As the CPG world evolves and more products are purchased online, e-commerce divisions are becoming a paramount group within companies. Previously an afterthought or a specialty group, e-commerce teams are increasingly driving growth within CPG firms.
CPG organizations must thoughtfully consider where the e-commerce group fits within the company and how its reporting structure works. Although it seems like a simple question, there are many moving parts executives must consider. As you will learn below, there isn’t currently an industry best practice, as companies react and strategize in very different ways.
E-commerce teams are a bit different than traditional groups within CPG organizations. Employees’ roles are a mix of sales, marketing and technology. Skill sets span the right brain and left brain, and teams often include employees who are adept at both analytical and creative tasks.
Job titles and duties often include a mix of User Experience (UE), Trade, Marketing, Merchandising, Social Media, Search Engine Optimization (SEO), Pay Per Click (PPC), Production, Analytics, Content/Editorial and Design/Creative. It’s best to separate out any functions related to Finance, Budgeting, IT, Automation and Data Entry.
The varied skill sets of e-commerce teams best lend the groups to one of four reporting structures: Marketing, Technology, Sales or a standalone e-commerce division.
Kevin Strawbridge from eCommerce Consulting notes that “in taking a look at the Internet Retailer Top 500 and seeing where the head of e-commerce reports, the majority of these businesses are aligned with the marketing area and usually report into the CMO or a Senior Vice President of Marketing.”
A significant benefit of this structure is that it’s easier to be sure that the e-commerce offering embodies the ever-important vision and branding of the company. The digital offering must reflect the same values that would exist in the physical store environment.
Reporting to Marketing also allows the most natural synergies for companies that create content and engage directly with the consumer. Think of brands like Duncan Hines, Simply Orange, Dove and Gain that have captivating social media presences. There are also brands that create original content, like Birchbox’s Magazine or Dollar Shave Club’s “bathroom minutes” newsletter.
In large organizations with massive advertising budgets, reporting to Marketing may be the best fit for e-commerce. In large multinationals like P&G, Unilever and Coca-Cola, Marketing teams have a wide variety of functions and granular specialties. Email Marketing, SEO/SEM, Trade, Social Media Marketing, and Creative and Design may have multiple separate teams responsible for different brands or business units. In these instances, it may make the most sense to report into Marketing simply because of the massive size and wide breadth of the group.
For these large companies, the essential duty of the e-commerce team is to control the entire customer experience. They must keep consistency in brand voice and positioning. Within these organizations, the message is often more important than the technology.
Digital & Technology
On the other hand, there are CPG companies for whom technology is the overriding factor to consider. In fact, there is a long history of e-commerce reporting into technology groups. E-commerce in the 2000s and early 2010s was often grouped with the IT team due to its roots in the technical world.
Although reporting to IT has become uncommon and is no longer recommended, there are organizations in which e-commerce reports to a dedicated Digital or Technology group. A Chief Digital Officer, Chief Technology Officer or VP of E-Commerce may oversee this group. Within this option, Product Managers are often responsible for different retailer relationships or a brand’s own e-commerce offering.
The benefit here is that it’s easier to ensure that all components of a website and e-commerce offering work together seamlessly.
Additionally, in the new e-commerce world, data and statistics are immediately available in a much more granular depth than in the brick-and-mortar world. Because of this, the expertise and skill sets of a Digital or Technology group may be able to make more sense of the flood of online data than a traditional Marketing or Sales team might.
A recent Profitero report found that “e-commerce most typically reports into Sales: This was the case for about 75% of the CPG companies surveyed [134 brands]. The other 25% of companies have it reporting into Marketing.”
This reporting structure is sensible, as the ultimate goal of e-commerce is to generate sales and sell products to the customer. It is a strategy that is particularly heightened for any CPG organization that has a direct-to-consumer offering.
An online presence and e-commerce offering often helps generate sales within a physical store and vice versa. It’s difficult to separate where sales originate or where they should be attributed. It’s much more productive, and increasingly common in the industry, to group e-commerce sales and physical store sales under the same line item internally. If that is the direction an organization is moving in, then grouping e-commerce under Sales is a wise choice.
There is a fourth option that is becoming increasingly popular: building out e-commerce as a separate division. Many times, this standalone department reports directly to the C-level of the organization. This is an excellent idea in the short term, as CPG companies’ growth hinges on e-commerce success. Over the next five years, GlobalData forecasts that offline sales will increase by 11.3%, while online growth will increase by three times that amount (35%).
Since e-commerce is often viewed as the most important group within the modern CPG organization, it makes sense that this division should report into the C-suite and have the autonomy to leverage all of the resources of the company.
At the end of the day, it is unlikely that e-commerce will report into the same part of the organization in every CPG company. It’s likely that all four of these options are the correct answer for different companies with different priorities.
However, it is important to remember that there is an individual, correct answer for your organization. It’s imperative to weigh the pros and cons for each group and understand why the reporting structure is the correct one for you. This guide is a perfect start, but all organizations should carefully and thoroughly study what direction is best for their organization.
Anthony Riva has a 9-year background providing analysis and intelligence on all aspects of consumer behavior, retail industry insights, and CPG trends.
He currently is an analyst at GlobalData, where he develops research that enables clients to make actionable business decisions.
Anthony is an active member of The Hudson Union, a cultural institution. In his free time, he enjoys exploring New York City’s restaurant scene and wandering the aisles of grocery stores across the world.