Amazon and the End of CPG Branding

Voice-control disruption

Amazon is on its way to dismantle Consumer Packaged Goods (CPG) branding, fundamentally changing the principles of global retail.

The success of CPG branding relies on 3 key factors:

1. Visual language (package design, shelving theatre)
2. Emotional attachment consumers have to the brand
3. A promise of better (than average) quality.

 

Now imagine, you are at home, trying to switch TV channels and the remote is a little slow to respond.

– 10 years ago you would have made a mental note to buy batteries next time you are out for groceries;

– 5 years ago you would have opened your laptop and bought them online;

– Today you could just say: “Alexa, buy batteries” and a slightly detached voice would respond with something along the lines of: “Would you like to buy Amazon batteries for next to nothing and receive them before you can spell “awesome”?”

“Yes” would bring the dialogue to the obvious conclusion, “no” would probably reveal that Alexa has a strong preference for Amazon own products.

CPG Brands need to accept the existential challenge they face and develop new reasons for consumers to prefer them to the (usually) more efficient and (increasingly) more convenient Amazon infrastructure.

 

How serious a threat are we talking about?

• 63% of American households (80 million people) are now subscribed to Amazon Prime; 38% more than a year ago.
• In 2016, 55% of online shoppers began product discovery at Amazon, up from 44% just a year before.
• Amazon’s private label already leads, or is a serious challenger, across a number of product categories.

 

5 Nails in the Coffin of Branding

First to dismantle the 3 pillars of CPG branding mentioned above:

1. Voice-controlled retail takes visual language out of the equation – consumers don’t see the familiar shapes and colours, are not seduced by ads or in-store theatre.
2. As for the emotional attachment – CPG are commodities – how many of us would prefer a familiar name to a guaranteed best deal on the market?
3. Finally, a high enough product rating feels like a de-facto guarantor of quality.

On top of that:

4. Amazon constantly looks for new ways of streamlining the purchasing process and cutting down delivery times.
5. Amazon can both promote brands and place them on page 10, allowing the company to squeeze brands for better deals, reducing their margins and, by extension, future war chests.

In short, the time to fight is now or never.

 

Take out

• Voice-controlled retail will redefine the CPG retail landscape.
• Amazon successfully undermines traditional branding strengths.
• CPG Brands need to accept the existential challenge they face and develop new reasons for consumers to prefer them to the (usually) more efficient and (increasingly) more convenient Amazon infrastructure.