Don Stuart, managing partner, Cadent Consulting
The headlines are arresting: “Amazon drives double-digit holiday growth while in-store trips decline.” But is this really affecting food retailers and manufacturers?
Amazon has changed the world of retailing, but its focus has been on: 1. digital media (books, music, video), 2. large ring/high importance/low frequency items, 3. select, routine non-perishable items. In fact, only about 1.5% of CPG sales are online — and less than 1% for food.
Let’s look at the major reasons why ecommerce doesn’t make sense for food retailers:
• No for retailers: Amazon could digitally disintermediate — or eliminate — traditional retailers from the food distribution process. What value does a grocer add if manufacturers “make” and Amazon “sells”? Food retailers should leverage their core strengths of convenience, selection, price and service while focusing on what is truly distinct. Food shopping is a sensory experience: Consumers touch, smell, see, feel and occasionally even taste what they buy.
• No for manufacturers: This is a more difficult decision as all marketers are searching for growth in new and uncomfortable places. Committing to Amazon is a Faustian bargain — build your Amazon business but lose support from Target — as P&G recently discovered.
Amazon doesn’t make money selling food products online, and food is not a logical business adjacency for Amazon.
Amazon makes money securing Prime memberships, not selling consumable food products. The base Prime cost has already increased in Europe, could increase by 50% in the U.S., and the AmazonFresh rate is already at $299 annually. What’s the limit even if additional services are offered?
The wreckage of Webvan and many others should still be in our rearview mirrors. New models have been developed but the watchword is “Caveat Venditor” — Seller Beware.
Brian Cohen, EVP and group director, Catapult Marketing
In a climate where omni-channel marketing has proven to be more than just another buzzword, and shoppers are personalizing their respective paths-to-purchase, one has to look at the ecommerce effect as a major driver. Too often, though, we look at ecommerce through a specialized lens, focusing on the transaction itself, and missing the overall impact it has on our business.
While macro-level indicators suggest that ecommerce is reaching maturity in some industries, it still represents a small percentage of CPG sales. Yet despite the low percentage of sales ecommerce represents, savvy organizations are investing because they realize the impact goes beyond a siloed view of the return on investment.
Ecommerce can’t be ignored. Just look at how brick-and-mortar retailers are responding to the showrooming phenomenon. One major big-box retailer recently asked its supplier community for help in combating the issue, while Best Buy’s holiday ad campaign designated themselves “America’s Showroom,” offering online price match to drive foot traffic.
Given how fragmented the digital landscape has become, with various resources and influencers, shoppers are left searching for a centralized and trusted resource to help simplify their lives. Etailers like Amazon and Walmart.com have become that resource, providing the most detailed set of product information, full assortment visibility, usage suggestions through lifestyle content, and peer endorsements to ensure shoppers can purchase with confidence. Even more, Amazon is redefining everyday low pricing by spidering the web multiple times per day, ensuring its price is always the lowest.
In today’s complex business environment, ecommerce is simply part of the omni-channel shopping experience, and not participating means more than missing out on the seemingly insignificant revenue realized today. But don’t take my word for it; take a look at where Walmart, Target and the rest of the retail industry are making their investments.
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