A reminder of just how powerful online shopping has become came just weeks ago, when statistics compiled by IBM found that Cyber Monday turned into the biggest shopping spree to date with estimated online sales topping $1.6 billion, up more than 30% from a year ago.
The numbers reflect an increasingly digital-driven consumer base that food retailers need to cultivate. Janica Lane, partner at Partnership Capital Growth, San Francisco, thinks food and beverage brands are poised to become a bigger player in the direct-sale, online universe over the next year.
“We see more and more brands moving online, both with their own websites and through other websites like Amazon,” she said.
Lane’s firm specializes in matching investors with companies focused on healthy and sustainable living. She noted that many smaller brands have been able to attract investment attention by selling direct to consumers through coordinated e-commerce platforms.
“For some of these up-and-coming brands, it really does expand the customer and the buying universe,” she said.
Even larger, established brands have been experimenting with direct-to-consumer sites that bypass brick-and-mortar stores. In 2010, Procter & Gamble launched the P&G e-store, where discounted products are often bundled in web-only exclusives or include similar incentives and free shipping. KIND Healthy Snacks offers an exclusive gift pack in its online store that’s not available anywhere else.
“You go online and you want to buy a Hain Celestial cereal, you don’t buy one box. You buy a bundle of 12. It’s almost like a warehouse store to some extent,” said Lane. “It’s a great way to build a brand presence.”
Destination websites that aggregate products for sell-through, such as Amazon, operate outside of the consumer-direct halo, even though they offer competitive prices and free shipping. In this context, Amazon is more like a traditional supermarket. It’s one reason why the industry might soon see a retailer join the online giant in a distribution agreement.
“Some retailers might feel they’re getting passed up by a lot of this online activity,” Lane said. “With their big database as a selling point, does it make sense to partner with someone like an Amazon, or is there some way they could interact directly with the brand?”
The digitization of today’s consumer may require mainstream supermarkets to form unconventional alliances with online companies they once considered competitors. If the direct marketing of brands continues to grow as expected, this coming year may prove to be a pivotal moment in the development of those new relationships.
The potential payoff in customer data could exceed the sophisticated insights many retailers already possess, said Lane.
“Just having that direct consumer feedback —when you’re controlling the customer database, you can see how much they’re purchasing and how big and how many times, and when they fall off and what they respond to” she noted. “You can even potentially survey them and get data that you would otherwise pay someone like McKinsey hundreds of thousands of dollars for.”
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