You and other stakeholders need targets
E-commerce is exciting. It can really get you inspired when the thought of anyone in the market you serve, with an Internet connection, is a potential consumer. You still need to be realistic to plan for the volume you will achieve and to consider your definition of success.
Many food and beverage producers and processors love the challenge of building the e-commerce platform but lose motivation when it comes to the ongoing, weekly work to deliver the sales.
One great strategy to keep the focus is to define success over a period of time. The Internet is a crowded place and it takes time and effort to build relationships, trust and ultimately volume. When you set objectives for metrics such as sales and profits it will help you build your business.
Just the same as selling in bricks and mortar, success is not just about making great products to sell, it is about selling the great products you make. To help you do this we have designed a new SKUFood C.A.R.T. process specifically for e-commerce. We have been learning a lot about this channel and invested the time to develop our proven process for this channel.
You can maximize the opportunity when you put the resources and effort into selling your products in a different channel. In the second segment of our C.A.R.T. process for e-commerce we ask the question ‘What is the definition of success you and your customers have?’
Define the components of success
I am always a fan of some targets to measure results. Sales are key because that top line make such as difference. Profit is also important as you can sell a lot and work hard but if there is no return you will lose enthusiasm quickly. It is also important other stakeholders such as online marketplaces and retailers with e-commerce offerings have expectations too.
Start with sales
For me it is always easiest to start with sales. You can look at sales per week, per month or any other time frame that makes sense for your products. Be realistic when you define the sales you will achieve online. You might have great products but building relationships online takes time and consumers will not automatically trust you will deliver.
Consider your online sales and marketing strategy when you define your sales targets. If you plan to follow and every day low price strategy then your build will be slow. If you want to offer discounts, multi buys and other offers then you might experience peaks and valleys. Build this into your definition of success.
Take the time to review your results and perhaps adjust if necessary. Every product will perform differently so watch what is happening and adjust for the future. Your sales forecast will also help you with production and all of the other requirements of fulfilling orders.
Define your sales for each online channel you are selling in. You might have your own e-commerce offering on your website and also sell on a marketplace like Amazon.
Profit from online sales
Sales are great but you need a return. Again this can take time as you have upfront costs to absorb and economies of scale will not be there at the beginning. Consider all of the costs as there are many.
One strategy used by e-commerce applications and online marketplaces is to charge fees on a monthly or even volume basis. These can seem low up front but they also add up and if it is per unit you do not see benefits when your volume grows.
You should include all of your digital strategy and promotion costs in your analysis. Social media ads also appear ‘cheap’ because they are low relative to mass media but they do add up. They can be very effective and targeted which is great but they all cost money.
Online marketplaces have expectations too
Prior to the pandemic Amazon and other online marketplaces seemed to be able to avoid some of the challenges faced by bricks and mortar retailers such as inventory turns and labour shortages. The pandemic changed a lot of that.
Amazon was forced to reduce inventory levels because they just did not have the staff to manage the product in their system. Although they do not have the cost because they do not buy it from suppliers, they still had to hold it and work around the slow moving products. They have been very aggressive to reduce inventory on slow moving items. They have expectations for inventory turns so you need to be aware of them. The costs of obsolete inventory in Amazon can be significant.
It is a % game
With the huge potential of the Internet and e-commerce it really becomes a strategy of understanding how many people will actually buy from the people who see your website or your presence on the marketplace. If you determine with some history that 5% will buy and you want to sell 10,000 the math is simple. You need to get 200,000 potential buyers to your website and/or your page on Amazon. Just remember to determine all of the cost of generating those 200,000 visits and order fulfilment on 10,000 units.
If you have any questions or help figuring out how to get your product online or in the virtual shopping cart you can always call me at (902) 489-2900 or send me an email peter@skufood.com.
We are adding more industry updates and interesting ideas to your SKUFood newsletter. Hopefully you have heard me say this before and that it resonated with you in your business.
“Success in this industry is not just about making a great product to sell; it is about selling the great products you make”
Peter Chapman
If you see things happening let us know so we can share them with our community. We also want to hear if you find this helpful and benefits your food and beverage business!
Seasonal changes are a reality in retail
Just when you are in the middle of summer you are reminded in stores we are not far from fall. This display in a Loblaw store includes Freezies to beat the heat, marshmallows for a campfire and believe it or not…Halloween candy. Yes, it is there already!
Consider the timing on all of your seasonal items and it might be changing. Talk to your customers about when product needs to be shipped and also if there are opportunities
More resources for food and beverage processors
This week we saw an announcement from the members of a national food industry consortium. They were celebrating the launch of the Food Convergence Innovation (FCI) Canada – Food and Beverage Supply Chain Project (FCICanada Project), a national, sector-wide platform that will link Canada’s food and beverage supply chain by allowing companies to post and search for specific products, services, and partners within given geographic parameters.
We have not seen the details yet but this does sound like a good resource if you are looking for inputs, co-packers and other options to help your food and beverage business.
Pepsi getting out of the juice business
For the large players it can be a chess game. This decision might be the result of needing funds to support expansion in other categories or a sign that juice sales are declining as consumers want less sugar in their diet. The lesson here is always look at the components of your business and make sure they are delivering what you need. That does not always have to be volume but there needs to be a reason to keep them in your portfolio.
