How Challenger Brands Are Beating Major CPGs on Visibility
Legacy CPGs are facing more competition from emerging and challenger brands than ever before. That’s especially true on Amazon, where digital natives and fast-growing third-party sellers are using their mastery of search and product listing keywords to reach shoppers who don’t care much about a product’s heritage.
A new report from IPG's Agentic Systems for Commerce arm used proprietary data from Intelligence Node (also owned by IPG) to analyze how major CPGs are faring on Amazon compared to these challengers and Amazon’s private label. The company found that emergent challenger brands were outselling legacy brands in 16 of the 18 categories analyzed. The competition isn’t especially close, with the challengers having an edge of more than 15% in 15 of the categories.
Shoppers are primarily buying these emergent brands through third-party sellers operating on the Amazon marketplace. These sellers pay the e-commerce commission fees and fulfillment costs, along with their spending on retail media, and, In return, they get access to hundreds of millions of shoppers without having to deal with the physical shelf constraints legacy brands face when getting their products into brick-and-mortar stores, notes the report.
The marketplace-first strategy makes it much easier for these sellers to launch new products than it would be if they were negotiating shelf placements with retail buyers. That means there’s less at stake if a product fails to achieve sales goals — they can just quickly replace it with something new. These sellers also know the value of ensuring that they provide product data using a structure favored by ChatGPT and Perplexity, making their listings more likely to get a high placement in a search using those tools, according to the report.
Agentic Systems for Commerce found that relatively unknown brands sold by these third-party sellers are beating major CPGs in two-thirds of Amazon’s categories. Their lead was greatest in health care, pet health and grooming products, pantry staples, and makeup — categories where niche items can find an audience and there are big advantages to be gained in the ability to rapidly launch products or change formulas to capitalize on trends.
This produces a vicious cycle for major CPGs. A recent analysis found that 84% of major brands sold on Amazon weren’t showing up in their top three unbranded keyword searches, according to the report. Cat food and treats was the only category analyzed where major CPGs held more page-one spots for top search terms than their emerging competition. Visibility is so important when securing Amazon sales that the emerging brands offer fewer discounts than their legacy competitors.
Constant Refinement Required
Third-party sellers work hard for that visibility, constantly refining listings and their retail media spend in order to follow with the leading search terms. Major CPGs have a harder time keeping up because they’re also competing at dozens of other retailers where they need to negotiate both shelf space and digital placements on e-commerce platforms with their own algorithms. That means up to 90% of product pages go untouched for months, further hurting their search rankings, according to Agentic Systems for Commerce.
Brands that adopt agentic systems that can help them manage their digital commerce ecosystem at scale will be the best positioned for competing in the future of e-commerce. Those that don’t run the risk of falling even further behind.