New technologies are fundamentally disrupting the business model for consumer products companies around the world. Relationships between manufacturers and retailers – and the consumers they share – are changing, and new business models are emerging. This is a challenge, certainly, but also a tremendous opportunity.

As the physical and digital converge and consumers’ paths to purchase become increasingly non-linear, we estimate that the digital market for consumer products globally will double from about $219 billion in 2018 to over $440 billion in the next five years, making it an urgent priority for consumer products companies.

In light of this, companies are investing billions in digital transformation across their businesses to position themselves for this growth. However, we are concerned that much of that investment is wasted. Based on our research, more than half, or approximately $50 billion, of digital marketing and trade spend globally is wasted. Digital transformation must be targeted, measured, and tailored to be profitable.

AlixPartners surveyed over 1,100 consumer products executives across six countries who are or have been decision makers for digital transformation to better understand how consumer products companies can successfully drive profitable, top-line growth. The synthesis of these thoughts, worries, and complaints illustrates a digital journey that is frustrating for most with significant cultural obstacles. It also shows that senior leaders may be significantly over-estimating their company’s progress in this journey, versus those further down within the organization. To navigate these issues, success will require persistence and pinpoint investment.


Not surprisingly, we found that 'digital' means vastly different things to different people in different markets.

But there is agreement that digital transformation is reinventing the entire business model for consumer products companies.



functions digital transformation fig1 2019

Technology, which enables digital transformation, has migrated from a back-office function to the commercial front end to now permeating the entire organization. The borders that long existed between 'technology' and the 'business' are coming down, allowing for greater agility, higher connectivity, and deeper insights. Today, technology truly helps define the business.

Digital transformation is, therefore, business transformation.


Where companies are on the path toward digital transformation depends greatly on both their size…

Both the largest and smallest companies by sales report being furthest along in the process of transforming the business. For the smallest, this is likely because many are digital natives, having been formed recently without the burden of outdated systems or culture. For the largest, these companies can use their significant resources to invest in transforming their businesses, further propelling themselves along the development curve.

Mid-sized companies, however, are lagging behind, with only 15% of companies between $1 and $5 billion in sales identifying themselves as digital leaders. Without the resources of the largest companies, but still burdened by legacy systems and ways of working, they are struggling with the necessary transformation of their businesses.

Across countries, companies have a very different view on how advanced they are along the digital journey, with a 22.5 percentage point gap between the most digitized (India) and the least (France).


Digital and physical commerce are rapidly converging in what we estimate is an approximately $220-billion top-line growth opportunity for consumer products companies. In 2018, global digital commerce for consumer products totaled $219 billion.1 By 2023, we estimate that this will grow to $440 billion. Digital commerce will, therefore, be a significant driver of future growth for consumer products companies.

And this growth will largely be incremental to traditional brick-and-mortar businesses. In our study, over half of the companies that are fully digitized or close to fully digitized (the 'leaders' in figure 4 of the downloadable PDF) strongly agree that digital commerce will not cannibalize their traditional businesses.

Digital and physical commerce are converging, and those further along the digital journey see this largely as already having happened.

With this convergence, consumer products companies have little choice but to pursue a digital commerce strategy. The growth potential significantly outweighs any potential channel conflict. Companies must meet their consumers where they are, and winners will be those that harness the full potential of the increasingly non-linear path to purchase.

Much of traditional marketing and trade spend is wasted. But based on our survey, digital marketing and trade spend aren't much better.

As one respondent to our survey said, “Winning will be playing in both [physical and digital] and adjusting resources depending on where [consumers] are on that journey… It’s not a conflict or collisions, it’s where the consumer is going and where companies have to go.” However, despite the importance of digital to their future, many companies still lack appropriate focus on digital transformation as a key component of their strategy.

We analyzed the earnings calls of the 125 largest public consumer products companies globally for the four months leading up to May 17, 2019, and searched for terms such as 'e-commerce,' 'direct-to-consumer,' 'online,' 'Amazon,' and other terms suggesting that digital strategies were being discussed. Fully one-third (or 42) of these companies made no reference to these terms in their calls with investors.


Much of traditional marketing and trade spend is wasted. But based on our survey, digital marketing and trade spend aren't much better.

In 2018, global consumer products advertising spending was $242 billion, of which digital advertising accounted for $60 billion. Based on our survey, more than half of that digital advertising spend had either a negative return or its return was not even measured.

Similarly, while digital trade spend is perceived as more effective than traditional spend, the vast majority is still ineffective. In 2018, global consumer product trade spending was $518 billion, with $19 billion digitally-enabled. However, based on our survey, $9 billion of that had a negative return.

Digital marketing and trade spend should be more precise and targeted than traditional methods, with greater opportunities for consumer engagement and data analytics. However, this promise remains elusive for many, who, in our survey, expressed continued frustration in their inability to track and measure outcomes given more complicated marketing models and distribution channels. “If you can’t measure it,” one respondent indicated, “then I’m skeptical of it.”

As paths to purchase become increasingly fragmented and non-linear, it is now more critical to focus efforts on digital marketing. There is a learning curve involved, and it takes time to get ROI from digital marketing.

The leaders in our survey reported that they are approximately 70% more efficient in driving positive ROI than those beginning their digital transformations. Success is, therefore, achievable with the appropriate investments and fine-tuning to get it right.

Winners in this area will be able to take savings to spend in other areas or directly to the bottom line.

Continue reading this article by downloading the full PDF.

1Including food, beauty, and household products. Euromonitor International