Online scrolling is taking the place of center store strolling as more grocery retailers take their shelf-stable items to online vendors, and more consumers choose to bypass the store lines and enjoy the convenience of delivery services.
The center store online migration is not a fad or a temporary disruption. In the era of Amazon and free next-day delivery, non-perishable food brands who hope to compete well into the future must adapt to this new reality—and develop and activate their own direct-to-consumer strategies. Mark Baum, Chief Collaboration Officer at the Food Marketing Institute (FMI), pointed to the urgency of this challenge in his remarks about FMI’s and Nielsen’s joint multi-year initiative, the Digitally Engaged Food Shopper. “While we are more connected than ever to influence what shoppers buy,” he said, “the window to influence those moments is narrowing.”
Who’s Driving the Shift
While the vast majority of consumers still buy specialty food and beverage products in large retail stores, the Specialty Food Association notes that shoppers are beginning to migrate towards online for these purchases. Previously, age and affluence were inhibitors to online shopping, but times have changed. Some have claimed the shift is due primarily to Millennials and the value they place on convenience. And while Millennials do indeed have a significant influence, the reality of who’s driving this shift might surprise you.
According to a recent study from eShopWorld, members of Generation X are actually the most active online shoppers, closely trailed by Baby Boomers. In fact, Boomers spend more money online, on average, than any other generation–because they are more financially able to do so. And if that’s not surprising enough, recent statistics from Nielson’s “Collaborating for FMCG Omnichannel Success” webinar also reveal that even 39% of the Greatest Generation have made an online purchase.
While members of all generations share a desire to avoid the traffic and crowds of in-store shopping, older shoppers are also becoming more tech-savvy due to work and family influences (see Amazon Echo commercial). According to Nielsen’s & FMI’s findings, more than 70% of consumers will engage with online food shopping within the next 10 years. Will you be ready for them?
Where Brands are Going
As a result of these trends, center store brands are moving more marketing dollars towards and distribution efforts around online channels like Amazon—and standing up their own eCommerce websites. Per Nielsen, nearly 9 out of 10 dollars of fast-moving consumer goods (FMCG) retail growth came from online sales in 2016, and this trend seems to be accelerating. While Amazon’s purchase of Whole Foods seems to indicate continued consumer confidence in retail, it also shines a very bright light on the growing prevalence of home delivery driven by online purchases.
For any specialty food and beverage brand, having a shelf presence in Whole Foods is a big win—but so is having successful consumer engagement through your own online store.
Think of your website as a product you control. You own its ingredients (what products you show and offer for sale), its functional benefits (how easy it is for consumers to shop and buy your products), and its story (why consumers want to buy your products in the first place). While selling on Amazon is important, standing up your own distribution channel should take precedence.
Consider this approach as your ultimate direct-to-consumer strategy; eliminate the middle-man, make the rules and reap all the benefits. It takes considerably more effort to push someone into a brick-and-mortar retail store and direct them to your product, living on a shelf among a sea of competitors, than it does to pull them into your own ecommerce store to experience only your brand. Your online store is your unlimited shelf. You control everything about it—what it looks like, how you prioritize and price your products, when and why you run promotions, how your customers interact with and ultimately purchase from you. There’s no retail noise to overcome. Fewer obstacles coupled with lower investment equates to more profit.
Managing a Successful Store
Developing your own ecommerce store, as opposed to using existing online retailers, does come with its own set of considerations. Questions you should consider:
- How are you going to package and ship orders?
- How are you going to maintain or increase production levels to support distribution?
- How are you going to handle customer service?
- How are you going to market it?
- How are you going to build it to begin with?
By opening a digital store, you make yourself and your brand the primary contact with the consumer, rather than a third-party retailer. While this adds customer service to your list of responsibilities, this should be viewed as a good thing—it gives you yet another touch point for building customer engagement and brand loyalty. With respect to technology, it’s imperative the whole of your digital ecosystem is working in sync—especially your product catalog and your shopping cart. The key is to provide a simple and seamless experience from browsing to buying. The smoother the process, the more likely you are to develop affinity among your customers. Integrating your site with social media can amplify this benefit—simply by giving customers the means to influence potential customers within their networks.
Circling back to consumers and the myriad differences in their shopping behaviors, these nuances can be mitigated by the strategies you employ within your ecommerce store. Using consumer segmentation based on generations at minimum, and/or in a more sophisticated way, by the functional benefits of your products, helps both you and them. It helps you to more effectively target-market, stage and sell your products, and it helps them to self-identify as a likely consumer of your brand.
Boomers and the Greatest Generation are more loyal to brands they’ve previously purchased, as long as they receive a consistent product at a fair price. On the other hand, Gen Zers, Millennials and Gen Xers prefer to connect with your brand on a more personal level. You’ll gain confidence and repeat business from these generations if you elevate and act out your values. And don’t overlook the “unboxing” experience. This is just another way to showcase your brand and values while providing a moment of delight not available in store.
Get Your Dot Com On
Does all of this mean retail is dead? Hardly. But we are recommending you shift a percentage of your attention towards digital, in particular towards your own ecommerce store—and that you start this process today, not tomorrow.
Benefit to you:
- Less overhead, higher profit margins
- Unlimited “digital shelf” space
- Control of your brand narrative and experience
- Access to consumer inputs/feedback
- Easier promotions
- Loyal customers
- Ability to scale
- Direct interactions with consumers
Benefit to your customers:
- More convenience
- More product choice
- Ease of purchase
- Brand relationship
- Proof of your brand investments beyond the store
- Foot traffic driven in store (not everyone who shops online buys online)
- Higher velocity, bigger baskets, more revenue
As reported by the Food Marketing Institute, 2017’s first quarter online grocery sales had increased at a rate four times that of retail’s when compared to the same period from 2016. This figure is a stark warning for any specialty food or beverage brand not yet using eCommerce as a marketing strategy. To put it simply—get your products online; get your eCommerce store open, and now!