June 26, 2013
CPGmatters: CPGs Need to Prepare for Growth of Online Grocery Shopping
Through a special arrangement, presented here for discussion is a summary of a current article from the monthly e-zine, CPGmatters.
While online grocery retailing has become a solid niche in the United Kingdom, it has been slower to take off in the U.S. That is about to change, according to executives from U.K.-based IGD, which serves the consumer goods industry.
"This is an immature channel, but it is growing very fast," said Richard Wallace, digital and e-commerce analyst, IGD.
Mr. Wallace, whose main focus is the U.K., points out four essential challenges for CPGs:
- Harnessing growth
- Developing an effective internal structure
- Understanding the online shopper
- Building category management skills for online.
In the U.K., this online channel for grocery is still between 3 to 4 percent of the total market, but expected to double over the next five years and starting to make "a material contribution to retail or manufacturer top-line sales."
But one challenge with online is that traditional sales and marketing roles do not necessarily apply to the online environment. U.K. businesses have taken a number of different approaches to structure. Mr. Wallace said, "There is no fixed route that works. It’s more about more agile thinking, taking the right skills, which means you have people who understand the digital shelf, and then finding a structure that works," he added. That may not be the kind of thinking CPGs have done before.
In the U.K., the online shopper shows a bias toward females, particularly younger moms. Shoppers’ missions must also be understood. Mr. Wallace said, "Why are they shopping online? Is it a monthly top-off, or is it a weekly full shop? Those are big challenges because this is a different channel, and you have to acknowledge that online is part of a multi-channel approach. Integrating online into multi-channel plans is really important for a manufacturer."
The most distinctive advantage that manufacturers bring to the online sales effort is building category management skills. Said Mr. Wallace, "Understanding how the website, or how the mobile device, is actually shopped for your product is a huge challenge, because every category is shopped differently."
BrainTrust
Recent Discussions
Discussion Questions
Do you agree that traditional sales and marketing roles in the grocery channel don’t apply to the online environment? What other changes in the vendor/retailer relationship should be expected with the expansion of online grocery?
Poll
Which traditional marketing roles—BOGOs or the Wall of Values?
For years I’ve said that there is a fundamental difference between physical and digital retail—the former being an extension of industrial age production logistics and command and control one-to-many communication theory, the latter being driven by information and an interactive feedback model of communication.
Liberated from the tyranny of physicality, online retailers are free to do what their brick-bound peers ought to think about at least—redefine the principles of customer engagement.
The same holds true for CPG manufacturers who—at least to date—have failed to significantly re-engineer their sales/marketing models in a way that truly engages shoppers.
Online replenishment shopping will grow in direct proportion to increases in population density, meaning, as the population continues to urbanize, online grocery shopping will grow.
Why? Because both delivery time and costs are reduced in urban areas, making online shopping comparable to on-foot shopping. When these two different trip types are comparable, online grocery shopping has a chance to “win” on convenience, without an increase in cost.
Transportation, order size, and order assembly costs are factors maintaining the difficulties of starting and growing a grocery order delivery service. Furthermore, customer service issues involving returns and the rapid response expectations of the friendly American consumer are having excessive impacts on company profits. These are just some of the biggest issues in board room discussions going on today.
Additionally, a knowledgeable awareness of the average consumer buying habits and storage capacity differences in Europe and the USA will allow for a better informed decision as to whether or not this is a market ready for exploitation. For the time being, I see only limited success for this market in few select market areas. But that’s just what I think!
Given the success of the Amazon model, online retailing will afford each e-commerce retailer the opportunity to target offers and content to their shoppers on the basis of their past purchases, directly and inexpensively, by creating a personalized online shopping environment.
The real question is whether the retailer will make the investments in systems and intellectual property to do all of that in an effective, profitable way.
Many other norms of conventional retailing should be reviewed as online retailing becomes more mainstream. Weekly specials, mass promotions and other traditional promotions will likely become a sub-optimal way to talk to an online shopper with so much new and targeted data to drive the conversation!
Changes in the landscape will definitely need to be figured out, but what remains constant are category management and shopper insights. In each environment you will have shoppers that have different shopper need states, and being able to effectively communicate and manage these states is what will be a win for the grocery industry. Vendor/retailers should expect to have greater understanding of what’s driving the purchase. Deep analysis of data will also be key in offering promotions and marketing tools to these shoppers, so insights will need to be gathered quickly in great detail.
In a study we just did on this same topic, one of the biggest takeaways for us was the fact that in-store shopping is an emotional issue for consumers, and the online experience is purely functional. Given that, the way things are marketed and sold online should be very different from in-store. More organization, less shouting, more price lists, etc., vs great signage, messaging that matters and plan-o-grams.
Now, can one person do both? Not very well, IMO. But you know, this is American retail we’re talking about, so WILL one person do both? In most cases, no doubt. But again, probably not very well.
“In the U.K., this online channel for grocery is still between 3 to 4 percent of the total market.”
I guess that qualifies as a “solid niche”—particularly if it’s shared by only a few firms—but it serves to point out how small it must be here in the U.S…. either great growth potential or a rounding error, depending on your POV.
The online channel for grocery will grow with growth in online per se. Don’t really agree with concept that traditional sales and marketing roles will not apply. It’s more about how these roles are customized for online shoppers.
So traditional roles of quality, service, satisfaction, etc. will still hold good—as the mode of delivery of these changes. The biggest change I would expect is in area of supply chain. How do you deliver on time, how do you reduce delivery time, what kind of inventory you need to keep in your warehouses, etc?
More Discussions
Is Meta Committing to Retail via Meta Lab Stores, or Are Other Goals More Important?
Is Meta playing in retail, actually committing to retail, or looking for more data?Aerie Recruits Pamela Anderson To Highlight No-AI Models Promise
American Eagle’s Aerie banner has recruited former “Baywatch” star Pamela Anderson to broadcast the lifestyle brand’s…How Timely Is the Planned Lowe’s Website Renovation Focusing on Personalization?
Is Lowe’s being timely with its website reno, and is it right to be placed as…
Which traditional marketing roles—BOGOs or the Wall of Values?
For years I’ve said that there is a fundamental difference between physical and digital retail—the former being an extension of industrial age production logistics and command and control one-to-many communication theory, the latter being driven by information and an interactive feedback model of communication.
Liberated from the tyranny of physicality, online retailers are free to do what their brick-bound peers ought to think about at least—redefine the principles of customer engagement.
The same holds true for CPG manufacturers who—at least to date—have failed to significantly re-engineer their sales/marketing models in a way that truly engages shoppers.
Online replenishment shopping will grow in direct proportion to increases in population density, meaning, as the population continues to urbanize, online grocery shopping will grow.
Why? Because both delivery time and costs are reduced in urban areas, making online shopping comparable to on-foot shopping. When these two different trip types are comparable, online grocery shopping has a chance to “win” on convenience, without an increase in cost.
Transportation, order size, and order assembly costs are factors maintaining the difficulties of starting and growing a grocery order delivery service. Furthermore, customer service issues involving returns and the rapid response expectations of the friendly American consumer are having excessive impacts on company profits. These are just some of the biggest issues in board room discussions going on today.
Additionally, a knowledgeable awareness of the average consumer buying habits and storage capacity differences in Europe and the USA will allow for a better informed decision as to whether or not this is a market ready for exploitation. For the time being, I see only limited success for this market in few select market areas. But that’s just what I think!
Given the success of the Amazon model, online retailing will afford each e-commerce retailer the opportunity to target offers and content to their shoppers on the basis of their past purchases, directly and inexpensively, by creating a personalized online shopping environment.
The real question is whether the retailer will make the investments in systems and intellectual property to do all of that in an effective, profitable way.
Many other norms of conventional retailing should be reviewed as online retailing becomes more mainstream. Weekly specials, mass promotions and other traditional promotions will likely become a sub-optimal way to talk to an online shopper with so much new and targeted data to drive the conversation!
Changes in the landscape will definitely need to be figured out, but what remains constant are category management and shopper insights. In each environment you will have shoppers that have different shopper need states, and being able to effectively communicate and manage these states is what will be a win for the grocery industry. Vendor/retailers should expect to have greater understanding of what’s driving the purchase. Deep analysis of data will also be key in offering promotions and marketing tools to these shoppers, so insights will need to be gathered quickly in great detail.
In a study we just did on this same topic, one of the biggest takeaways for us was the fact that in-store shopping is an emotional issue for consumers, and the online experience is purely functional. Given that, the way things are marketed and sold online should be very different from in-store. More organization, less shouting, more price lists, etc., vs great signage, messaging that matters and plan-o-grams.
Now, can one person do both? Not very well, IMO. But you know, this is American retail we’re talking about, so WILL one person do both? In most cases, no doubt. But again, probably not very well.
“In the U.K., this online channel for grocery is still between 3 to 4 percent of the total market.”
I guess that qualifies as a “solid niche”—particularly if it’s shared by only a few firms—but it serves to point out how small it must be here in the U.S…. either great growth potential or a rounding error, depending on your POV.
The online channel for grocery will grow with growth in online per se. Don’t really agree with concept that traditional sales and marketing roles will not apply. It’s more about how these roles are customized for online shoppers.
So traditional roles of quality, service, satisfaction, etc. will still hold good—as the mode of delivery of these changes. The biggest change I would expect is in area of supply chain. How do you deliver on time, how do you reduce delivery time, what kind of inventory you need to keep in your warehouses, etc?