Modern Trade Promotion: Thinking Digital

Posted on January 24, 2018 by Caitlin Orosz under Trade Spend Topics

How can you influence the digital shopper’s purchasing decision? Many consumers are wary of product quality and freshness when ordering online. By advertising shipment schedules or providing money-back guarantees, retailers and manufacturers can address their concerns and affect their decisions.

Consumer goods manufacturers take note: The line between the physical and digital world is cloudy and it’s time to consider how the complex consumer journey to purchase impacts your trade spend.

Pew Research cites 8 in 10 Americans shop online; these connected consumers expect grocery e-commerce to stick with the convenient digital retail experiences that industries like durable goods and service-oriented categories have set as the norm.

Today’s digital shopper is spending about 25% of their food budget online. Online grocery shopping is anticipated to grow five-fold over the next decade, with American consumers spending upwards of $100 billion on food-at-home items by 2025, according to a report from FMI and Nielsen. This digital growth is largely attributed to Millennials and Gen Z shoppers, who are native tech users.

More Competition to Influence the Digital Shopper

 

Online shopping is experiencing growth, but brick-and-mortar retains advantages in the consumer goods category.

“Online sales make up less than 3% of total food and beverage sales,” Sam Gagliardi, IRI Senior Vice President of E-Commerce. This data implies that most folks still head out to the store to buy their grocery products. And, while consumers fill their shopping cart by browsing aisle after aisle of product, they’re likely to impulsively choose a product from an end cap or pick up an item from a brand with a BOGO offer.

But, remember, more and more sales are moving online. In this era of omnichannel shopping, there are endless channels that influence a shopper’s purchasing decision.

As you would guess, certain food and beverage categories are better suited for success in a digital grocery store. Retailers and manufactures expect canned goods, condiments and packaged products will shift to digital consumption faster than perimeter items like produce and meat.

Shoppers are wary of online ordering because of the inability to inspect the item and the uncertainty in freshness or quality. A Nielsen survey revealed that 69% of respondents agreed that they prefer to examine products personally. To address this, retailers and manufacturers should proactively advertise shipment schedules or provide a money-back guarantee.

But, look at coffee; coffee sales are booming online. US (in-store) retail ground coffee sales were down 0.3% from the previous 52-week period, according to IRI data. “We do not see in-store growth returning here in the foreseeable future,” said Gagliardi.

Tracking Your Product’s Digital Success

 

Traditionally, manufacturers have easily tracked the success of in-store promotions through POS scanner data provided by research firms like Nielsen and IRI. With this data, manufacturers can identify product movement by retail channel and specific retailer.

But, Kraft Heinz US COO, George El Zoghbi, notes, “With the changing retail landscape, measuring consumption is not as simple as it used to be.” For Kraft Heinz, e-commerce sales make 1% of total sales, but is growing at a 60% rate.

To learn about consumption in e-commerce, CPG manufacturers must jump into the world of digitized big data sources and turn the information into profitable promotions and business value. What are consumers searching for online? What are shoppers saying on social media? Where are your competitors running advertisements? McKinsey and MIT reveal that companies mining big data outperform their peers by 5% in productivity and 6% in profitability.

Digital shopping is alive, and your product promotions have to cut through the noise. Communicate with your shoppers across all the channels they touch and analyze digital data details to provide the right promotions to the right customers at the right time.

E-commerce is one part of the digital landscape. Brick-and-mortar locations can incorporate tech tools to create a better shopping experience for consumers, bridging the cloudy line between physical and digital purchases. The most successful retailers and manufacturers will strategize for both the physical and digital world.