While “only 2% of the food industry is being purchased online, I think eventually that number is going to be 20%, 25%, 30%. It will just continue to grow and grow because consumers want the convenience of being able to shop from home, get products delivered on a regular basis, be able to choose exactly what they want and not be limited by what is on deal or whatever products the grocery store might have,” Gautam Gupta, who launched NatureBox online four years ago, said at FoodVision-USA in Chicago in October.
He explained that he decided to start in the online direct-to-consumer space because it better positioned NatureBox to own the consumer relationship, “extract data about what the consumer wants” and respond quickly.
Specifically, as an online player, NatureBox can easily track and analyze consumers’ product ratings and either discontinue or develop products quickly based on real-time feedback.
“We are able to develop a product from the idea to the product in the hand of the customer in 12-16 weeks, which is a fraction of the time that most food or CPG companies take,” he said.
Online retail also is a good option for a company that offers a large portfolio of products that will sufficiently attract consumer attention in the absence of buzz created by competitors’ products, he said, noting NatureBox has a “very broad assortment of 120 different options.”
And finally, he noted, online retail is well suited for companies selling products that are routinely purchased and will demand repeat business.
The subscribe and save or “replenishment model is really what online is built around and good at,” he said.
Online isn’t perfect for everyone
There also are several downsides to online retail that firms should consider before going that route, Gupta said.
“It can be really expensive to build a brand in a direct-to-consumer way, because every consumer you reach out and touch, you are usually paying for” through aggressive advertising, he said.
“Conversely, in the brick and mortar channel, a pro is that you get all the exposure to consumers who are coming in to the store,” he said, explaining: “They might not be looking for your brand or your product, but they are coming in the store, so you can attract those consumers to your brand.”
Physical stores, therefore, might be better suited for start-ups launching only one or two products, because they can benefit from the larger category generating awareness, Gupta said. In addition, companies have the option of demonstrating their product in stores to drive trial and gain immediate feedback.
Focus on one channel at a time
Reflecting on the pros and cons of each channel, Gupta advised startups to consider the characteristics of their brands and the services they provide and then select the one channel that best matches their needs.
“I would encourage young start-up brands to focus on one channel and make that one channel really successful,” he said. “It is really hard for any brand or company to try and do two things at once.”
The operable word, of course, is “hard” – not impossible, as NatureBox recently demonstrated when it entered physical stores to drive brand awareness and growth.
Acknowledging the company straddles both channels, Gupta said he followed his own advice and focused on digital retail for the first several years before deciding to step a toe into the physical realm.