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Online availability – the key digital opportunity

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online-availability-img

I recently wrote this blog on online availability for www.shoppermarketingexperts.com

You can listen to the podcast version here:

As more and more shoppers move their purchases from regular store to online platforms, brands are in a bind – how do you cut through in a world of unending ranges? For me, this is the key digital opportunity and nothing should be more important than ensuring your brand’s online availability.

Even the world’s biggest brands are struggling with online availability.  Let me give you a real example; I checked out three online grocery stores (Sainsbury.co.uk; Tesco.com and Ocado.com) and searched ‘soft drinks’. Sainsbury prompted me to choose a sub-category, Tesco gave me Vimto and Mountain Dew and Ocado gave me a list of products based on my favorites – what binds all this together? The world’s biggest soft drink brand Coke did not appear on any of the first page results!

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Bizarre.

So, I tried searching ‘Coke’ on all three sites instead. Ocado and Sainsbury were amazing – a great representation of Coke in all its varieties with great messaging and graphics but on Tesco I got diet coke the caffeine free coke then two variants of Schweppes lemonade in the first line.

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What does this tell us? Well whilst Coke rules the offline fixture (its red packaging is used as a guide to finding soft drinks by many shoppers) online, its strength is far from assured.

This is a huge problem and one which a lot of the hype around so-called ‘digital shopper marketing’ seems to miss. For decades on-shelf availability has been the key mission of the sales team. Major companies have built massive expertise in getting right in the right stores. But the concept of online availability is still a novelty to these teams (as it is to many retailers).

The issue is that an online store can, in theory, hold everything – an unlimited range. But online shoppers, just like regular shoppers can’t mange that volume of information so they rely on search terms to get them where they need to go.

For most normal shoppers they want the process of selecting a product to be quick and easy. They prefer to browse one page (maybe 15 products) rather than trawling through many pages until they find the right one. So, what happens to brands like Coke in these circumstances? A mum who searches ‘soft drinks’ might be tempted to by something else – maybe something that is perceived to be healthier or a direct competitor. Perhaps a banner ad will catch her eye (for example, I tried searching soft drinks on Amazon.co.uk and got a great banner for Pepsi Max). Or maybe, in that split second when she pauses for thought, she decides the kids would be better off with water.

As shoppers spend more time online brands need to get way sharper on creating availability. So here are a few tips:

1. Make online availability the number one priority.

For years ensuring the availability of a brand has been the number priority in regular stores. This is the same online. It’s key to ensuring that your brand is immediately visible to shoppers that want it and in-stock. So, get everyone focussed on this and make online availability a KPI so teams measure it.

2. Get to grips with search terms.

Search is now important to brand managers, shopper marketers, trade marketing teams and key accounts managers. These teams must begin to take ownership. It’s important to define which search terms are key to your brands, research how shoppers search for your products and ensure that your brands and core SKUs get placement against these terms

3. Get targeted

Pages differ for each user based on their preferences and their purchase history. As algorithms improve this is going to get more complicated. As more people buy online the number of page variations will explode exponentially. As this happens, the need for clearly targeting shopper segments becomes greater. Brands should work with retail teams to agree on shopper segments that are important to both parties and collaborate to determine that parameters of the range that’s presented to these segments

4. Get disruptive

The world of online grocery shopping is still open territory. If Pepsi Max can stick a banner on a page full of Coke product so can anyone! If you don’t dominate a search term for key shoppers, find a way to use the page to draw attention and win triallists.

5. Get serious!

Shopping has changed forever, shoppers are switching channels and traditional channels like supermarket are only going to lose traffic over time. Commercial teams must now recognise that they must win shoppers online. It’s no longer a niche area and it’s no longer an area that can be ignored. It’s time to invest in getting to grips with analytics and creating agile teams that can hunt down and capture opportunities as they arise. This is going to take investment in capability and creativity.

 

There’s a lot for marketers to think about here but if I’m going to close with a key message it’s this: Online shopping is now mainstream so companies need to embrace this with a mainstream approach. In regular stores the number one priority has always been availability – this has to be the case online too.

If you’ve enjoyed this blog, please subscribe here and to Shopper Marketing Experts for more great content and if you have a specific question why not drop me a line?

Tough Times Ahead for UK Sales Teams

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Tough Times for UK Sales Teams

A new study by Engage Management Consultants suggests that UK sales teams will face significant challenges ahead. 5 key trends conspire to make delivering sales results even harder.

Retail re-structuring puts pressure on sales teams

Most UK brands rely on supermarkets and larger hypermarkets for over 70% of their sales today. However, the rise of discounters, category specialists, convenience retail, online grocers, recipe boxes and subscriptions are rapidly eating into this core business. As a result, over the coming years, the growth of supermarkets and hypermarkets is set to stall and probably decline.

Many sales teams pin their hopes on replacing this lost growth in emerging channels. But, for most brands, this is likely to be tough. Discounters and convenience stores favour limited ranges so offer little respite for brands not already distributed there. Online sales may well seem to be the panacea for many. But successfully converting brand awareness in an online grocery store is proving to be much harder than many sales managers had imagined.

We have worked with a number of teams who are considering this shift and, on average, their brands are predicted to lose between 5 and 10 per cent of their market share if they do not make swift and significant adjustments to their strategies over time.

Changing shopper behaviour challenges sales teams

As a new cohort of shoppers enters the market en masse and as existing shoppers begin to experiment with new ways of buying, our assumptions about how people behave are being upended.

As shoppers spread their purchases across numerous retail platforms, sales teams face several challenges. For instance: When considering recipe boxes, how important is the brand within a curated meal solution? With online grocery shopping, how skilled are current sales teams in securing first-page visibility for their brands? When shoppers switch to discounters or convenience retail, can sales teams ensure brand distribution? And, if footfall declines in supermarkets, how do sales teams manage that decline?

These are all significant problems that may see lead to the further erosion of market share if not aggressively addressed.

Retail consolidation

The first two macro-trends affect a brand’s topline growth but in the UK retail consolidation is likely to hammer the bottom line too. Assuming the Sainsbury / Asda merger is concluded; over 60% of the UK’s grocery sales may be concentrated in the hands of the new group and Tesco.

Sales teams in the UK will have to manage significant challenges in trade terms negotiations; similar mergers have seen a loss of up to 1.5% of margin which is likely to hurt.

Increased financial pressure from retail

In the long term, all supermarket retailers will feel the pinch of retail restructuring and use aggressive pricing to entice shoppers back into their stores. Concurrently price pressure from discounted brands and from online retailers will increase the pressure on retail prices.

At a time of currency devaluation along with the rise in input costs, grocery brands are likely to suffer a major constriction. But this is not the only issue arising from retail. Globally retailers are destocking and cutting the number of products they hold; as well as reducing inventory. These factors may well also lead to a further decline in grocery sales. Sales teams will also almost certainly feel further pressure as retailers also seek to pay slower.

All in all, these pressures from retailers could put brands in considerable and escalating financial difficulty over the coming years.

Talent shortages

Whilst the UK boasts of its low unemployment, there is a marked shortage of knowledge workers generally. In times past, FMCG companies were attractive employers offering good working conditions, training and remuneration. However, as employers, the CPG industry has been long-eclipsed by the financial sector and the tech sector, which has drained much of the new talent from the market.

Young sales managers in the industry are impatient at the slow rate of development they perceive in consumer goods and many leave in the hope of better prospects elsewhere. This puts huge pressure on the incumbent sales teams to just look after the day-to-day delivery of targets, let alone consider the strategic development of a brand’s future. As a result, the overall capability of many consumer goods companies is in decline.

So what does this all mean for sales teams?

For many managers, these trends may seem quite abstract; the effects distant, even remote. However, collectively, they will combine to have an immediate impact on all members of customer-focused cross-functional teams in the industry, both now and over the coming years:

Finance teams will see a net decline in cash flow as retailers destock and pay slower: making ready cash flow management harder and forcing some tough decisions that are likely to be unpopular.

If brand shares decline, budgets will be slashed or shifted to faster-growing markets. Furthermore, the pressure to justify expenditure as well as to account for ROI will intensify.

For sales teams, things will get even tougher: expect hard negotiations with customers; greater pressure on your performance in the short term; and lower bonuses in the future.

Industry leaders respond

The leading lights in the industry are rapidly taking proactive steps to mitigate risk and even prosper from the opportunities that this new environment presents. Many are currently taking steps to better understand the fast-evolving UK retail landscape, to reassess retail channel priorities as well as to redefine and crystallise future sources of revenue growth.

This is leading to a concerted multi-functional effort across commercial functions, as combined teams collectively reconsider customer priorities, build more integrated brand and customer plans and determine a vision for the ‘store of the future’.

Many are taking the opportunity to assemble real and virtual customer-focused teams with the aim of blending the best resource to deliver against cross-functional initiatives which will underpin future sustainable growth.

These businesses are well placed to weather the storm; however, they represent only a small minority of the UK’s branded manufacturers. Many of the others are struggling to identify where to start and how to engage cross-functionally to formulate a response.

Accessible solutions at hand

To support leaders and managers in the industry during these tempestuous times, Engage has partnered with a team of UK and Global industry experts in order to build a roadmap that describes the key actions that companies should be planning for the future as well as helping them to identify immediate opportunities to begin working together ever more closely as a team.

Both the roadmap and Engage’s findings are freely available to managers in the consumer goods sector. If you would like us to share these with you, please email toby@engageconsultants.com today.

Online Grocery Shopping – Why it’s not working

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Online grocery shopping

China arguably leads the world in online grocery shopping with some categories seeing more than 40% of sales online. When asked why this might be, a small group of Chinese online grocery shoppers offered a number of opinions: “It’s convenient,” said one, “I don’t have to drive to the store, I shop before I leave work and groceries are delivered soon after”. “It’s easier to get what I want,” said another, “in regular shops I often can’t find the right product”. A third said. “I hate going to regular stores, they’re dirty and uncomfortable, my mum used to shop in a market for us when we were kids, but that’s not for me”. For these shoppers, online grocery shopping offers a significantly better experience than they get in the real world.

Elsewhere though shoppers clearly don’t seem to agree. Rumor has it for instance that when Tesco launched online shopping in Malaysia, they only managed to secure 35 transactions a week. Even in the UK, arguably the world’s most developed e-commerce market, only 5% of grocery sales are online. Why is this? Not having completed an in-depth survey, I can only offer hypotheses, but I can suggest three reasons why I think many shoppers still prefer to buy groceries in the real world.

Online Grocery Shopping is not intuitive

Online sales have taken off in the entertainment industry because the product is so simple; if you like a song or a movie, you search for it, and there it is. There may be a few versions knocking around but it only takes a few seconds to find the one you’re looking for. Grocery products aren’t like that, categories might include hundreds of individual products, categorized into different segments, differentiated by brands and then further broken down into variants, pack types and pack sizes.

In the physical world, grocery shoppers have developed intuitive coping strategies to deal with this, filtering out the extraneous and focusing in on just the product they’re looking for. When the precise product isn’t there, they switch to a substitute. Equally shoppers in the real world are rarely as specific about what they want as they need to be in the online world: How often have you found yourself putting ‘beef’ or ‘veggies’ on your list knowing that you’ll choose what looks good when you get there?

Online grocery shopping is different, you’re required to know what you want and all but a few search systems are intuitive enough to help a lost shopper. As a result many shoppers may prefer to stay with the store they habitually visit rather than change.

Online grocery shopping is not trustworthy

I suspect that online grocery shoppers hold web-stores to a far higher standard than they do regular ones. In the real world, it’s not uncommon to find lines out-of-stock; one audit of Asda we did in the UK found 12% of lines off-sale. Real-world shoppers have learnt in many cases to cope with this reality and to substitute or go elsewhere.

However, I believe that online grocery shoppers have an automatic assumption of availability. I’m guessing this is born largely out of their experience of shopping for other products online: When you buy a track in ITunes, it’s delivered immediately; if you buy a book at Amazon, it’s dispatched in days. I’m guessing that since many online grocery shoppers’ first experience online was like this, they feel let down when the product they want isn’t available in the online grocery store.

Further, when grocery products that have been ordered online don’t turn up, shoppers get even more frustrated. I’m pretty sure that for many this sort of experience leads them back to doing things the old way.

Online grocery shopping isn’t ‘social’

My third hypothesis is that that many offline grocery shoppers who don’t make the switch online, choose to continue shopping in stores because ‘it gets them out of the house’. For many, going out to shop is a social occasion which can’t be easily replaced online.

In research we’ve done, shoppers often rate the availability of help and information third only to convenience and range when it comes to selecting a grocery store. For many shoppers, the absence of a personal contact, may frustrate those seeking a hard-to-find product let alone those seeking input or advice.

Making online grocery shopping work better

If any of these hypotheses were proven true, this would give some valuable insights to the grocery trade on how to elevate the performance of their online stores. Such insight might lead to more personalized and better curated online environments which satisfy the needs of shoppers better. Equally this might enable web-stores to improve their product availability in more targeted ways (and enhance their forecasting capability). Lastly, learning what turns shoppers off online grocery environments would help create more engaging customer service experiences.

It occurs to me, however that very little of this insight exists today, and if it does exist, it’s not being published. So perhaps it’s time we addressed this. If you have information that might shed light on why so few shoppers go online, or would like to share other hypotheses, please get in touch.

Image from Wikipedia.

Shopper Marketing 101 – Product Availability

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Which would you buy?
Which would you buy?

With all the talk surrounding advances in shopper marketing, many marketers might be tempted to forget that the biggest single influencer of shopper behavior is product availability. Put it this way, if a shopper can’t find the product, she won’t buy the product and chances are, she’ll buy a substitute instead.

With the vast majority of purchases being made on the home shelf in stores and off the regular page online, ensuring your product is present and visible is the first responsibility of the shopper marketing team. This might sound like a glib statement but ensuring product availability is surprisingly tough to get right and astoundingly easy to get wrong.

Here’s a few simple rules every shopper marketer should bear in mind.

Make sure it’s ‘there’

Ok, I know this is really basic but a shopper can’t buy your product if it’s not for sale where they are shopping. This doesn’t mean that your product has to be everywhere – I’m not suggesting that anything less than 100% distribution is a failure. What I am urging, though, is that brands understand who their target shopper is, what he wants to buy and where he wants to buy it.

This means that range and distribution targets should be set with the target shopper in mind and not just based on the efficiency of any given route-to-market. In today’s grocery markets the tectonic plates of retail are shifting; big-box, one-stop shops are giving ground to online outlets, discounters and convenience stores. Waiting for these channels to become significant for your brand may make your brand insignificant as the shoppers who are flocking to these environments choose your competitors and not you.

Shopper marketers are stewards of a brand’s future and their challenge is to always ensure that there’s a product available to the brand’s shoppers, wherever they choose to shop.

Just because it’s ‘there’ doesn’t mean it’s ‘there’

Be super careful of relying on inventory reporting for peace of mind. The fact that a product might be showing up as being in distribution doesn’t necessarily mean that it’s available for purchase. As a sales guy years ago a lot of the time I wasted in stores was spent hunting through stock rooms trying to find that box of Twix that had been delivered but hadn’t made it to the shelf.

In online stores, shoppers expect to be able to receive everything they want at the same time, so if your product isn’t in-stock, even when it’s on the page, there’ll be a bunch of folks who choose the other brand that is there.

As a shopper marketer, the only time you can relax is when you know your product is available to buy, in the right place and in sufficient quantity to meet your shoppers’ demand. (I know that means, like, never!)

Just because it’s ‘there’ doesn’t mean that it’s fit for purchase

Have a look at the pic I posted above, now have a look again – which bottle would you buy? The one full to the brim or the one that only looks part full? I’m guessing you and I would come to the same conclusion – the one that’s full!

As shoppers we always want the best, so apparent product quality is a must. Damaged and dirty goods turn us off and whilst a committed shopper might look for a perfect pack, others may just as quickly switch to something else. The same holds true online, perhaps more so, if the product imagery doesn’t look outstanding, some shoppers will go elsewhere.

As a shopper marketer, doing your level best to nail the quality of your presentation in store is a great way to win shoppers for your brand.

Just because its ‘there’ doesn’t mean I can see it

Shops are busy places and shoppers are busy people, in the average superstore, shoppers will browse a category for 30 seconds – that’s 30 seconds to find your product amongst the other 200 or so products on sale. In surveys we’ve done, shoppers often cite not being able to find a product on shelf as the key reason why they switch brands. Scarily, in many of the cases, the product was on shelf, just not in a place where it was easy to find.

On a website, particularly one that sells grocery products, getting visibility is going to get harder: Here algorithms determine what shoppers see. As these algorithms get smarter, so the pressure on shopper marketers will increase. But for shopper marketers, obsessing about how visibility can be constantly improved is far more likely to pay greater dividends than the next big thematic activity.

So what does all this mean?

An awful lot of ‘shopper marketing’ initiatives seem to focus on the short-term delivery of great communications gimmicks or super, shiny, new promotions. Indeed one team I work with currently spends over 80% of their time working on promotions alone.  Interestingly though, as we’ve worked through a re-organization process, the team has learnt the true RoI their efforts and it’s not pretty.

Uncovering the true value of product availability by contrast has had a profound effect on way this team thinks and on the way they will organize themselves. Their new plan is to focus over half of their resources on continuous improvement of product availability. I think this is the mark of a true shopper marketing team; one that knows that marketing to shoppers requires the use of the full range arrows in their quiver – availability, communication and offer.

In our book, “The Shopper Marketing Revolution”, Mike Anthony and I explore what it takes to make a great shopper marketing team and we talk extensively about getting product availability right. Incidentally, the book is available to shoppers globally, just click here!

Is 2014 the year to invest in online retail channels?

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online retail channelsA very Happy New Year! As many of us dust of the keyboard and make resolutions regarding our waistlines, thoughts turn to the priorities we might set for the coming year. If you’ve paid attention to the extensive coverage given to online sales over the last month, you may be seriously considering whether this year is the year to make significant investments in online retail channels.

Your decision will of course be based on how important you believe online retail will become in your market and category and at what rate its importance will grow. 2013 saw online sales reach the highest levels ever in markets around the world. There’s no doubt that as shoppers become more time poor and continue to struggle with suppressed incomes, many will be attracted to e-tailers offering lower prices and savings in time and transport costs. Yet in many markets, shoppers lack confidence in online retail offers: concerns abound about reliability and quality of products. Equally shoppers in many markets are still unable to access credible e-tail offers either locally or via well-established global players who refuse to deliver outside limited geographies.

How fast will online retail channels grow in 2014?

Depending on where you play and what categories you operate in, there are two potential pathways for the growth of online sales.

The first is that sales will grow exponentially: (and 120% annually between 2003 and 2011). Whilst online retail sales are , in some categories online represents a significant share of business. Some manufacturers’ online sales leap in the last few years to in excess of 8%. If online sales do grow rapidly, manufacturers could easily be caught out and those left napping could see their shares decline whilst their sales in traditional outlets suffer. Equally they may be caught in a double bind, as traditional retailers use price discounting to catch up, causing margins to tumble at the same time.

The alternative is that online will grow incrementally. In the US, sales online seem to be growing at a rate of between 9% per annum, albeit from a base of 8% of total retail sales. If sales grow at this rate, manufacturers will have more time to accommodate changes in their trade structure and the impact of these changes, whilst significant, will be far less dramatic.

In either scenario online retail has the potential to be a significant proportion of sales within 5 years, so changes in marketing strategies, organization structure and business process will become necessary for all.

Shoppers are the agents of change

Whatever happens, the agent of this change is neither the manufacturer nor the retailer however. 2013’s seasonal sales in Europe and the US show that shoppers will reach a tipping point where confidence levels reach a point were reticence to shop online is overcome. For anyone considering what to do now, the message is clear: Understand your shoppers better.

To really get to grips with what to do about online retail channels you need to know how your key target segments are likely to behave in the future. Research programs should consider:

  • Which shoppers are likely to remain offline in the future, their relative importance to your brands and what their expectations from retail stores are.
  • Which shoppers are already online, how important they are to your brands and what is needed to drive value from them.
  • Which shoppers are likely to move online, how they may deliver potential brand value and how you should approach them to gain maximum leverage.

Should you act this year?

For those pondering whether it’s worth making such an investment in research consider this: There are only two likely outcomes: online retail will become important very rapidly or online retail will become important slowly. Against these outcomes you have two choices; to act now or not to. So in deciding what to do; draw matrix: on the vertical axis put rapid growth of online retail at the top and put slow growth on the bottom. On the horizontal axis plot action on the right and inaction on the left.

In the top right quadrant you now have a space where change is rapid but you’ve acted and can anticipate this change. As a result you are competitively ahead of your peers, market share grows and you assure long-term stable growth. Immediately below is the situation where you’ve invested, but online retail doesn’t take off rapidly. At first blush this might seem like you’ve wasted money but if you’ve worked hard on understanding all shoppers and not just those who might go online, you will gain competitive advantage from the insights you now have about shoppers in offline retail and you can anticipate the future. In both cases, you gain a positive result.

Contrast this with the outcomes of inaction – say change happens but more slowly; your inaction may not affect today’s results but as online becomes slowly more important, you may incur greater cost in the future to catch up. The worst outcome of all however is you don’t act this year and there is rapid change. In this scenario, the market moves rapidly ahead of you leading to market share loss and extreme pressure on the topline and bottom line. You have to respond relatively, which means you incur not just catch-up costs but also suffer from talent shortages.

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Of course this is just my analysis but I would recommend as you ponder the future that you think about what might happen in your category and your market in the same way. If you feel that action is an imperative, feel free to contact me to discuss your next steps.