their inventory, pricing and reliance on big retailers. To do this, CPGs should take a holistic approach to commerce, which integrates and aligns digital channels, partner e-commerce and physical retail to create connected experiences across each stage of the customer journey.

DTC and Online Channels

CPGs are facing an existential crisis as they risk losing control of the brand and product experience, increasingly relying on retailers to meet consumer needs. Prior to COVID-19, traditional CPGs were lagging behind in e-commerce. While online sales rose 35 percent and 20 CPG companies accounted for 96 percent of market share in physical stores, they only captured 14 percent of the same market share across digital commerce channels.

As consumers continue to take less frequent trips to the store, online ordering and stock-up trips to physical locations will become the norm, with consumers looking for value and convenience. Social distancing is fueling this behavior in the short-term, but as more consumers try these methods, they’re likely to warm up to them and continue using digital channels.

CPGs can meet these new demands with direct-to-consumer services customized by consumer behaviors and budgets. Many large companies have acquired or tested subscription-based brands already and can leverage and scale existing capabilities across their portfolio to offer more value to their consumers. Leveraging first-party consumer data gathered through direct channels and loyalty programs, brands can tailor specific content, offers and experiences to individual consumers based on their specific needs and past shopping behaviors. In addition, CPGs who have control over their buying experience through their direct-to-consumer channels can implement predictive, dynamic pricing to optimize in surge moments and deliver value when consumers need it most, rather than having their brands fall victim to the price gouging of third-party sellers.

Launching and running a direct-to-consumer business can be challenging for CPGs as consumers are more likely to go to a marketplace or multi-brand site than jump from site to site for all of their essential packaged goods. CPGs can create a collaborative network of category adjacent partners, distributors and suppliers to design and deliver multi-brand platform solutions with speed and scale.

Making the Experience Easier

As findability and availability become the baseline for purchase, brand loyalty goes by the wayside. For CPGs, this poses new opportunities to attract new customers and build relationships to strengthen retention long after the crisis subsides.

Brands can foster consumer loyalty by becoming the go-to source for availability data. For example, adding a “where to buy” button to a brand’s website and strengthening search – both backed by real or near-real time local inventory data – will enable consumers to find what they need when they need it. Increasing the channel options beyond brick-and-mortar to include retailer websites, marketplaces and direct sales can provide consumers with more options to purchase.

Managing Inventory

CPGs can use AI and machine learning algorithms to optimize supply chain and dynamic inventory management to ensure products are on the physical and digital shelves with the most demand by leveraging consumer shopping behavior, search data and other dynamic demand predictors. For brands struggling to keep up with demand, offering replenishment timeframes or even an alternative product option, including a value brand or white-label brand made by the manufacturer may result in diminished sales in the short-term, but can increase brand affinity in the long run.

Building Consumer Trust  

While the last decade has seen a shift toward healthy products across all consumer goods categories, COVID-19 is likely to add a new dimension to the needs related to product health and safety. While the pandemic has had fairly widespread global effect in its first round, future cases may be centralized in key hot spots. CPGs can create trust and ease consumers concerns over the safety of their products, especially food product, with supply chain transparency, ingredient information and readily-available consumer support.

Looking Ahead

The world will forever be impacted by this pandemic. New, digitally-engaged consumers will bring a different set of expectations and new opportunities for brands. For many CPGs, e-commerce has not been a primary driver of business, with their existing digital channels and operations not optimized for shift in demand. Now is the time for consumer goods companies to quickly seize the opportunity to become truly consumer-centric and build a scalable omnichannel presence.