By Sam Gagliardi, EVP, Market & Shopper Intelligence, IRI
In a recent webinar I presented for SNAC International, I talked about the dramatic changes e-commerce is spurring in the snacking industry. I also highlighted the trends that make it essential for snack brands to invest heavily in e-commerce now if they want to win in this increasingly important channel moving forward.
A Still-Rapidly Growing Channel
E-commerce continues to grow as a proportion of snack category sales. According to IRI data from the last 52 weeks (ending 5/16/21), 12% of overall snack sales are happening online already. And 60% of the snacking growth over the past year has been in the e-commerce channel.
While COVID-19 gave shoppers another reason to embrace online snack purchases, these figures reflect a larger shift. Changing shopper preferences ensure that online snack shopping will continue to grow and disrupt the market long after the pandemic has ebbed.
To thrive, snack brands need to rethink their approach to the shopper. No one has all the answers and we’re all in undiscovered country. Brands and retailers need to forge strong partnerships to test, learn and then replicate the e-commerce approaches that prove successful.
Brick-and-Click Retailers Are Critical
Over the past year, Amazon has captured 23% of the snack category’s online growth, while 65% of this growth has been realized by click-and-collect and delivery vendors. These players that are really thriving in the edible categories – the brick-and-click retailers like Walmart, Target and major grocery chains, along with Instacart and Shipt — had built out their infrastructure for e-commerce prior to COVID-19. They were then able to capitalize on those investments in the snack category during the pandemic.
Today, Walmart is the e-commerce sales leader in the snacking category at 25.4% retailer share, beating out Amazon at 23.8%. Amazon is far more dominant in the non-edible categories characterized by "spearfishing" shopping trips. This is when a shopper goes online, finds an item, buys it and then leaves.
Snack purchases are often made as part of basket-building online purchases in which several adjacent purchases are made together — and this is more characteristic of shoppers at retailers such as Walmart, Instacart or grocers like Kroger. As a result, these channels hold great promise as online growth drivers for snack brands.
E-Commerce Encourages Brand Loyalty
Recent IRI data from one specific retailer also revealed an interesting online trend: E-commerce shoppers exhibited apparent higher loyalty to their brands than those who shop in brick and mortar. I say apparent because much of this effect can be attributed to the nature of the online shopping experience.
When you enter a large brick-and-mortar store, you might see 100 SKUs or more in certain categories to choose from. But when someone does an online search for the same product category, a selection of 15 or fewer products generally comes up. The same search on a mobile device might yield two or three product options. And a voice-assisted product search, by default, takes consumers to just a single item.
Source: firstMovr, April 2021
As a result, online shoppers do more buying than shopping. Beyond the reduced product selection, online consumers are also encouraged to repeatedly repurchase the same items with “Buy It Again” features and discounts for product subscriptions.
IRI data confirms that once shoppers start buying online, they often repurchase what they've bought previously, and often put items they need to replenish regularly on subscription. These online shopping dynamics make it incredibly challenging for brands that don't win early in e-commerce to catch up.
The Time to Invest in E-Commerce Is Now
Right now, we're still in the early part of this game and it's not too late to catch up. To win in the online world, snack brands need to do a better job of targeting and building awareness with key consumers. They need to drive shoppers down the path to purchase and integrate their messaging to earn performance online and in-store.
Your online product pages need to be as good as your brand's website. You should invest in them, optimize them for search and view those product pages as your new packaging. They need to be as strong as possible.
Also, your digital media should drive people to your product pages, not your brand dot com pages. Partnering with different retailers to test and learn the best ways to find the right shoppers, send them to your product pages and then convert them is critical.
Within the snack category, it's also important to be "always on" at key retailers by investing in paid search.
Since we know that snack shoppers take a basket-building approach online, creating e-commerce shopper marketing programs that encourage shoppers to buy products from your portfolio in a larger basket is also key. For snacking, occasions like the Super Bowl and back to school will remain big opportunities for these shopper programs.
Because it's so important to win in e-commerce now and will be so hard to catch up later, I recommend a "plus two" strategy for e-commerce investment: Invest today in online at the level that you would expect your e-commerce business to be two years from now.
While the online share of snacking sales is currently 12%, I expect it to be around 20% in two years. Investing 20 percent of your marketing budget right now toward e-commerce is a good bet for any snack brand. If you want to get a better marketing return on investment over the longer term, the time to invest big in online is now.
Questions about how you can improve your performance online? Learn more about IRI’s e-commerce services, reach out to your IRI representative or contact me at Sam.Gagliardi@IRIworldwide.com.