Definition

consumer packaged goods (CPG)

Consumer packaged goods (CPG) is an industry term for merchandise that customers use up and replace on a frequent basis. Examples of consumer packaged goods include food, beverages, cosmetics and cleaning products. CPG can be contrasted with durable goods (DG), an industry term for merchandise that is not consumed or destroyed in use and is generally not replaced until the merchandise experiences a problem. Examples of durable goods include appliances, furniture and automobiles.

Typically, CPG merchandise is sold by retailers in physical brick and mortar stores and packaging is designed to differentiate a product from its competitors on a pharmacy, grocery or big box store shelf.  Because shelf space is a finite commodity, the CPG market is highly competitive. Until recently, it’s been difficult for manufacturers to take advantage of the internet and sell CPG through e-commerce channels.

Most notably, an attempt in the pet food industry during the internet heyday illustrated the limitations of e-commerce for CPG products. The demise of Pets.com not only put a face on the dot-com bubble, it also put a spotlight on the failure of infrastructure to support the sale and delivery of consumer packaged goods. Significant advances in mobile technology, automated supply chain management, machine learning and data analytics have balanced the scales and the promise of using the internet to sell consumer packaged goods through e-commerce channels is finally becoming a reality.   

Now that the infrastructure is in place to support CPG e-commerce, many retail stores and restaurants have implemented “click and collect” delivery models. This model allows customers to  order and pay for a product or meal online and receive a text message when the order is ready to be picked up.

Amazon Prime, which is noted for its “click and deliver” services, has implemented Prime Pantry, a CPG service that allows Amazon Prime members to purchase standard retail-size groceries and household products online and have them delivered to the member’s doorstep the next day. Amazon is also experimenting with Prime Now, a CPG service for urban customers that delivers consumer goods within two hours -- and Amazon Dash, which allows connected devices such as smartphones, smart appliances and the Alexa digital assistant to order and reorder CPG merchandise through voice recognition and single-touch commands.

Changes in delivery models have affected how CPG merchandise is being marketed. Coupons and loyalty card programs are designed with mobile end users in mind and marketing initiatives are omnichannel, providing the customer with a seamless shopping experience for frequently purchased products. A number of vendors, including Oracle, SAP and Siebel Systems provide marketers with software programs to facilitate CPG marketing. Generally, the software helps marketers federate data from multiple streams, improve geotargeting and personalization efforts and respond in a timely manner to changing demographics.

This was last updated in February 2017

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