Four Reasons Why Your CPG Sales Are Plummeting
The transformation of the business landscape mainly spurred by technological advancements and economic flux has engendered some troublesome issues that if left unresolved may bode ill for the organizations in the CPG retail market. And, among the range of issues that are trying to prevent CPG companies click into gear, plummeting sales is surely a megawatt contender. In a similar fashion, no lone reason is responsible for the decline in sales, but a pack of reasons is throwing their weight behind this underwhelming performance. From toning up their digital muscles to unveiling new or thoroughly reengineered products to stamping solid footprints in developing markets, CPG manufacturers are taking diverse countermeasures to rescue sales from getting into a downward spiral.
OK, now let’s go a tad deeper into the assemblage of major factors that is hindering sales growth for consumer products.
Debilitating incursion of the private label products
In the last couple of years, private label products have gathered enough clout to take national brands head-on. With the backing of consumers, they have unseated national brands from their long held leading positions in certain categories. According to a Rabobank projection, in the coming decade, market penetration of private label brands will be somewhere between 25% and 30%. But, the most alarming figure that can send shivers down CPG companies’ spine has been released by the 2013 American Pantry Study. It says that, as high as 88% of US consumers find no qualitative difference between private labels and well-known national brands. Under this stressful situation, CPG companies are toiling hard to bring out innovative products as tourniquets to stop further bleeding in sales.
The indomitable recession syndrome
It seems that the recession which set in 2008 and clasped nearly the whole world in its pernicious tentacles has made an indelible mark on the customers’ mind. With thriftiness being placed on top of their shopping agenda, they have become bargain hunters and discount chasers. They are consciously avoiding the call of impulse and showing unfaltering fidelity to the shopping lists. For players in the CPG retail arena, besides snatching away sales, these developments are making huge dents in customer loyalty. Data from the study quoted in the earlier paragraph suggest that 94% of consumers are in no mood to change their spending habits on consumer products irrespective of any improvement in the economy.
Effects of the digital gap between consumers and CPG companies
Along the path to purchase, today, consumers are doing all sorts of things through digital means. Even for actual purchase, they prefer the ease and comfort of the digital channels to physical ones. On the other end of the spectrum, according to a Deloitte report, a measly 43% of CPG companies have a proper e-commerce policy in force. This is keeping enterprises on tenterhooks as they have little to moderate presence on the digital front, and thus depend largely on the traditional outlets to fulfill their sales targets.
Mounting pressure to comply with strict regulatory norms
With the introduction of rigorous rules, especially related to the environment and consumers’ health, CPG companies are coming constantly under the surveillance of regulatory bodies. Due to an unprecedented surge in the number of information sources, consumers themselves keep a watchful eye on the ecological and quality issues related to the products traded in CPG retail. Products that fall short of the prescribed standards will get disapproval from consumers in no time. In that case, firms will run the risk of losing stream of revenues from the products.