Food Industry Solutions for Transition to E-commerce

2018 PTT Biz/Food Industry Solutions for Transition to E-commerce - Darren Seifer
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WILL E-COMMERCE EVENTUALLY dominate food sales and, if so, what are brick-and-mortar food and beverage companies to do? Darren Seifer, Executive Director, Industry Analyst-Food Consumption, NPD Group, addressed these questions in helpful detail in his presentation titled “Food & Beverages Migration to E-commerce: The Tipping Point is Here.”

“We are now at the tipping point,” argued Seifer, noting Amazon’s acquisition of Whole Foods immediately turned it into a major player in the food category, forcing box stores, such as Walmart and Target, to try and catch up.

“All retailers and their supplier partners should collaborate and re- think what will happen within their box,” said Seifer, noting that there are important lessons to be learned from other categories’ e-commerce experiences.

Lesson one is that food and beverage companies need to expand their thinking in terms of offering solutions to consumers. Lesson two is that companies need to rethink just what “category leader- ship” means in the world of electronic commerce. Lesson three is that “brick-and-mortar stores are and will remain very important, but they will need to change quickly in order to survive,” said Seifer.

Even as total U.S. retail sales dipped slightly, Seifer said, growing e-commerce transactions captured about 7.7% of those sales in 2017. The food and beverage industry is only at the very beginning stages of transitioning to e-commerce, he continued. The food and beverage category today captures only 4% of its sales online, as compared to technology products (at 30%). In the middle of the range are prestige beauty products (14%) …what beauty products share with foods and beverages is that they, too, are products that consumers want to see, smell and otherwise test out before purchase.

People go online to find solutions, so “companies need to make sure their products are perceived as part of the ‘dinner’ solutions that people seek.” Seifer divided these into eight steps, starting with “deciding what to eat” and finishing with “cleaning” and “restocking.” Added Seifer: “Each presents their own e-commerce service opportunities.” For example:

• Carry it for me! Many consumers may buy some products in quantity, but they don’t want to carry large, bulky items home with them. Online delivery services provide a solution.
• Unpack it for me! Some providers, such as Amazon and Walmart, are experimenting with having consumers provide home access to their service providers, whereby they can directly stock pantries, refrigerators and freezers.
• Restock it for me! For certain products (e.g., pet food), companies can anticipate purchase cycles and provide direct-door delivery on a schedule.

However, there are barriers to be overcome, the biggest being that “consumers still want to pick out their own fresh items and they would rather not pay delivery fees,” said Seifer. He noted that benefits of direct store shopping include “reminding consumers of other things they need,” and that it is often “faster to drive to a store and obtain products as needed.” It is also true that “impulse buys” and “brand attachments” tend to plummet when consumers shop online, he added. E-commerce companies have tried using pop-ups and other tools to try to spur impulse buys.

E-commerce engenders other supplier opportunities. For example, whereas retail package designs are conceived so that they visually dominate crowded retail shelves, this is less important for online product sales. Retailers can thus design lower-cost packages to better fit in crowded consumer pantries, for example.

While online sales may render it more difficult to capture impulse buyers, it is a good place for replenishment buying, especially for “high-loyalty” brands, said Seifer. “Once consumers pick their site, they tend to stick with it.”

“Brick-and-mortar stores are not going away,” concluded Seifer, but if food and beverage retailers don’t heed the lessons learned from other industries’ shifts to e-commerce, they put their very survival at risk.

“Food & Beverages Migration to E-commerce: The Tipping Point is Here,” Darren Seifer, Executive Director, Industry Analyst-Food Consumption, NPD Group

This presentation was given at the 2018 Protein Trends & Technologies Seminar. To download free presentations and the Post-conference summary of this event, go to https://www.globalfoodforums.com/store/protein-seminars/

See past and future Protein Trends & Technologies Seminars at https://www.globalfoodforums.com/proteinseminar/

Posted on:February 4, 2019

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