Autor: Web Smith

The tailwinds are with CPG, grocery, and meal delivery. Invest accordingly.

By 2027 21.5% of eCommerce will  be food and beverage (Statista). This number is currently sitting at sub 14%. That’s some acceleration.

A discernible shift has emerged. After collecting a year or so of data, there is a clear redirection of momentum towards grocery and food CPG as the prudent investment over any other category, especially when juxtaposed against the volatile sectors of clothing and accessories. If you want to throw money away or get stuck in a cycle of illiquidity, invest in cool, fashion retail brands. If you want to 80x your return, invest in the right food, drink, supplement, or snack foods brand (or the technologies that support this trade).

This affirmation isn’t merely a trend but a reflection of changing consumer behaviors, technological advancements, and strategic shifts by retailers that underscore the resilience and potential of the grocery and CPG eCommerce sector. The recent developments, including Marc Lore’s new venture, Wonder; Liquid Death’s staggering $1.4 billion valuation; and Aldi’s ambitious expansion plans. 2PM recently published this on Aldi’s growing network of grocery delivery hubs:

Aldi’s growth is indicative of the changing consumer landscape. With 2,356 stores, it would land at third on this list. The place is the antithesis of complication. Shopping at Aldi is like a breath of fresh, budget-friendly air. The store’s design is straightforward, and the selection, while limited, covers all the basics at prices that test the American belief of consumer pricing index. It’s the kind of simplicity that makes you wonder why shopping anywhere else feels like preparing for a space mission. Aldi’s model is a testament to the power of keeping it simple – a lesson many subscription services could learn from.

Aldi’s plan to add 800 stores across the United States by 2028, with a significant investment, showcases another dimension of the sector’s growth. This expansion not only emphasizes Aldi’s confidence in the physical grocery market, but also its role as a powerful eCommerce delivery partner to platforms like Instacart, illustrating the synergies between brick-and-mortar strategies and e-commerce dynamics.

Additionally, the insights from a recent PYMNTS report on online grocery shopping paint a compelling picture of why this sector stands as a beacon for investors seeking stability and growth in the digital marketplace.

The PYMNTS report, “Retailers Win in Online Grocery,” offers a data-driven perspective on the shifting dynamics in the eCommerce landscape. It highlights a crucial consumer behavior: the preference for purchasing groceries from retailer websites and apps over online marketplaces or brands’ direct channels. This preference underscores the trust and loyalty consumers place in established grocery retailers, which offers these retailers a unique advantage in capturing and retaining customers in the digital realm. Companies like Kroger and Walmart are not just participating in the online grocery market; they are leading it, leveraging digital platforms to fuel growth and improve unit economics.

But it’s not only established enterprise retailers investing heavily in logistics or marketplaces in the food space.

Marc Lore, an eCommerce titan known for his disruptive ventures, has once again grabbed the headlines with the launch of Wonder, a new company that aims to revolutionize the food delivery service. By pivoting from a van-based cooking model to kitchen-prepared meals and strategically positioning the startup within the bustling hubs of New York City, Lore has demonstrated a keen understanding of the consumer’s demand for quality and convenience. His substantial personal investment and ambitious plans for Wonder signal a strong belief in the food and beverage eCommerce sector’s growth potential, reinforcing the narrative that grocery and meal-based eCommerce is still ripe for innovation and investment. Perhaps more than ever, given the adoption levels of this form of online retail.

Further solidifying the sector’s appeal is the meteoric rise of Liquid Death, a brand that has transcended its product offering to become a cultural phenomenon, now valued at an impressive $1.4 billion. This valuation speaks volumes about the consumer’s appetite for unique, branded experiences in the grocery space, even for products as ubiquitous as water. Liquid Death’s success story is a testament to the potential for brands within the grocery and CPG sector to achieve exponential growth through strategic branding, digital marketing, and traditional DTC models.

The shift towards grocery-based eCommerce is not merely a reactionary trend but a reflection of broader societal changes. The pandemic accelerated the adoption of online shopping, and while many sectors experienced a boom-and-bust cycle, grocery eCommerce has shown resilience and sustained growth. The convenience of online shopping, combined with consumers’ growing interest in cooking and eating at home, has propelled grocery and CPG eCommerce into a position of strength.

There have been few stories or indicators of tailwinds in other eCommerce categories. In contrast, the clothing and accessories sectors face inherent challenges that grocery circumvents. The fickle nature of these products, coupled with the variability in sizes and personal preferences, leads to higher return rates and customer dissatisfaction. Thanks to unwieldy inventory management, fashion continues to be a complex and risky endeavor. With the exception of few labels like Greyson Clothiers, Todd Snyder and a short list of others, few can claim the tailwinds

Investing in grocery and CPG eCommerce, therefore, emerges as a strategy grounded in consumer demand, technological integration, and market stability. The sector’s resilience during economic downturns, coupled with its essential nature, offers a buffer against the volatility seen in discretionary spending categories like clothing and accessories. Moreover, the ongoing innovations by entrepreneurs like Marc Lore and companies like Liquid Death and the potential scale of Aldi demonstrate the sector’s potential for high returns on investment.

The pivot towards grocery and CPG eCommerce is underpinned by a confluence of factors that promise sustained growth and stability. As consumer behaviors continue to evolve towards convenience, quality, and sustainability, grocery and CPG eCommerce stands out as a sector not just surviving the digital shift but thriving within it. Again, invest accordingly.

By Web Smith | Editor: Hilary Milnes with art by Christina Williams 

The DTC model was a game-changer for retail. But the category’s three letter moniker won’t be remembered for the brands that came from that forgone era. Data suggests that it will be remembered as a media or advertising strategy. There is a precedent for this.

Google, Wikipedia, and other sites still suggest that the phrase “direct-to-consumer” and its shorter-form catchphrase are referring to a “business model focusing on e-commerce of a single product category” or a sales channel where the original equipment manufacturer sells directly to the consumer (instead of using traditional wholesale channels).

The DTC era marked a pivotal moment in the way businesses connect with their audiences. This evolution, initially sparked by pioneering platforms like Shopify and BigCommerce in 2007 and 2009 respectively, now sees the moniker pivoting from the exclusive domain of retail and towards other industries adopting the acronym. Today, the media and advertising sectors are the ones stealing the search traffic for DTC news.

The journey of the three letter acronym, from one meaning a nascent brand retail strategy to one meaning a broad-based approach impacting retail, advertising, and media reflects a deeper change in consumer behavior. In eCommerce, DTC is less of a category and more of a function. In media, DTC is entering the cycle that harkens back to the 2009-2014 years of online retail. Here is what I earlier published on this seemingly forgone era:

The Direct-to-Consumer Brand era brought about a significant change in retail dynamics. Brands like Figs and Warby Parker exemplified this era by cutting out intermediaries and connecting directly with consumers. This model, highlighted by the rise of Shopify, allowed for greater control over brand messaging, customer experience, and product quality. The DTC era highlighted the importance of eCommerce, digital marketing, and consumer data analytics, making it a pivotal period in the evolution of modern retail. But few retailers mastered the economics required to become a durable brand.

The pandemic further exposed the vulnerabilities of the DTC model. Many DTC brands, with high operational costs and low savings, struggled with diminished consumer demand and supply chain disruptions. This led to significant downsizing of companies such as Away, Everlane, Casper, and others. Post-pandemic, we’re witnessing a shift in the DTC landscape. Entrepreneurs and investors are reevaluating the model, seeking a balance between the aspects that worked and those that didn’t. The focus is now on sustainable growth, effective customer engagement, and prudent financial management.

Fueled by Facebook and Google advertising spend, that DTC era democratized the market for small and medium-sized brands. Shopify’s platform, among others, played a crucial role in this revolution, allowing brands to sell directly to their consumers and bypass traditional middlemen that were known to block entry, at the time. This model thrived on the back of digital advancements and a growing consumer preference for personalized, direct brand interactions. It is in decline.

But prior to the decline, the periodic spikes in Google Trends for “d2c” are testament to this model’s growing resonance with the public, highlighting key moments of technological adoption and consumer shifts towards more personalized shopping experiences.

The recent strategic move by ESPN to launch a direct-to-consumer version by fall 2025 underscores the shift away from DTC’s hold on physical product brands, moving beyond retail to capture media and advertising realms. This approach, aimed at reaching an audience increasingly disenchanted with traditional cable bundles, represents a broader industry shift towards offering content and products directly to consumers. The collaboration among giants like ESPN, Warner Bros. Discovery, and Fox Corp. to bundle sports content into a new streaming service exemplifies their need to meet the modern consumer’s demand for direct, personalized content consumption. Ironically, it’s a demand that retail brands helped normalize for media companies.

While media is headed away from omnichannel and towards DTC, the retail sector has increased its focus on omnichannel strategies, as highlighted in recent analyses. The convergence of physical and online selling, accelerated by the pandemic, has led to significant investments in technology that enhance the customer experience across all touchpoints. Innovations such as augmented reality fitting rooms and interactive in-store displays are not merely enhancements but fundamental shifts in retail strategy, blurring the lines between eCommerce and physical stores.

Yet, this shift towards a more integrated approach to product retail comes with its set of challenges and criticisms. Concerns over scalability, sustainability, and consumer privacy are increasingly prominent. The model’s reliance on continuous consumer engagement and data collection for personalized experiences raises ethical questions. Moreover, for smaller brands, maintaining growth without compromising on quality or customer experience presents a significant challenge.

For product retail: sustainability, transparency, and the protection of consumer privacy are set to become central to consumer choices and, consequently, brand strategies. For media companies venturing into DTC, the creation of value will extend beyond content to encompass interactive and personalized experiences, crucial for attracting and retaining a modern audience. The trajectory of DTC media strategies will likely be defined by a delicate balance between leveraging technological innovations and addressing cost considerations.

The evolution of the DTC model reflects a broader narrative of change, from its early days in retail to its current embrace by media and advertising sectors. This shift is indicative of deeper societal changes and technological advancements. As the landscape continues to evolve, the adaptability and appeal of the DTC model remain clear, promising new opportunities and challenges for businesses aiming to connect directly with their consumers. The future of DTC lies in its ability to innovate while remaining mindful of value creation and proper unit economics, ensuring a sustainable and consumer-centric approach to business.

Por Web Smith | Editado por Hilary Milnes con arte de Christina Williams