EB2B enables large and small CPGs alike to execute promotions to final consumers at an affordable cost and faster time to market.
Selecting a strategic posture
CPG manufacturers have three interrelated potential strategic postures they can adopt in eB2B RTM:
- Leading: owning an eB2B platform
- Partnering: joining with other CPGs or wholesalers and distributors to co-own an eB2B platform
- Participating: forgoing ownership of a platform but working with and selling directly to an eB2B platform (for example, a CPG manufacturer may tap opportunities in underpenetrated geographies by creating a commercial agreement with a global eB2B player)
These three strategic postures are interrelated because they can coexist in the same geography or channel and even with current RTM models; for example, a company with its own RTM model could leverage eB2B to reach customers that would otherwise be too costly to serve. But only a few companies are by default positioned to develop an eB2B platform because of the existing breadth of their client relationships, depth of distribution network, and coverage of a store’s share of wallet.
For everyone else, the investment for this type of platform is significant when infrastructure, promotions to drive engagement and activation, and inventory are considered. For that reason, only top CPG manufacturers, wholesalers, and distributors in a given market—or digital natives with significant funding—are expected to be capable of leading this disruption.
And because our experience shows it usually takes around five years to break even, we expect only a handful of platforms will succeed in most markets, along with potentially a few small, specialized players (such as those focused on cold chain, the management of perishable goods that require temperature-controlled environments).
One final consideration: given the nature of this business, eB2B platform builders look for multicategory portfolios from inception. And while negotiations to reach commercial agreements with a seller typically take time, eB2B platforms tend to buy other manufacturers’ products through wholesalers or distributors (even sacrificing margins) to ensure they have a compelling portfolio to offer their clients.
This means that whether manufacturers want it or not, their products will most likely be available through eB2B platforms. The best response is to be proactive in defining a strategy to become a direct seller to eB2B players, which gives CPG manufacturers a say on the product offering, strategy, and promotional activities, while potentially getting access to additional benefits such as data, in-app product placement, and in-store execution.
Key considerations for successful participation with eB2B marketplaces
CPG manufacturers should prioritize five considerations when developing a winning eB2B seller strategy:
- Understand the options. Scan the market to understand the differences in the value propositions of existing eB2B platforms, identifying those with the features and engagement that best complement your objectives. There will be different profiles that produce potential trade-offs for CPG manufacturers, such as eB2B platforms with wider distribution versus those with greater share of wallet in a specific segment, platforms with great engagement features (such as loyalty plans) but lacking logistics or financial capabilities, or successful platforms that could develop a private-label portfolio in the same CPG manufacturer’s category.
- Fit with the current RTM. Considering the available eB2B platforms and their capabilities, manufacturers will need to redefine their overall RTM strategy, including the potential implications of existing distribution channels. While the eB2B space is expected to keep growing, existing distribution channels will still dominate in the medium term. That is why it is critical to align expectations, clarify roles, complement reach, and avoid promotional distortions to amplify the impact of eB2B and minimize cannibalization. The potential evolution of this new RTM should be analyzed to design a long-term plan under different scenarios, such as the concentration of the market around one player, the potential bankruptcy of a current distributor, or the merger of an eB2B company and a distributor.
- Manufacturer value proposition. Manufacturers should also identify what they have to offer eB2B platforms to understand how much value they can add and in what dimensions. This value proposition should be assessed mainly around the manufacturer’s assets (for example, market share, strength of brands, B2C digital marketing channels, in-store materials, and consumer knowledge); operational attractiveness (such as high value per kilogram or cubic meter); and capabilities (such as processes for understanding consumers, A/B testing, and in-store execution). It is recommended that CPGs map these elements and benchmark them against the industry to understand their competitive advantage and market power to prepare them for negotiation.
- Negotiation approach. CPG manufacturers should develop a “give and get” approach that incorporates their leverage and objectives with the value proposition of eB2B platforms. This approach can consider dimensions including commercial, marketing, execution, operations, data, talent, and finance. The negotiations can then be informed by the CPG manufacturer’s objective (get) and clear offering (give) toward the eB2B platform (such as exclusive SKUs or support in digital marketing channels) based on the platform’s value proposition and the existing and expected eB2B services.
- Capabilities for working with the channel. The growth of eB2B platforms is expected to grant both platform owners and sellers access to new data sets. CPG manufacturers will need to develop an “eB2B channel management” capability to get the most out of platforms today and in the future, with a focus on talent, data, and logistics. For example, CPG manufacturers will need people who can manage large amounts of data, convert data into insights and actions at trade and consumer levels, and orchestrate channels while operating with more agility and financial acumen.
In developing their strategies, CPG manufacturers will want to consider potential risks such as eB2B private-label portfolios, volume concentration, higher fees compared with wholesalers, and disruptions to current distribution partners.
While the eB2B market remains relatively immature in most geographies, we predict that exponential growth will redefine the landscape in the years ahead. That is why CPG manufacturers should act quickly. There is a window of opportunity for them to define their strategies, start engaging with eB2B platforms, and adapt their RTM and organizations on potentially better terms than if they wait until the environment is more mature.”