A study of some 50 CPG executives and more than 2,000 consumers released by Deloitte Consulting earlier this year found that consumers expect to be buying 158% more grocery and HBC items online by 2017, while marketers think they’ll be buying only 76% more. Surely, there’s nothing wrong with a 76% increase, but CPGers may risk leaving money on the table.
Packaged goods execs expressed a fear that a bold move into online will erode their margins, but Deloitte found that they greatly overestimate how much they’ll have to give up. Eighty percent of consumers said a 10% discount on a product would be enough to send them online, while CPG execs figured they’d need to offer 20% deals to attain that level of participation.
Actually, an integrated in-store and online strategy can reduce marketing costs. In an analysts’ call during Q1 2014, a senior P&G executive said that the company’s long involvement with online and digital marketing campaigns had caused a decrease in spend with no noticeable drop-off in results.
“We continue to drive marketing effectiveness and productivity through an optimized media mix with more digital mobile search and social presence, improved message clarity and greater non-advertising marketing efficiency,” said Jon Moeller, CFO of P&G. Because digital methods like social and mobile are targeted and more effective, he pointed out, “non-working” marketing dollars, such as that spent developing content, can be reduced greatly.
“I don’t think this is an and/or situation anymore,” says Rich Nanda, a principal of Deloitte Consulting. “Digital can be incremental - the inhibitors to shopping online are starting to get outweighed by the accelerators.”
Some companies have even found ways to profit from their digital promotional campaigns. When Mondelez VP of Global Media and Consumer Engagement, Bonin Bough, hired game designer, Pick Pock, to create a game called “Twist, Lick, and Dunk” for Oreo, it scored 4 million downloads and had 250 million users at its peak popularity.
E-commerce will claim 20% of retail sales by 2020, predicts RetailNet Group. It sees grocery chains at the back of the digital pack, with only 5% to 7% of their sales online sales by that time. Nevertheless they believe that digital’s imprint will force itself on grocery retail, through in-store Wi-Fi and mobile communications, digital shopping lists and auto-replenishment models.
A multitude of hybrid digital-physical formats will likely dot the retail landscape as the 21st Century unfolds. “The reality is, whether you’re Walmart or Costco or Peapod, everybody’s got to merge toward the middle,” suggests RetailNet Group VP Tim O’Connor. “Not every consumer is going to want home delivery and not every consumer likes to shop the store, but everyone will have occasions to need and do both. If I’m throwing a party, I’ll order a case of wine and have it delivered, but for a special occasion I’ll want to go to a store and do some sampling before I spend a lot of money on one good bottle.”
“Perhaps the definition of online has to change,” O’Connor continues. “Is it only when you buy online and get delivery? What if I buy online from a supermarket, but pick it up at the store or from a locker? In Europe, the drive-in model is already scaled.”
France’s Auchan supermarket chain has established the Auchan Drive program with its own branding and television ad campaign. A shopper selects her entire order online, and then selects her pick-up time. She drives to a designated numbered parking space at her local store and is met by an Auchan Drive attendant who loads her order into the car.
Merchandising must be more than a brand-building, product-holding delivery vehicle. It must continue to evolve into an online and in-store engagement vehicle. Target leans into this strategy with its Cartwheel couponing app and in-store merchandising. Staples drives assisted shopping techniques through in-store kiosks and endless-aisle applications. CVS capitalizes on personalization through offers and a robust data set for manufacturers to leverage at a price.
Implications for your in-store merchandising and display strategy. Jon Kramer, VP Enterprise Marketing, the leading provider of in-store merchandising displays, offers these suggestions:
- Understand the internet-ability of your category. Some (like high-ticket items) are much more highly prone to on-line purchase. Others (like groceries) are not. Grocery shoppers tend to be looking for “solutions” (What’s for dinner?) – design your merchandising accordingly.
- Deliver consistent messaging at both ends of the endless aisle. Understand that shoppers may be touching in store and buying on line. Or, conversely, they may be looking on line and buying at the store. Pave the way for them, with consistent images, messages and offers.
- Embrace the technology. Alcon’s new display for Walmart enables shoppers to visualize the benefits of a choice of nine different colors of contact lenses with a monitor on the display and a link to a web site that allows them to upload their photo and “try out” the colors.
- Make it easy. Retailers like Kohl’s and Staples use kiosks to let shoppers find items that are out-of-stock in store, and have them shipped free to the shopper’s home. Brand marketers should make sure that 1) their displays call out the availability of on-line purchase, and that 2) their items are highly-visible on the retailer’s kiosk.
For additional insight into these topics, contact your WestRock representative.