Lessons CPG Brands Can Learn From Startups

They need to integrate the digital savviness and flexibility of entrepreneurs

CPG brands are benefitting from a scrappier, more nimble marketing approach. Getty Images
Headshot of Loren Padelford

Entrepreneurialism and experimentation are usually the domain of the Davids, not the Goliaths. The digital era has largely been defined by scrappy startups challenging incumbent industry leaders by being more creative, more inspired and more consumer-friendly. That’s how we got brands like Dollar Shave Club, Netflix, Warby Parker and, yes, even Amazon.

But now, established consumer-packaged-goods (CPG) companies are facing a retail landscape that requires them to borrow a page from the scrappy startup playbook to survive. It’s a fitting plot twist, as the world of ecommerce has always been full of surprises and contradictions. For example, there’s supposedly a retail apocalypse underway, even though retail spending is up year over year. Conversely, many ecommerce brands are launching pop-up shops and physical stores because millennials actually like the mall.

For most of their history, CPG companies have relied almost exclusively on retailers to sell and engage with customers. Unfortunately for CPG and for their traditional partners, retailers are finding themselves in a life-and-death struggle with online startups and the likes of Amazon and are turning to private label brands, which compete directly with the CPG brands for shelf space and attention. This is leaving the CPG firms out of the loop and in an unfamiliar position. Not only are they now competing with the very channel they so heavily rely on, but they also have to compete directly with Amazon. The ecommerce giant now offers more than 70 of its own private label brands, with the latest addition being the Wag pet supplies.

Startups aren’t hampered by decades’ worth of infrastructure and process; they are nimble, use the latest technology and are digitally native.

For many CPGs, they are watching their market share and brand relevance get eaten by startups. Part of the challenge is that the well-established companies have similarly well-established practices that have worked for a long time and made them lots of money. Startups aren’t hampered by decades’ worth of infrastructure and process; they are nimble, use the latest technology and are digitally native. For CPGs to truly transition from retailer reliance to brand independence, it’s critical to start thinking and acting like entrepreneurs to best capitalize on the market opportunity. Here are a few ways to make a move in this direction.

Experiment all the time

Right now, no one is 100 percent sure what shopping will be like in the future. The best brands are experimenting with online, offline, mobile, social, etc. And they are doing it just to learn, not to make money. Success will be rooted in breaking away from reliance on the typical traditional methods of reaching consumers and testing new ways to have your brand show up where consumers are.

Stop acting like an IT company

For many large CPG companies, they have spent hundreds of millions on technology stacks built for 20 years ago. In today’s rapidly changing technology space, smart firms are leveraging technology instead of building it. This allows them to move faster, always be at the front lines of new trends and ensure precious resources are focused on brand, product and experience instead of servers.

Obsess over experience, not revenue

Entrepreneurs are obsessive about customer experience and engagement, even before they worry about making money. The startups disrupting industries are doing so because they focused on the consumer’s needs, not dollars per square foot. CPGs need to develop new metrics of success to match the new world of shopping. This may mean smaller companies, fewer brands and less profitability in the short term, but it also almost certainly means survival.

The future for CPG companies is bright. They have a huge advantage in their transition into the new age of shopping: They have brands with heritage and stories. Consumers love brands and they love stories. The more that CPG companies incorporate these entrepreneurial-minded strategies and tactics, the stronger their relationship with consumers will become.

This story first appeared in the July 23, 2018, issue of Adweek magazine. Click here to subscribe.
@LorenPadelford Loren Padelford is vp and gm of Shopify and a self-described space nerd based in Waterloo, Ontario.