The way consumers shop for everyday products continues its transformation towards the Web. In 2008, online retail accounted for approximately 7% of total retail sales in the U.S, with 1.5% of consumer packaged goods (CPG) spending done on the Web.

In the future, your children will likely conduct the majority of their shopping online. While online shopping accounts for a modest percentage of today’s sales, it is growing rapidly – Nielsen estimates that online CPG sales alone increased 25-30% between 2004 and 2008. And there are compelling reasons to believe that growth will continue, as overall online sales are projected to increase almost 200 percent between 2008 and 2012.

Shopping Evolution Centers on Convenience, Choice and Value

Shopping has evolved along three dimensions, with each new phase increasing consumer convenience, choice and value – the three main reasons consumers shop online today. Online shopping redefines convenience and choice and equips consumers with unprecedented way to seek value.

Convenience – online is a simpler, faster, more hassle-free way to shop for frequently purchased products.

Choice – online offers more variety, which services like Peapod’s “endless aisles” clearly demonstrates.

Value – while value isn’t the primary reason most consumers shop for “everyday” products online today, it will become increasingly important as e-commerce becomes more mainstream. Tools to rapidly compare product prices already exist and online coupon sites have become the rage in the down economy.

Smaller, Niche Retailers Can Reap the Benefits of an Online Presence

Whether searching for solutions to a specific need, directly accessing retailer Web sites or deciding to click on an advertisement or link, consumers have far more control over what they are or are not exposed to online than offline. This offers smaller brands the opportunity to generate an online presence that is effectively larger than their big brand counterparts are, while serving up compelling messages and undercutting leading brand prices – all at the point of purchase.

Take the beauty care category as an example. Boutique retailers with fewer stores and lighter foot traffic than the large offline chains are as readily accessible on the Web as a Walmart or Target, which sometimes do not carry the leading offline beauty care brands on their Web sites.

What is interesting to note though, is that the online commercial challenge for leading consumer brands has less to do with the “long tail” than with the collapse of physical structures that literally help distance leading brands from smaller brands offline. It is not the number of brands available online that matters, but that there is less separation between them, which levels the playing fields, creating a flatter, broader marketplace for everyday brands.

To learn more about digital opportunities for leading brands, download Building Great Brands in the Digital Age: Guidelines for Developing winning Strategies.

The internet is in an increasingly funny place. We’ve developed a media that allows an extraordinary amount of targeting and advertising measurement structures previously unheard of in other media. We track impressions, ad engagement, clicks, view-throughs, conversions, post-buy demographics, time per ad, branding effect and offline ROI. We can measure, and even plan by, just about any construct an advertiser would like.

The funny part is we can’t seem to get our head around GRPs. This is something I’ve written about in some length in the past and it boils down to this, for any given site, the reach and frequency is probably so low that you produce barely readable GRPs. If you assume that any given media plan is made up of quite a few of these sites, when you mix this level of fragmentation with a blunt instrument like GRPs, you derive little value. It’s not that the calculation itself is so hard (pretty simple multiplication); it’s the fact that it is not very meaningful to most of us online people.

However, GRPs are meaningful to offline media and this is where the problem lies. There is a demand by offline planners to create a similar online metric to those used by TV buyers. We might think that this is a blunt force metric, but it is the tool used by the people that plan most of the advertising dollars in the US.

So where does this leave us? Do we use GRPs online? Yes. Do we like it? No. Do we keep using the online metrics we currently do? Sort of, reach is becoming increasingly irrelevant. As TV changes do they incorporate more online like metrics? Absolutely.

This is the very topic we will be picking up on the panel: “Defining the New Media Currency: How to Bring Traditional Media Metrics Online” at Ad:Tech San Francisco in a couple weeks. It should be a great discussion; we have folks from QuantCast, TNS and the always brilliant Young Bean Song from Atlas. If you’re at Ad:Tech come on by and say hi, hopefully we’ll avoid the fist fights this time.