Over the past year, traditional multi-channel retailers such as Tesco and Waitrose and marketplaces such as Amazon have successfully captured this growth. During the pandemic, Tesco reported a 69% growth in online sales , Waitrose saw a 182% hike in ecommerce sales while Amazon’s grocery sales tripled in Q2, 2020. According to a recent survey by Retail Economics many consumers are expected to continue to shop online beyond the pandemic.
Partnering with existing online retailers is often the quickest route to the online market for Consumer Product (CP) brands.
For consumer products (CP) brands that decide to sell through the E-Retail channel will have two types business models to choose from. The traditional model and D2C (Direct to Consumer) model.
The traditional model comprises indirect B2B2C relationships such as logistics partnerships (e.g. Amazon), sales through multi-channel retail partners or third-party sellers (e.g. distributor networks). While the D2C models includes E-Retail shop in shop (e.g. Amazon Store).
E-Retail models offer the benefits of a faster time to market and reduced effort and investment in infrastructure and learning curve compared to developing or acquiring their own ecommerce channels.
There is a wider argument for CP brands to consider new business models given the underlying market challenges they are facing.
CP brands continue to tackle the balance of power between brands and mass retailers, which is mostly in favour of retailers. Mass multi-channel retailers equipped with richer consumer insights continue to demand more from CP companies. Growth for the largest CP brands is slowing with industry growth declining from 5.7% to 3.2% in 2018, according to Consultancy.UK. The big CP brands need to find and capture new avenues of growth to survive.
With the rise of social commerce, the consumer’s path to purchase has shortened and widened, making it harder for brands to stand out. CP brands need to address the new ways of shopping. It has become easier for online consumers to switch between brands as new disruptive brands present true alternatives. CP brands need to tackle the weakening brand loyalty.
Content is a key influencer of the consumer’s purchase journey. Brands have to find ways to generate effective content whilst adhering to restrictive parameters of their E-Retail partners
As CP brands plan their E-Retail approach and mechanics they should keep several considerations in mind:
- Building an understanding of online and offline consumer preferences to reduce reliance on traditional retail partners: What are the different purchase journeys for the emerging channels like marketplaces? What are they key touch points?
- Capturing the key category trends by understanding: What is the right proposition? Which are the most relevant E-Retailer partners for the proposition? How can social channels be used to scale their brand?
- Driving digital customer engagement across the path to purchase: What are the touch points that influence purchase on E-Retail sites? How to optimise the channel, content mix and budget to influence traffic and conversion on E-Retail partner sites?
- Managing the digital shelf with E-Retail partners by understanding: How will the products get discovered on the partner sites? How to make the product information more relevant and effective to influence purchase? How to curate our own digital shelf?
- Ensuring product availability and relevance as consumers: How to improve forecasting accuracy to minimise stock outs? What data could enrich forecasts?
Key capabilities required
CP companies will need to evolve their capabilities to define and deliver a successful E-Retail strategy. They should have the ability to:
Develop relevant e-retail value proposition: This entails ability to identify the right E-Retail business model suited to the category/ categories. While balancing E-Retail with the brick and mortar sales to deliver on the overall profitability goal. One such example is MAC make up that runs its own brick and mortar and ecommerce channels and has set up effective shop in shop store fronts with E-Retail partners like Boots.
Leverage relevant data and insights: This involves developing a data and analytics strategy that includes first party and multi-channel data. Developing granular insights to tailor assortments, grow the category, optimise pricing and promotions etc especially adding value to the relationship with their E-Retail partners. Unilever is one of the players making strong strides in this space with their People Data Centre capability.
Drive omnichannel engagement: By using data, content and technology solutions to deliver targeted or personalised digital campaigns along the path to purchase e.g. driving referrals to the E-Retail site, driving product discovery on social channels etc.
Establish end to end content management: Managing the end to end content lifecycle across a range of content artefacts (e.g. product information, campaigns etc) and digital touch points (Search, Social, E-Retail platform) across the path to purchase. While maintaining a consistent brand voice and messaging across the channels.
Optimise user experience and use journey: By working hand in hand with retailers to understand the customer behaviours and motivations and help optimise different parts of their journey.
Establish an enabling operating model: Developing relevant competencies and ways of working for the E-Retail with cross functional teams across marketing, sales and brand building. As well as developing enterprise agility to evolve these capabilities. Furthermore, finding a partner management approach that helps unlocks greater value for both parties.
Brands that will thrive in the future are those that are swiftly able to adapt their marketing and sales organisation to understand the online consumer, influence their purchase journey and influence the category growth with the right digital commerce approach such as one offered by E-Retail sales.
Tanya Anand Senior Consultant with Capgemini Invent focused on helping client unlock growth through business agility and relevant digital capabilities.