Walmart Tops Amazon Growth Across Five CPG Categories. Understanding CPG

Walmart may be the biggest brick-and-mortar retailer in the US, but online, it has been playing catch-up with Amazon for years. Its smaller size has made rapid growth possible—including the 207% growth in the number of ecommerce buyers since the beginning of 2017, according to a January 2019 report from Nielsen and Rakuten Intelligence.

Digital sales at Walmart are also growing rapidly. Marketing analytics platform Jumpshot found that sales of several consumer packaged goods (CPG) categories grew many times faster in 2018 compared with Amazon’s. Digital sales of food, for example, were up 53% at Walmart year over year, vs. just 8% growth at Amazon.

According to a November 2018 study from The Retail Feedback Group, when online grocery shoppers were asked where they’d purchased groceries most recently, one-third of respondents said Walmart, up from just over a quarter who said the same in 2017. By comparison, 31% of shoppers said they’d recently purchased groceries from Amazon, down from 36% in 2017.

But food isn’t the only CPG category with substantial growth this year. Sales growth in the beauty, personal care and household essentials categories can be attributed to Walmart’s 2016 acquisition of and its large brick-and-mortar presence, which positions the retailer ahead of Amazon for its more efficient shipping capabilities.

Walmart purchased Jet in 2016 and has since assimilated its resources, allowing the company to take advantage of Jet’s penetration in more urban areas. According to Jumpshot, Walmart has also cut back on Jet’s advertising, which impacted Jet’s transaction volume. From 2017 to 2018, conversions dropped from 6.3 million to 2.7 million. By contrast, Walmart saw 3.2% growth year over year, with transactions increasing from 106 million in 2017 to 109 million in 2018.

These millions of transactions are taking place both online and in-store. Walmart’s expansive brick-and-mortar footprint allows the retailer to better serve clients due to its thousands of stores located in close proximity of the majority of the US population. And these physical stores put the retailer one step ahead of Amazon when it comes to fulfilling fast deliveries and shipping orders.

Walmart’s retail site also had 132 million unique visitors in December 2018, up 4% from a year prior, according to Comscore. While Amazon did experience greater traffic, at 206 million unique visitors, its growth was the same.

Topping Amazon’s nearly 21% sales growth this year, we expect Walmart’s sales will account for about 5% of total retail ecommerce sales, growing roughly 33% year over year.

Author: By Lucy Koch, eMarketer Retail

Consumer Packaged Goods (CPG)

What Does Consumer Packaged Goods Mean?

Consumer packaged goods (CPG) are items used daily by average consumers, that require routine replacement or replenishment, such as food, beverages, clothes, tobacco, makeup, and household products. While consumer demand for CPGs largely remains constant, this is nevertheless a highly competitive sector, due to high market saturation and low consumer switching costs, where consumers can easily and cheaply switch their brand loyalties.

Understanding Consumer Packaged Goods (CPG)

Despite experiencing a slow-down in growth over recent years, the CPG industry is still one of the largest sectors in North America, valued at approximately $2 trillion, led by well-established companies like Coca-Cola, Procter & Gamble, and L’Oréal. And although CPG makers generally enjoy healthy margins and robust balance sheets, they must continuously fight for shelf space in stores, and they must ceaselessly invest in advertising, in an ongoing effort to increase brand recognition and stimulate sales.

Consumer Packaged Goods vs. Durable Goods

CPGs generally have short lifespans and are intended to be used quickly. And as the name implies, CPGs are traditionally packaged in easily-recognizable wrapping, that consumers can quickly identify.

Like most CPGs, cosmetics typically have limited shelf lives, as these products quickly deteriorate if exposed to extreme temperature fluctuations. Lipstick, blush, eye shadow and foundation are cheaply sold in individual packages, and after using the products, consumers either discard or recycle the empty vessels.

Frozen dinners are another popular CPG example. These high-volume perishable items are sold at retailers worldwide and are often purchased for immediate use by consumers who automatically replenish their favorite go-to frozen meals, with little deliberation.

CPGs Versus Durable Goods

Unlike CPGs, which are cheaply sold and replaced often, durable goods like automobiles are intended to last for several years and enjoyed for extended use. Consequently, the purchase of a durable good typically involves considerable thought and substantial comparison shopping, given the higher price-tags attached to these investments.

Economic slumps often trigger flagging durable goods sales, because people are more likely to hold onto their cash in times of economic uncertainty. This is especially true with consumers who own older versions of a durable goods product. A family may opt to squeeze a few more years from an outmoded washing machine, rather than upgrade to a newer model. By contrast, sales of CPG staples like bread, milk, and toothpaste are less affected by market fluctuations.

CPGs in the Digital Age

Although CPGs have typically been sold in traditional brick and mortar stores, consumers are increasingly turning to online retailers. Making purchases with the “click and collect” model, consumers receive text message confirmations that their delivery is en route. Amazon’s business services like Prime Pantry let customers buy CPGs and enjoy next-day delivery.

Reviewed by Andrew Bloomenthal