Ecommerce is a channel you need to consider

There have been a number of changes that everyone in the food industry needs to consider. The considerable shift of dollars to ecommerce is one of those changes. Prior to the pandemic 3-4% of food in Canada was purchased online. This number has increased to 12-15%. It is difficult to determine the precise penetration in the market but we do know it has increased significantly.

Canada had a lower penetration of ecommerce prior to the pandemic than many other countries. The relatively small number of dense urban populations makes the delivery component of ecommerce less attractive in Canada. The other consideration is a huge percentage of the food and beverage in Canada is sold through the larger retailers. They all have considerable investments in stores and they have been reluctant to push consumers to ecommerce and reduce store traffic. The click and collect option eliminated the need for delivery and the pandemic forced retailers to improve their ecommerce platforms and execution as consumers did not want to be in stores.

Ecommerce has a number of factors that influence a portion of the market to pursue this option:

1) It is just more convenient. A lot of consumers really do not like going grocery shopping so this is an option for them to do it faster, from anywhere and avoid the unpredictable store visit.

2) During the pandemic it is safer. We have experienced public heath advice to stay home unless absolutely necessary to go out and there is always a risk of contracting the virus while shopping. Stores have made a lot of changes to how we shop but there is still interaction with many people.

3) Confidence in the accuracy of orders is improving. There has always been a concern expressed by consumers that retailers would be challenged to select perishables as they would. Overall retailers have probably performed better than expected which increases the trust consumers have. I will tell you in our house we have received 1 Brussel sprout instead of the 1lb we ordered but for the most part the perishables have been good quality.

4) There are more millennials shopping in grocery stores and they like to buy online. With the reduction in food service volume, we know millennials were in restaurants more than other segments of the population.

Ecommerce does have different segments that all producers and processors should consider. Some, all or none might be the right answer, depending on your business, your products and your customers.

The first option is selling direct to consumers from your website. If you have a shelf stable product that is relatively easy to ship then selling direct can be a good option. If your product is refrigerated, short shelf life, large and heavy or difficult to ship you will have some challenges to overcome. There are examples in many categories but the complexity can become onerous. There are benefits to selling direct in that you will receive a greater proportion of the final selling price and you have the chance to interact directly with people buying your product.

A second option to ecommerce is selling through an established third-party seller like Amazon. These platforms drive a huge number of people to their site; however, they also sell a huge number of products. The competition is fierce and consumers have the ability to compare one offering to the next very easily. There are fees to list products and that also get generated with each sale. You also have the option to do your own order fulfilment or have your inventory reside within their distribution system. Within the Amazon world this is known as fulfilment by Amazon (FBA). There are fees for this as well however consumers are more likely to select these items as shipping is usually cheaper or free if they are an Amazon Prime member.

A third option which isn’t really an option if you are listed with a major retailer that is selling online is retailer’s websites. I say it isn’t an option because if you are listed and, in the stores, it is likely you will be included in their ecommerce offering. It is recommended to check your items regularly on these sites to ensure the information and photo are correct. You should also try to buy the item to make sure it flows as it should. Remember they are managing many thousands of SKUS and if there is an issue they might not even know about. Consumers might try to buy it but if it doesn’t work, they will just move on to another item.

Overall, we expect ecommerce to continue to grow in this market. Consumers are getting used to the platforms and as continue to live under the weight of the pandemic many people do not want to go out if they do not have to. It is important to remember the buying decision is different online. Shoppers do not have the category in front of them to make decisions but they do have more opportunity to make direct comparisons. For producers and processors who are selling direct the sales are great but the information is just as good. Remember to review and analyze the purchase and other data to learn and use it in decision making. Developing direct relationships with consumers can be very valuable.

With 1/$8 being spent online for food and beverage it is a channel that cannot be ignored.

If you have any questions about how to get your local products on the shelf or in the shopping cart you can always call me at (902) 489-2900 or send me an email peter@skufood.com.

Peter