eCommerce is here to stay, but within FMCG eCommerce is still quite low in terms of market share at circa 6% in 2019 (source: GfK, Intage, Kantar). However, with eCommerce forecast to reach 10% of FMCG sales by 2025 (if not sooner in my view), should suppliers be complacent with allowing people to simply move their purchases from one channel (e.g., supermarkets) to eCommerce?
Unfortunately if this happens, it means only one thing. Given the cost to serve in eCommerce, largely driven by high delivery costs, unless suppliers increase the average transaction value of their products, their retailer partners will make less margin on the same products. That will no doubt result in retailers looking to share the burden of these additional costs with suppliers.
So, instead of focusing our efforts on ‘getting our fair share or above’ from the Grocery eComm channels, as most clients we talk to seem to aspire to, Quantic believe in a different ‘Ambition’. In our view the focus needs to be on how to utilise this channel to spearhead category growth through better meeting unmet or latent consumer needs.
However, the natural barrier to this is the large volumes coming through ‘favourites’. So this will require suppliers and retailers putting pressure on each other to change the current norms and strive for a different type of growth. By taking this challenge on board, eCommerce presents a great opportunity to finally deliver the great shopper marketing that has traditionally been difficult to execute in stores for various logistical reasons.
According to Edge, and in keeping with our own beliefs, there are four basic characteristics that great retailer websites must deliver to win. Three of those characteristics fit well with this idea and the fourth does too, if not misunderstood:
- Experiential – giving shoppers an experience beyond simply fulfilling favourites
- Social – connecting shoppers and allowing them to share great inspirational ideas with each other
- Curated – personalised propositions
- Frictionless – aiding the shopper with easy options that meet their needs
Beware though. If ‘Frictionless’ is taken at face value, and misunderstood to the same extent that ‘ease of shop’ was in traditional retail, we will be back where we started – the same product sold in a different channel at a higher cost.
If you want to know more, please talk to us about how to maximise the links between your category and brand strategies and the potential that the eCommerce channel offers.