Today, more and more consumers are expecting companies to develop a direct online ordering offer, which is creating a new dilemma for Consumer Product companies: How to go about online commerce? Should they simply ignore it, keep on relying on their traditional retail partners, develop new partnerships with pure online players, such as Amazon, or should they develop their own eCommerce offer as an alternative route to consumers?
Source: Capgemini, Digital Shopper Relevancy, 2012
If you are part of the marketing or sales team of a large CP company, considering its fast growing rate, its size accounting for about 10% of the total retail sales globally and its great influence on the customer purchase journey, chances are you are more and more considering eCommerce as a strategic opportunity.
In most of the cases, it will give you the opportunity for the first time to fully own the relationship with your consumers – this includes having a greater influence on pricing, product information, display, customer service etc in order to provide a total customer experience. It is also an effective tool to increase distribution overnight, which is often a key challenge for emerging products, niche or legacy offers. And most importantly, it will give you access to a very precious commodity: data. By having the opportunity to develop a customer database, you will gain precious insights about behaviour & needs which can be used to refine your product offer, fuel product innovation pipeline or implement powerful CRM programs to name a few.
In that context, the opportunity seems very tempting, but how easy is it to materialise it and what are the challenges on the way?
- Despite common belief, cost of sales driven by technology platform, logistics, delivery cost, bank charges or most recently exponentially increasing marketing costs are high, resulting in thin margins. Beyond intangible benefits, delivering a positive business case can prove difficult and few are the companies which are actually generating positive return.
- Most CP companies are not internally equipped to deal with the necessary changes in their operating model, resulting in a complex and time consuming learning curve. This includes acquiring new skills to distribute and market the products online, developing logistics and inventory solutions, building a P&L from a retail point of view, transforming the customer service, … In most cases, companies who ventured in that journey had to initially outsource these skills to bridge the gap.
- Customers expectations in terms of range, shopping experience, pricing and offers, delivery options, customer services and privacy requirements are also rising rapidly, which means that you will be practically competing against the most successful online retailers!
Therefore, before making a strategic move, it will be important that you develop a deep understanding of why eCommerce is becoming increasingly appealing to consumers:
- First, the prospect of finding a good Price bargain. It is now even very frequent to use your phone to check prices online whilst shopping in a physical store!
- Access to a large range of product. Traditionally, this has been one of the key pillars of the growth of early days online retailers.
- Services including flexible payment & delivery methods, subscription, gift wrapping, … In that space, recent innovations such as Click & Collect or 30 min delivery windows pioneered by large retailers have made it even easier for consumers to shop!
- Greater product Experience, including rich content, brand features, demos, …
- Product exclusivities, personalisation, …
Key choice drivers for shopping online – Source: Capgemini, Digital Shopper Relevancy, 2012
With that in mind, what do you need to know to define an optimal eCommerce proposition?
- Do you own a destination category, or is it usually part of a broader shopping basket?
- What are the pricing mix and margin you can play with?
- Are you facing distribution issues?
- Do you have the operational capability to meet customers’ service expectations?
- What are the levels of brand equity of your products?
- Are your products / category a conversation starter / fueller?
- How standardised is your offer, and how healthy is your product innovation pipeline?
- How aggressive and successful is your competition?
- What would be the impact of a move on the relationship with your retail partners?
Depending on your answers, having a dedicated platform might not necessarily be your best plan. Instead, some of the following options might prove very efficient and give you a more secure environment to test and learn quickly:
- Working in close partnership with your retail partners to increase the strength of their online offer and develop customer insights.
- Developing specific partnerships with key online retailers, such as Amazon, who have online know-how and are currently massively increasing their focus on the grocery range.
- Increasing digital presence to gain customers’ share of mind by leveraging social commerce and advertising opportunities. Companies such as Slingshot for instance are now offering the opportunity to add any item to your existing shopping basket from anywhere.
- Investigating alternative solutions such as apps complementing the retail offer by the level of services and the overall customer experience.
A potential lens to evaluate your eCommerce options
Successful organisations are putting consumer needs at the centre of what they do. The priority of your online commerce strategy should always be aimed to enrich the customer experience, and provide you with the opportunity to build on your consumer needs.