From Packaging World

By July 1, 2016, InternetLiveStats.com estimates that 46% of the world’s population will be connected to the Internet via computer or mobile device—a tenfold increase since 1999. In this rapidly expanding digital world, we have entered the age of Willy Wonka’s Veruca Salt, demanding “I want it NOW!”

To accommodate the clamor from consumers for products purchased digitally and delivered quickly, conveniently, and efficiently, conventional retail channels have evolved over the past two decades from brick-and-mortar only to include online sales. According to digital market tracker eMarketer, Inc., e-commerce currently accounts for $1.3 trillion of the $22 trillion global retail market.

While traditionally confined to the sale of non-consumable items, online sales of grocery products have exploded over the past several years. Statistics vary widely on the trajectory of this market, but many analysts predict that between 2013 and 2018, online grocery sales will grow at a CAGR of 21.1%, reaching nearly $18 billion by the end of the forecast period. In comparison, offline grocery sales are expected to rise by just 3.1% annually during the same period.

Moving forward, CPGs need to understand and embrace this new channel to remain competitive. In Part I of a three-part special report, we will examine how e-commerce is affecting the traditional supply chain, resulting in challenges in packaging equipment design and secondary and tertiary package structure.

Putting the power in CPG’s hands
In a March 2016 article in Business Solutions, Justin Stone, Head of Sales and Business Development for supply chain-centric software provider Deposco, noted that in today’s omni-channel environment, control is shifting away from the retailer to the manufacturer and distributor, which “releases them from being dictated to by the retailers’ demands.” Author Matt Pilar quotes Stone as saying, “In this model, the power lies with those who have the inventory.”

This model, however, also requires that manufacturers considering selling direct-to-consumer (DTC) will need to develop a supply chain specifically for this channel. For now, the question of whether CPGs will engage directly in e-commerce is unclear. According to a recent study from PMMI – the Association for Packaging and Processing Technologies titled, “2015 E-Commerce Market Assessment," among the 55 key decision makers surveyed, only 29% believe that CPGs will become directly involved, 24% say they will not, and 47% are undecided.

“The idea of CPGs becoming directly involved in e-commerce evokes a wide cross-section of opinions among e-commerce decision makers,” says the report. “The perspective is overall undecided as to the feasibility of the idea, listing clear benefits and drawbacks that would await any CPG company that considered wanting to be directly involved in e-commerce. The overall consensus is that the tide of consumer demand is pushing in the direction of direct involvement. Nevertheless, that fact is weighed with the already established and proven relationships many CPG companies have with mass retailers and the substantial financial and operational barriers to conquer before being able to do so effectively.”