E-COMMERCE
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CPG’s $100 Billion Opportunity for Online Grocery
By Keith Anderson
A new study from The Food Marketing Institute (FMI) and Nielsen predicts that within the next
10 years, online food shopping is set to reach digital maturity in the US - fundamentally changing
how groceries are bought and sold.
One fifth of all US grocery spending (valued at $100 billion) is expected to come from the online channel by 2025. That is the equivalent of 3,900 grocery stores based on store volume. And as online grocery continues to evolve, nearly three-quarters of all US shoppers are projected to conduct 25 percent of their grocery shopping online within the next decade.
A growing consensus among leading CPG firms is that online is a channel that can’t be ignored. However, fundamental challenges remain.
The path-to-purchase is evolving rapidly. CPGs are not only having to deal with a shift in consumer shopping habits, but are also confronted with emerging retailers like Jet and Boxed, and the continued growth of newer technologies such as Amazon’s Dash button and voice-activated Echo. Only last month, Amazon launched virtual Dash buttons on it home page and app, enabling one-click buying for hundreds of Prime-eligible products.
While food and beverage firms have been comparatively slow on the uptake for eCommerce sales versus more mature categories (around 2 percent of CPG sales are estimated to be generated online), increasing numbers of CPGs are also publicly stating their commitment to the online channel. For example, Mondelez aims to grow its eCommerce business to $1 billion in sales by 2020. For General Mills, eCommerce is “mission critical.”
Grocery is set to become the next retail sector to be transformed by digital. The FMI/Nielsen study predicts that online food shopping will reach saturation in the US faster than other industries have come online before. So what should forward-looking brands be doing to capture their fair share of this $100 billion opportunity?
Here are five key pillars to success for every CPG brand in the eCommerce channel.
Discoverability in search and category rankings: Can a shopper easily find your product? Online retailers are increasingly the research platforms of choice for shoppers. Fifty-five percent of US online shoppers now check Amazon first when searching for a product, and just 30 percent of searchers click past the first page, according to research from Millward Brown Digital.
For CPG brand manufacturers, being present on Amazon and other online retailers - and more importantly being seen by potential shoppers - is paramount to eCommerce success. Identifying key search terms for your product and category, monitoring where your product appears in the search term rankings, and optimizing content and promotional strategies to improve your brands’ position is essential to discoverability on a consumer’s digital path to purchase.
Accurate and optimal product content: Shoppers are starved for time, and your products need to stand out with images and titles that are informative and eye-catching. Once a potential shopper lands on your product page, is your product’s information accurately displayed to increase the likelihood of purchase? Good content attracts and converts shoppers. Be sure to follow each retailer’s specifications and follow leading practices.
In-stock availability: If your product is out-of-stock, shoppers simply cannot buy. A a joint study from FMI and the Grocery Manufacturers Association (GMA) from 2015 (not focused explicitly on eCommerce) reveals that the first time a shopper encounters an out-of-stock product, 70 percent substitute a different product; the third time this happens, 70 percent switch stores.
On-shelf availability is fundamental, just as in brick-and-mortar retailing. Prioritize solving supply chain issues by focusing on your highest-velocity items at your most strategic online retailers.
Activate your brand loyalists: Once a shopper has bought your product, you have the opportunity to leverage brand advocates by encouraging them to rate your product and write a product review - helping you to drive more customers. According to Bazaarvoice, 81 percent of customers read online reviews before making a purchase decision.
No matter the stage of a product or brand in its lifecycle, ratings and reviews can help reassure shoppers that they’re making a smart choice. Reviews produce an average 18 percent uplift in sales, and as shown in our monthly Amazon FastMovers reports, we see a direct correlation between best-selling brands on Amazon and the number of reviews.
Close the loop by measuring actual sales and category share: While reliable data on category size and growth and individual brands’ share of category data are challenging to acquire on the market level and for many retailers, new approaches like Profitero’s Amazon Sales and Share estimates are helping CPG companies measure their eCommerce performance through familiar metrics.
By connecting data on business drivers at the digital shelf, like a product’s search ranking or the number of ratings and reviews, with sales and share measurement, causal analytics are helping CPG manufacturers to increase performance and win market share.
It’s clear that sales via the online channel will continue to accelerate in 2017. New brands are continuing to emerge and, at the same time, are investing aggressively online.
CPG companies that succeed in eCommerce get in early, have strategies and campaigns designed for digital, and are not afraid to continuously re-invest. The longer CPG brands wait to break into the eCommerce market, the harder it will be to compete.
Keith Anderson, SVP Strategy and Insights for Profitero, leads the firm’s continuous innovation and development of online insights solution for retailers and brands. For more information, visit www.profitero.com.
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