Brad Bane, executive vice president of marketing, Market Track
Grocery retailers have been spending an inordinate amount of time lately trying to figure out the last mile. Whether a direct reaction to the threat posed by Amazon + Whole Foods or a nod to shifting consumer preferences for online shopping, the solutions have been nothing if not innovative (and, at least sometimes, expensive)
Kroger entered into a venture with British online grocer Ocado to build robotically operated warehouses to eliminate the manual work required to fill online orders, with actual delivery provided both in-house and by vendors Instacart and Shipt. That’s the same Shipt that was recently purchased by Target to provide same-day delivery.
Walmart has taken the exact opposite approach to grocery delivery with its recent venture with Waymo. Rather than bringing groceries to its shoppers, Walmart is testing a service that shuttles customers to and from their stores to pick up groceries, for free, via self-driving cars.
Whether bringing the groceries to the customer or the customer to the groceries, the impetus for retailers is clear. Within the CPG space, e-commerce grew 18% over last year and now accounts for 16% of all omnichannel consumer goods sales according to research from Market Track-owned InfoScout.
People Can’t Buy What They Can’t Find
Retailers know that Amazon poses a very real threat to their business and are taking dramatic steps to become truly omnichannel. But for manufacturers, the response to Amazon has been somewhat muted.
Admittedly, today the online sale of consumer goods makes up a relatively small percentage of total sales overall, and online sales are virtually nonexistent for items like fruits and vegetables, dairy and frozen foods. As well, in many cases manufacturers are more focused on the threat posed by private-label offers from the likes of Aldi and Trader Joe’s—members of the universe of retailers for which point-of-sale data are not readily available, which grew over 11% last year—than they are anything happening in the online space. Finally, many manufacturers are expecting grocery retailers to solve the problem for them, viewing this as strictly a delivery problem.
While this might seem like a rational response by manufacturers to the shift in consumer preference to omnichannel shopping (meaning “shopping how they want, when they want”), it ignores the new reality posed by shoppers selecting their groceries through any type of digital platform. People still can’t buy what they can’t find.
The Click is More Important Than the Collect
For CPG manufacturers, the click is more important than the collect. By all means, leave the problems of the last mile to the retailer. The challenge faced by brands is a more fundamental one. In-store, brands know what they need to do to make their way into the shopping basket. Online, I’d venture that many still have a huge learning curve in front of them.
Taking a cue from the experiences of durables manufacturers, the exact same principles apply to consumer goods products in a click-and-collect environment as apply on the digital shelf. CPG manufacturers need to reconsider how they view the online environment, including:
1. Learning how people shop: We know that within a marketplace environment shoppers are adept at using the search bar to find specific products. In a more ritualistic environment (and grocery shopping is nothing if not habitual), how consumers will adapt to a digital shopping platform remains to be seen (and requires monitoring).
2. Rethinking trade promotion execution: While on some basic level trade promotions have the same goals (drive retailer traffic, convert manufacturer sales) whether online or off, the way that partnership manifests itself may look dramatically different depending on channel. And the trade promotions identified as being most effective in an in-store environment may have to be reimagined to deliver equivalent returns via click and collect.
3. Monitoring the click and collect shelf: The same urgency exists in the CPG space to be on the first page (or, quite frankly, the first row) of search as is seen on sites like Amazon. Instacart’s own research shows that 70% of conversion from search happens in the first row. It’s almost merchandising malpractice for manufacturers not to monitor their search placement (and, of course, develop strategies to improve their ranking). As well, monitoring everything from pricing to reviews and correlating those data to sales conversion provides a key piece of input into a successful digital shelf strategy.
4. Assuming all grocers aspire to be Amazon: Amazon has learned how to make money, doing everything from creating an ad network to selling space for promoted products to directly comparing their own private-label brands to national brands in an effort to sway consumers. Kroger is already working to build an advertising network, can other grocers be far behind? Even if a brand’s presence on Amazon is minimal, it makes sense to monitor the Amazon marketplace to ensure that you are considering what your retail partners may implement in the future.
Though still smaller, e-commerce represents the fastest-growing channel for consumer products. It also represents a new frontier for manufacturers, one with the potential to reorder brand preferences and reshape the shopping experience. The time to master the click-and-collect environment—and correspondingly the digital shelf—is now, when the stakes are at least slightly lower. Because it’s much less expensive to preserve sales now than to try to recover them later.
Market Track provides subscription-based advertising, brand and pricing intelligence solutions in North America.
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