Insights
Freshening up online food retail
November 5th 2014

“Finally, after a decade of transformational impact on other sectors of the economy, the new frontier of e-commerce has come to food. Ready or not, our industry must do a much better job of leveraging this channel.”

Campbell Soup Co. CEO Denise Morrison candidly delivered this statement last week to analysts at the company’s investor day, acknowledging the untapped potential for food and beverage marketers in the online space.

While consumer brands have long since existed in the online world, just about every market sector has performed better than Food & Drinks. In the year to April 2014 the UK grocery market amounted to £174.5 billion, which was an increase of 2.8% on 2013, and yet that same portion of the market claimed the smallest share online.

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A mere £7.7 billion of the £174.5 billion total came from online sales, which explains why the Food and Drinks category sat at a 5.5% share of the online market in 2013. It’s hard to determine whether this is the result of low consumer demand, or if it’s food retailers simply not driving the right experience into their online channels. But what we do know for sure is that the Institute of Grocery Distribution forecast the UK grocery market value to be worth £203.0 billion in 2019, which means online will naturally witness a comparable growth.

The biggest force behind online retail sales growth will come from the older generation of consumers. While younger consumers have been faster to adopt ecommerce, they are still struggling with the weakened economy, and therefore retailers are best to align their strategies with those aged 55 and over.

The older generation have been less affected by economic downturn, and the number of online buyers in that age category is expected to rise by 5.5% this year, and a further 5.0% in 2015. They are expected to continue to grow faster than any other age category through to 2016, so how will marketers adapt?

Overcoming the executional challenges of online grocery selling requires considerably different marketing strategies than those used in physical stores. The tactics of promotional spending and freestanding inserts just don’t work; the e-marketer must accept a world where search is the new shelf space and the online retailer controls the consumer relationship.

Online retailers are up against Amazon as a major player in the online grocery world, and packaged goods marketers are up against each other to even be seen on the site. Adage recently reported that Amazon’s search algorithms reward brands that get the most clicks and sales, which have been referred to as a “democratization” of shelf space. It means that once brands reach the top of the search results, it’s hard to dislodge them because that placement alone will drive more clicks and sales.

Carefully managing product pages, using visuals and key phrases to drive search results, and directly responding to negative consumer reviews are a packaged goods marketer’s best bet at working with Amazon’s system, but the competition here will remain fierce.

Online retailers in general will also have to review why 55% of Food & Drinks consumers abandon their shopping carts prior to checkout. While this ranks comparably better than other sectors, the opportunity presents to explore the cause and how to best address it.

 

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It could mean a review of how inspiring your experience is and offering customers incentives and rewards that convert them into a sale at check out, or it could even be a revision of your check out facility operates. Consumers will not bother with overly involved or complicated check outs systems.

Whatever your approach, the opportunity to take a fresh perspective on online food retail has never been better. Brand connections are changing and inspiration needs to be present in both your physical and online offering.

Brought to you by an underscore thought leader:
Rachael Bradley, Strategic Account Executive.

Source 1 Adage
Source 2
eMarketers
Source 3 IGD
Source 4 veinteractive

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