By Sam Gagliardi
With the rise of online shopping, consumer purchase habits are changing at a breakneck speed. Not since the invention of the automobile, and the freedom it gave consumers to shop in farther-away places, have American consumers adjusted their buying behavior so drastically. Check out these facts from eMarketer:
- Online CPG sales have been growing approximately 15% annually since 2010, far outpacing brick and mortar stores.
- U.S.-based retailers will invest over $15 billion to drive online sales in the next three years.
- This year, there will be 40 million first-time online baskets, and one-third of U.S. households will become first-time online grocery and consumable customers.
It’s truly a new era, one in which digital is now the primary way that people shop. According to IRI data, more than three-quarters of people (76 percent) researched online before making a purchase during last year’s holiday shopping season, and 75 percent say they plan to use a smartphone/tablet more during the shopping process in the future (eight percent already do it while they shop). And, mobile is now the primary way people shop online, with mobile devices used 56 percent of the time spent online researching products and 51 percent of retailer website visits.
If you’re a manufacturer or retailer, the e-commerce train is clearly on its way out of the station. But it’s not too late to get on board.
E-commerce may be a small share of CPG sales today but it’s on track to rapidly accelerate. Retailers will continue to invest in this area, and consumer adoption of digital CPG shopping will occur quickly. But, shoppers’ path to purchase online is also likely to become more rigid, with only certain sites considered for purchases (right now, more U.S. consumers start their CPG online shopping with Amazon rather than any search engine).
Whether you already have an e-commerce strategy in place or you are considering developing one, there are six important questions you need to answer in order to be successful in this channel, to protect your market share when consumers migrate more online and increase sales:
1. What are the total market trends? This includes the size and growth, markets, categories and delivery methods. Note: It’s hard tell just yet if one distribution model will be overall winner but we suspect click and collect and home delivery will be dominating the field.
2. How does online impact what happens in-store? You’ll want to understand whether there’s any cannibalization or leakage of products, household penetration, shopper frequency, customer loyalty and attribution back to exposure.
3. How are my key categories doing online? This includes the size of the category, its growth rate, household penetration, forecast, assortment, and who is and is not shopping these categories online.
4. How am I doing versus my key competitors? It’s important to know your share, growth, exactly how you are winning your current shoppers and how you and your competitors are doing with product, placement, pricing, promotion, position and perception.
5. How is online similar or different to in-store? The companies and brands that are you competitors in the store may be completely different online – your shoppers too. Understanding barriers in these channels as well as the different strategies and tactics that are needed is the first step in ensuring that you develop and execute the right approaches.
6. What are the path-to-purchase insights that will inform your online strategy? What sites are consumers visiting before and after they purchase brands? What media are they consuming?
To fully answer these questions for your business and brands, you need accurate online and offline sales tracking, an understanding of what’s happening at the digital shelf (think product/assortment, pricing, placement/search terms, position/search rank and perception/reviews), omni-channel insights and visibility into the path to purchase. In short, you need good e-commerce data to drive your growth in this evolving channel.
E-commerce is well on its way. Are you ready?
For more information on the future of CPG e-commerce, read The Digital Future by IRI, Google, BCG and the Grocery Manufacturers Association. Then, email me at Sam.Gagliardi@IRIworldwide.com to find out how to access and use point-of-sale, shipment and other e-commerce data to drive your own growth in this evolving channel.