Planning for profitable growth in UK grocery ecommerce...FMCG & CPG, eCommerce & Retail David Gordon...
Transcript of Planning for profitable growth in UK grocery ecommerce...FMCG & CPG, eCommerce & Retail David Gordon...
Planning for profitable growth in UK grocery ecommerce12th March 2019
Introductions
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Gael PeignéEdge by AscentialEurope Client Insight DirectorParis
Experience18 years experience in retail analytics & consulting• Global Customer Development Director at Pernod Ricard• Global Category mgmt solutions Director at Nielsen• Senior Consultant at NPD Group
Main categories expertise:FMCG & CPG, eCommerce & Retail
David GordonEdge by AscentialResearch DirectorLondon
ExperienceRetail & retail intelligence• Retail Management Safeway• International Development Poundland• Research Director IGD
Main categories expertise:FMCG, retail channels
A journey begins…
2015 2016 2017 2018
UK e-grocery
UK ecommerce
UK ecommerce gaining share quickly
12% 13% 14% 16% 17% 19% 20% 21% 22% 23% 24%
88% 87% 86% 84% 83% 81% 80% 79% 78% 77% 76%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Ecommerce Store Based
Ecommerce+9% CAGR
Store based+3% CAGR
*Compound annual growth 2018 - 2023
3x
…and will continue to lead in grocery ecommerce
6,3
5,1
2,9
1,1
0,5 0,3 0,2
10,4
9,1
6,3
3,3
1,71,2 1,1
0
2
4
6
8
10
12
UK France US Germany Russia Italy Brazil
2018
2023
Online share of food retail sales, selected markets
% o
nlin
e/f
oo
d r
eta
il fo
rma
t
Leading grocers have gained from early adoption..
3,5
2,3
1,8
1,5
0,4
0,1
4,34,1
2,9
2,0
0,7
0,2 2018
2023
Gro
ss
sa
les
GB
P b
n
Increasingly complex landscape…Fragmented chain and alternative paths to purchase
BRAND
Traditional Route to MarketRetailer (1P) fulfilment 1P & 3P marketplaces
Direct to consumer Intermediaries
1 2
3 4
1
2
3
4
…with rising expectations
Consumer requirements …
74% more likely to purchase
again from a company after
receiving same-day delivery
43% expect ‘much faster’
delivery times than the previous
year
78% say they’ve experienced
packages arriving late
Retailer profitability.…
‘…small, loss-making part of the business’
‘…no route to profitability’
The shrinking shelf
Online customers get a much narrower selection at first glance
Product search through the search engine is increasingly the common way to search online
Search engine
Menu/Taxonomy
Browsing habits online are way faster than offline
64% of clicks are on top 3 items(range 39 - 81%)
Only 19% of clicks are past the first page of results
Top 3 Items
Remainder of first page
An additional 17% of clicks stay on the first page
90%of purchases
begin with search
80%of clicks
remain on the first page
Ove
r
*Data is based on a weighted average of top 10 to 25 search terms for 22 CPG categories
In Amazon.co.uk, some categories are already very concentrated
Instant coffee
33%
42%
Toothbrush
38%
67%
Batteries
31%
58%
Toilet tissue
62%
78%
Top 3 weight
Top 10 weight
Amazon.co.uk 1P/2P revenue weight
Mobile 1st page gets smaller
…Even smaller…
The rise of ecommerce, then m-commerce and then v-commerce shrinks the number of products browsed by shoppers
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Planning for profitable growth in ecommerce….Areas to manage
1. Range
3. Pay to play
2. Private labels
4. Supply chain
Range
1) Identify most segmenting characteristics (dimensions)2) Define a primary one (It could often be brands)
Total careAnti-
cavities
Sensitive Fresh
Whitening Kids
TubeHead
down tube
PumpTravel pack
Premium tier
Mainstream tier
Value tier
Benefits Formats Price tiers
3) Define the size of each box
Size of each box is defined according to:
1. Revenue/Margin (Fair share)
2. Growth (Potential)
3. Saturation
Nb of SKUS
Sa
les
4) Select products in each box
Range selection KPI= Velocity X Price X %Retailer unit margin
Total care
Adjust with additional metrics: Exclusive penetration, Basket size, purchaser demographic
Add innovations
Traffic X conversion
Private labels
Amazon continues to grow its private label offering
Batteries example: Increased visibility for Amazon’s PL
Batteries example: Increased share for Amazon’s PL
Extra visibility on private labels on Amazon
In Tesco, high visibility also of private labels in several categories
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Search ranking Cat foodSearch ranking Biscuits Search ranking Cereals
Pay to play
Paid search is getting the lion’s share at the top of the page on Amazon
…Also on Ocado
Case Study: Incrementality of #1 Organic
ASIN
• Pre/Post: Amazon Sales Increased $39k
• Amazon Marketing Services spend was $16k
• Average Selling Price was flat
• 2.4x ROI
Paid search boost sales even on #1 organic search product
Supply chain
The new supply chain requirements
Automated
Agile
Real-Time
Promiseable
Routes to end-consumer
Ways to deliverWays to receive
Ways to pick & pack
Ways to order
3,240
5 9 98
ORDER PICK & PACK DELIVER RECEIVE
What is required?
DriveC&C – curbside pick-upClick-and-collect(in-store) Home delivery
Packaging optimisation
Weight and durability: Changed from glass to PET Transit performance: Redesigned packaging to avoid leaking
Product optimisation
Ecommerce pack types: Online only (large) pack variants
Ecommerce design: New product development
Search ranking Cat food Amazon
Borderless commerceCPG strategies to manage
cross-border sourcing
3P
Harmonisation
Third-party business model
Organisational structure
Dedicated channel strategies
Borderless commerce - channel approach
Pack: Single bar
Convenience and Discount
Pack: 12 bars
Grocery
Pack: 24 bars
HypermarketPack: 60 bars
Amazon Item
Nature Valley’s Oats ‘n Honey Crunchy Granola Bar has an Amazon-specific pack size
Huggies sells an Amazon-exclusive ‘monthly pack’ SKU(Germany, Spain, France)
What is the right eCommerce
strategy?
Adapt trade strategy to ecommerce
Range Perfect page Search
Range Search Perfect page
Search Range Perfect page
1) Select where you want to playToothpasteCharcoal toothpasteWhitening toothpasteCharcoal whitening toothpaste
Natural toothpasteTravel toothpasteOrganic toothpasteBaby toothpasteToothpaste pumpRegenerate toothpaste
Look for emerging search terms in reviews
2) Select priority items
Select the range of products that stands a chance for each search term
Ensure these terms have a full presence across the retailers distribution network
3) Optimize their content to maximize SEO (Traffic) and conversion
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3P can be a very viable option for secondary items
• Higher Volume• Content Control• More Promo / Program Options• Lower Fees
• Control Over Price / In-Stock• Capture Manufacturer & Retail Margin• Added Access (Seller Central)
Concentrate forces on key items
Priority SKUS
Concentrate forces
1. Identify most important Search terms
2. Evaluate saturation and your competitive position on main Search terms & Menu locations
3. Select items with high velocity rate
4. Ensure a Max distribution across retailers network
5. Set a Search optimized content adapt to Search algorithms
6. Invest in high quality content: Videos, A+
7. Focus activation & Paid search investments on these terms
Secondary SKUS
Apply a bypass strategy
1. Aim “Niche” search terms & Menu locations
2. Evaluate distribution through 3P
3. Evaluate a seasonal strategy (when relevant)
4. Optimize basic content
5. In & Out strategy on key search terms?
Adapt packaging to ecommerceEnsure price consistency on each channel across markets
Thank you