August 14, 2023


eCommerce efforts inside consumer brands have historically been ignored by the investor community.


There were rarely any direct questions on eCommerce strategy or capabilities asked of senior management teams. For most, eCommerce amounted to a minority of sales, and there was a general underappreciation of its growth trajectory and the influence and customer acquisition efficiencies it offered.


This indifference influenced where eCommerce fell in the priority for many organizations – “Why emphasize it if investors and the Board weren’t doing so?”


And this is, in many ways, still the case:

  • Investors don’t ask every company about eCommerce
  • Many consumer brands continue to treat it like a side project
  • Even amongst the brands we studied in 2Q23, many didn’t mention it at all


But there were exceptions worth calling out this quarter.


Six major eCommerce themes emerged from our review of second-quarter results from 30 consumer brands across food, beverage, personal care, beauty, apparel, footwear, and consumer durable categories.


This serves as a wake-up call to brands that have not made eCommerce a priority.


For brands that are performing well online, share this analysis with investor relations and senior leadership teams within your organization. This will assist them in effectively communicating your eCommerce efforts and highlighting its significance as a key component of a multi-pronged growth strategy.


Based on the review, brands should be:

  • Highlighting their outperformance in digital channels
  • Demonstrating the high returns from digital ad spend
  • Clarifying who owns retail media and the role it plays
  • Cleaning up digital marketplaces from gray market sellers
  • Seeing strong year-over-year trends on Amazon Prime Day
  • Embracing a pie-growing mindset when it comes to omnichannel


Six eCommerce Themes in 2Q23 

eCommerce Performance & Capabilities

Like we wrote about the CAGNY conference this year, several companies highlighted their outperformance in digital channels and the importance they’re placing on it from a capabilities perspective.


  • Mondelez: “I’m pleased to share that we have achieved the number one market share position in digital commerce in our top five markets of the United States, China, United Kingdom, France, and Brazil while over-delivering in up-and-coming emerging markets such as India, Philippines, Brazil, Mexico and Poland, which are up 40% YTD…”
  • Colgate-Palmolive: “…three years ago we were below the peer group (in terms of digital capabilities). Today we are above the peer group…. And we feel we’ve got good plans in place to continue to advance that. And our goal is absolutely to become best-in-class.”
  • L’Oreal: “If you look at the incredible success of CeraVe, the brand continuing to go up at 38%, it’s because…it’s a great brand that’s recommended by dermatologists. But it’s also the brand of L’Oréal that has mastered the codes of TikTok the best, and all the other brands are trying to learn from them…We’re getting better and better at targeting and making sure you have not only the right influencer, the right channel, but also the right tone of voice to be successful is an art.”
  • WD-40: “Our final Must-Win Battle is focused on digital commerce. E-commerce sales were up over 35%, both in the third quarter and year-to-date, primarily due to strong growth in the Americas. As I've shared with you in the past, our digital commerce strategy is about more than driving online sales. It's about driving awareness of our brands and teaching end users how to use them.”
  • Unilever: “Digital commerce continues to reshape our markets as consumers seek the distinct buying experiences offered by different channels. We saw 16% growth in digital commerce in H1 to now represent 16% of our turnover. The pace of change here is very fast and adapting to emerging channels like short video and group buying with products that are optimized for that specific consumer channel remains a key focus for us.”
  • Traeger: “We had nearly 18,000 user generated content posts and video views more than doubled versus last year's Traeger Day.”
  • Nike: “(Driving traffic in the billions) helped increase the digital share of our business to 26% in FY2023 as compared to 10% in FY2019. For the year, we had strong digital growth of 24% and we expect digital to continue to lead our growth. Now, this is all powered by our membership offense. We know our consumers better and are better able to serve them with data-driven insights fueling our end-to-end value chain, including product creation, marketing and merchandising.”


Excluding Nike, talking about these types of eCommerce themes was largely unheard of just a handful of years ago.


Two questions arise:

  • What type of eCommerce insights will need to be shared five years from now?
  • Importantly, is your company investing in the right areas today to have a compelling story to tell?


Digital Advertising Efficiency

Nearly every consumer brand we analyzed is planning to ramp up advertising spend in 2H23, with digital getting essentially all of the growth.


  • In staples categories, brands generally delivered beat and raise type performance with strong margins, allowing them to re-invest more dollars in advertising to support recent price increases.
  • In discretionary categories, brands largely saw better than expected results in 1H23 (although expectations were quite low!), inventory is in a much better position, and they anticipate a more normal holiday season compared to last year, all of which combine to support more normal advertising levels.


Across multiple earnings calls, investors continually asked about how brands planned to keep a high ROI bar as they ramped up spending.


The answer often came back to digital advertising simply offering better targeting, measurability, and flexibility, all of which support more spend.


  • P&G: “…as we further develop our ability to target more effectively and efficiently in the media space, we generally see a higher return on investment on every incremental dollar that we spend.”
  • Colgate-Palmolive: “…our focus on digital advertising is yielding a much higher ROI and we have the ability to analytically measure that much more effectively than we have in the past.”
  • L’Oreal: “So a lot of our fuel is social media and it’s very flexible…social media is even more flexible than the good old TVs where you had to commit long in advance. So, it gives us a lot of flexibility, not 100% because you have some point-of-sale materials that you can’t just eliminate. But we are very flexible, and that allows us indeed to accelerate where the growth is.”


Retail Media Execution and Opportunity

Having a clear line of sight to the relative performance of retail media and the role it plays in the holistic marketing plan is only going to become more important. While many brands are having these conversations internally, retail media is just starting to be asked about in public settings.


Here’s an exchange between an analyst and P&G’s leadership:


  • Q: “…can you talk a bit about retail media spend from your perspective? Who’s responsible for it within your business? Is it the brand teams or your customer teams? And is there a risk that this really will need to be incremental spend or is it just shifting from shopper marketing dollars and legacy media channels.”
  • A: “For us, any type of media spend, whether it’s digital, online, OTT, TV, print, or, as you say, customer media, is part of the total mix. So, what we’re looking to do is optimize our reach effectively with a target and the frequency across all of those different touchpoints. And just like any other channel, retailer media needs to earn its place in our marketing mix model based on the relative return that it can provide. Now, are we working with our retail partners to maximize that return? Absolutely. There are plenty of opportunities in data sharing combining transaction data with media data to optimize. And that is a strong reason why retailer-based marketing spending can make sense.”  


Few brands have a clear idea on how to integrate retail into their holistic marketing plans, who should own it, and whether it should receive incremental dollars or be funded from other areas.


This is understandable considering it’s so new and there isn’t one playbook every company can follow.


But each company should be developing clear answers to these questions so that they can communicate what they’re doing to stakeholders and what they need from retail partners to spend more.


Marketplace Control

Implementing marketplace controls can often create short-term pain that is necessary for long-term gains.


Crocs’ management team talked extensively about its marketplace control efforts with its HEYDUDE brand, whereby they turned off a great deal of distribution, particularly in international markets, because of the negative impact those channels were causing on ASPs.


  • “…we are seeing quite a lot of gray market activity on Amazon pressure our HEYDUDE ASPs. And that's really related to some of the terminations that we did when we went through and terminated some of the legacy international distributors and also some of the legacy US partners. So, we expect to work through that and to improve throughout the year. So, I expect next year our gross margins should be back in line with kind of where we originally thought, which is more on the lines of around 50% in the shorter term.”


Brands struggling with marketplace control can point to this example for lessons on how to communicate the negative near-term results and for ideas on how long the P&L needs to work through the temporary disruption.


Prime Day Wins

Brands typically don’t comment on particular retailer performance during their communications to investors, but we found more than a dozen examples of companies highlighting their strong Prime Day performance this quarter. Examples include:


  • Unilever: “Liquid I.V. in Beauty & Wellbeing has been growing strongly through increased distribution and awareness with excellent performance in the recent Amazon Prime Day event”
  • GoPro: “Circana reported that consumer spending over Amazon's July Prime Day saw discretionary and general merchandise sales decrease 3% year-over-year, with unit sales down 8%. By contrast, during the same period, total GoPro camera unit sales for North America, which includes both our retail channels and, were up 6% year-over-year.”
  • Spin Master: “We are, however, encouraged that POS declines have begun to slow, and in late June and in July, we have started to see growth reemerge. For example, we had very strong results in the US for Amazon Prime Day, with POS well ahead of our expectations and ahead of market growth. Our Prime Day performance increased 130% year-over-year and is at an all-time high.”


Amazon has successfully created a culturally relevant shopping holiday essentially on-par with Black Friday in terms of brands prioritizing it.


Omnichannel mindset means it’s not a zero-sum game

While it can be useful to compare B&M channels to digital channels for purposes of understanding where growth is coming from, brands and retailers are not trying to grow one at the expense of the other. Rather, they see both as complementary and necessary elements to serve the consumer however that consumer wants.


This exchange between an investor analyst and P&G’s senior team is a great example of articulating this growth mindset:


  • Q: Jon, you mentioned I think in your introductory remarks that your e-commerce business is at now about 17% of total, which is probably doubled in three or four years. Can you maybe kind of stand back and reflect on what that means for your business overall…how does that change your relationship with brick-and-mortar? Has it had an impact on your shelf space in brick-and-mortar? How has it changed your supply chains? What added complexity it’s given to you, and how has it changed your overall discussion with retailers?


  • A: “It’s getting harder and harder to distinguish between e-commerce and traditional commerce, if you will, even in our conversations with our retail partners. Most of the large brick-and-mortar retailers are emphasizing the development of e-commerce in different forms themselves and have had significant growth behind those efforts. So honestly, I have not been in a conversation that is zero-sum in nature or that is in any way combative in nature. More of the conversation is how can we work together to fully satisfy our shoppers, many of whom prefer an e-commerce experience. From a pure business standpoint, we aim to be indifferent between channels. We want to have an equally attractive margin which we generally do at least in aggregate, and we want a share profile in the different channels that allows us to be indifferent and allows us to support consumers and shoppers and whatever their choice is, wherever they want to go.”