AlixPartners report: Online consumer products sales to reach 15% of all sales by 2022

According to a new report from global consulting firm AlixPartners, consumer-products (CP) companies are grappling with disruption as online sales are forecast to quadruple in the span five years.

The report highlights an ongoing fundamental consumer shift to e-commerce in all its forms, including increasing demand for direct-to-consumer (D2C) sales, resulting in online sales of consumer products in the US growing to 15% of all industry sales, or $175 billion, by 2022—3.6 times more than 2017 levels.

The reports suggests that CP companies in many cases lag other industries in digital transformation, including in e-commerce capabilities.

“Long gone are the days when consumer-products companies could rely exclusively on the power of their brands and their relationships with retailers to drive sales,” said David Garfield, global co-leader of the consumer products practice at AlixPartners and a managing director at the firm. “Companies that don’t act quickly and decisively to implement the right digital strategies, including direct-to-consumer strategies where appropriate, will likely find themselves falling far behind.”

The report also finds that many if not most CP companies aren’t sufficiently focused on both the opportunity and threat a digital future represents. The report analyzes the earnings calls of the 102 largest public CP companies in the US made during the four months leading up to Jan. 24, searching for terms such as “e-commerce,” “direct-to-consumer,” “online,” “Amazon,” and other words suggesting that digital strategies were being discussed. Fully one-third (or 34) of these companies made no reference to these terms in their calls with investors. And middle-market companies with less than $1 billion in revenues were the least likely to talk about digital strategies, with 55% (11 out of 20 companies) failing to discuss this topic in their earnings calls.

The report also notes the e-commerce sales rate of CP companies is currently only about half that of retailers in the US, and that recent combined e-commerce rates in countries like the United Kingdom (19% of all sales in 2017) and China (23% of sales) dwarf US rates—suggesting that the future for US companies is either digitization or decline.

“The fact that many CP companies aren’t even incorporating e-commerce as a key part of their strategic narrative on their earnings calls is very telling,” said Andrew Csicsila a managing director in the consumer products practice at AlixPartners and one of the authors of the report. “A fundamental shift in CP companies’ relationships with their consumers is already underway, and a strategic realignment inside companies is necessary to position themselves for this digitally-oriented future.”

The AlixPartners report goes on to recommend that the key issues CP companies should be focusing on today are: assortment (including product innovation), consumer experience (including timely delivery), supply-chain optimization, opportunistic M&A (including to gain digital capabilities), and organization capability.