And yet many companies continue to follow the same “human-touch” centered techniques to interact with online retailers and shoppers that they use in traditional stores.
Part of manufacturers’ reticence to invest in new marketing and management techniques is they don’t see ecommerce as a big enough piece of the pie to justify investing in a new approach. And while it is true that online sales of food and beverage currently is in the single digits, research from the Food Manufacturing Institute and Nielsen suggests in as few as five to seven years 70% of shoppers will buy food and beverage online – spending upwards of $850 per house per year for a total of $100 billion annually.
That is a lot of money for manufacturers and retailers to potentially miss out on if they fail to evolve their marketing and supply chain management techniques to account for ecommerce’s differences from brick and mortar.
In this episode of FoodNavigator-USA's Soup-to-Nuts podcast, Gary Liu, the vice president of marketing at Boomerang Commerce, a technology company that helps retailers and brands succeed in modern commerce, explains how brand manufacturers can prepare for the influx of online shopping and maximize their impact.
Why brands must evolve to embrace ecommerce
Liu explained that the rapid changes and development of online grocery shopping has caught many players flatfooted, but they should resist the temptation to stay on the sidelines.
“The online food and grocery space is one of the fastest emerging spaces in ecommerce now. As a percentage of total sales it is still relatively small, but in terms of the amount of energy attention there right now it is accelerating,” especially as brands and retailers continue to track the impact of Amazon’s acquisition of Whole Foods Market, Liu said.
As brands and retailers alike develop their “Amazon strategy,” they need to consider that how they sell goods in store will not transfer to online.
“The problem that they are wrestling with is a lot of the national brands are used to selling their foods and goods in store-centric models. They have decades of research and relationships with these retail customers and grocery store outlets,” but now they are trying to figure out on this new playing field, how much of what they had before is applicable,” he said.
The answer is not much. “Things are so different now,” executives need to rethink “not just the distribution of my products, but also the sales and marketing and supply chain and operations,” he said.
The transition online will be easier for shelf stable items, especially snacks and packaged foods, but Liu says that manufacturers and retails are working fast to develop ways to safely and effectively deliver temperature controlled products, including produce, meat and dairy.
While he thinks this technology is just six months away, he says there are several last mile distribution options already available, including Instacart and click-and-collect models, that are allowing brands and retailers across categories to dip their toes in online marketing.
How to catch shoppers’ attention online
At the same time that retailers and manufacturers are fine-turning the shopping and delivery experience to attract more consumers to ecommerce, they need to reimagine how they will capture those shoppers’ attention once they are online because, as Liu warns, the strategies that work in stores don’t always translate well to the Internet.
For example, while taking a buyer out to lunch to negotiate product placement works for brick and mortar stores, it doesn’t for online retailers such as Amazon which are essentially automated platforms, Liu said.
Rather, he explained, manufacturers selling online need to bid on key words so when consumers search for something their product pops up. They also need to use digital ads, vendor promoted coupons and discount offers for replenishment subscriptions to increase the chances consumers will see their product and add it to their carts.
Finally, Liu said, manufacturers moving online also need to rethink their supply chain to account for single unit orders, rather than the purchase orders for pallets of products that they are used to getting from brick and mortar retailers.
So, a lot to sort out. And to make matters more complicated, Liu noted the digital space is always shifting based on up-to-the-minute sales and the strategies deployed at different times by competitors. For many players, this can make ecommerce a bit of a black box.
CommerceIQ helps navigate online unknowns
To help brands unlock this box, and their full potential online, Boomerang Commerce recently launched a machine-learning based platform called CommerceIQ that comes with three applications for sales, marketing and operations.
Liu explains that CommerceIQ uses machine learning to provide forward-looking predictive recommendations that it can automate – making life easier for marketers and managers.
For example, he said, CommerceIQ is all about finding sales growth opportunities and helping drive higher search recognition and conversion. It focuses on making offensive plays that allow brands to increase their sales and market share.
CommerceIQ for marketing identifies opportunities to drive higher page rankings on ecommerce sites, such as by alerting a brand when a competitor is out of stock so that they can make a play for those shoppers by having a sponsored ad appear when they search for an alternative replacement product.
Finally, CommerceIQ for operation tracks how much product a company needs in stock and identifies ways to streamline the supply chain to better control margins. It also looks for ways to optimizing packaging and quality improvement issues that might go unnoticed.
While the technology is still new, Liu notes that several national consumer goods brands and food innovators already use it and are seeing positive results.
“We have one consumer goods customer that in the first month ran their program for just three weeks on just one of their brands … and they deployed 21 strategies in CommerceIQ and they basically got a 24% lift in sales within their first three weeks,” Liu said.
He added that the technology can be used by large and small brands alike, but in both cases it is essential to have c-suite buy-in because ecommerce will not be a side project for long. Rather, as it takes off in the next few years, it likely will become just as valuable as brick and mortar stores and will require the same level of attention in order for a brand to succeed.