Investing in the Future of Food: Failure to invest in e-commerce threatens market share, reputation

By Elizabeth Crawford contact

- Last updated on GMT

Related tags: Investing in the Future of Food, ecommerce

With online sales of food and beverage representing only a small fraction of total sales, many established brands have taken a wait-and-see approach to e-commerce – focusing instead on tried-and-true retail channels – but according to the e-commerce management consulting firm Hinge Global this strategy may do more harm than good.

Hinge Global CEO and Founder Fred Killingsworth explains in this episode of FoodNavigator-USA’s Investing in the Future of Food that online sales of food and beverage are growing too fast to ignore, and that failing to sell online not only is a missed sales opportunity but it leaves brands vulnerable to third party sellers that could eat into their overall market share and potentially damage a brand’s reputation.

‘There will be winners and losers’

Killingsworth estimates that the food and beverage industry at large is worth roughly $22 billion and expected to expand $60-$100 billion over the next four years with e-commerce representing the best opportunity for manufacturers to be a part of that growth.

However, he cautioned, “there will be winners and losers based on people’s investment and adoption of best practices, technology and operational changes that are required to reach the digital consumer.”

He added that the best place to reach consumers – both at the retail level and through food service and business-to-business is on Amazon,  where six out of 10 people on the Internet have already purchased a grocery item.

He explains that consumers are being trained to shop on Amazon and to understand the convenience it offers – as the acclimate to the experience and the benefits they will increasingly turn to the website – making it crucial for all brands to be a part of Amazon.

It is time to get off the fence

Despite the potential opportunity, Kinllingsworth says many large CPG companies continue to sit on the fence either because they don’t know how to engage with consumers online or they don’t have the budget to do so effectively.

However, he recommended, they “scrape up”​ a budget, even if minimal, to invest in online sales now. He explained that a $100,000 investment in e-commerce could easily grow to a $50 million business in two years. But, he added, if they wait not only will the value increase drop but the amount needed to invest to receive the same returns will increase.

Beyond just the missed sales, he explained that third-party sellers are taking advantage of brands that are not actively selling their own products online by selling their goods in their place.

“Excessive of 59.6% of all food sales are happening via third party sellers. That is a gigantic number and it creates an enormous risk. The longer the companies wait, the worse that number gets. And it leaves the door open for them get leapfrogged,”​ he said.

He explained that consumers will become trained to visit these third party sellers to buy the food they want so that even if a brand enters the online market in the future, consumers will continue to go to the vendors where they always have gone – making it difficult to regain that lost market share.

In addition, he cautioned, third party vendors often do not meet the same high standards that a brand would set for itself – and as a result may deliver a subpar product or shopping experience that could tarnish consumers’ perceptions of the brand.

To avoid these consequences, Killingsworth recommends that brands dedicate a team to online sales that can ensure quality customer service, police the advertising content associated with products sold online and ensure that the products sent to consumers are correct and of high quality.

This can be a tall order for companies that are already spread thin, which is where companies like Hinge Global come into play. Killingsworth explains that his company helps brands win at e-commerce by providing information, strategy and expertise.

It does this first by assessing the marketing opportunity and where a brand over- and under-indexes in online sales and market share. From there it identifies gaps and opportunities for businesses from a content, search, planning, demand, forecasting, marketing and advertising perspective.

Hinge Global also helps brands limit their exposure to third party sellers by working with partners that help govern and remediate them on a global basis, and by structuring contracts with retailers and distributors to control where product is sold and by whom.

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