You need to define the amount you can spend
Selling online can appear to be a bargain. You do not have to pay listing fees, offer free fill to distributors and so far, Amazon has never negotiated fees to appear in the summer theme ad. We know many of these fees are frustrating for suppliers and can be unrealistic for others.
Selling online requires your web presence with e-commerce capabilities and/or listing on marketplaces. Both of these options provide the opportunity for you to receive orders and get the product to the end user. It is true they can be very reasonable to implement.
The real investment is required to differentiate and develop relationships online. This can take many forms but you have to be realistic it will cost money.
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 third segment of our C.A.R.T. process for e-commerce we ask the question ‘What can you afford?’
The investment required is different but it is an investment
We see many suppliers who decide they want to include e-commerce as an option for consumers. It is a viable channel for many and it can bring incremental sales to your business. Aside from the very rare viral success you do need to be prepared to invest to ensure people can find you and that you develop relationships that translate into sales.
Your website
You have heard us say before your website is the foundation of your online presence. This could be the first place consumers or customers go to check out your products and your business. Your website should reflect your brand and support the positioning you have determined for your product. If you are a niche product, appealing to higher than average income consumers then your website should reflect this. A do it yourself website with poor photos and no value will not appeal to these consumers. It also will probably not lead to many sales.
You do not have to invest many thousands of dollars but you probably will have to invest something. Think of this spend similar to listing fees. We appreciate it is about you and your brand but it is also the price you pay to create your own space on the Internet.
Budget dollars to keep your website fresh and delivering value to your target market. If you have determined recipes are key to selling more then you will need a new recipe developed and photographed at least every month. Make it easy for people to share and use. This can be a pdf to download or some other form of electronic media. This all costs money.
Social media
Social media is awesome. You can create a presence and post for free. Remember the applications are businesses and they are working hard to generate revenue. That means they will push you to paid posts. Your generic posts will be viewed by some of your followers but not all.
The more interesting and value driven your posts are the more likely they are to generate reactions from your followers and others new to your brand. Social media applications also want the people on the application to be engaged. The more your followers are engaged the better chance you have to be in front of them.
Paid advertising on social media can be effective. You can be very specific about the people you will reach and even the geography you want to reach. Applications like Facebook and Instagram have a model where the cost per ad is very low. With a reasonable spend you can reach quite a few people. The biggest win is the ability to target your investment. Test results and figure out what works best.
When you do invest or post online make it easy for people to buy.
Discounts
E-commerce is no different than bricks and mortar when it comes to discounts. Consumers look for them and unfortunately, we are training them to watch for them. Some shoppers visit a store because they believe it will be the best overall value. Walmart work hard to win this everyday low price shopper. Once they are in the store they will buy. Online is different because consumers can move around easily and the options are almost limitless.
A discount can entice people to buy. If they perceive the value to be 4.99 and they see it can be purchased and delivered for less than 4.99 they will be more likely to buy. Obviously, this changes with different target markets.
Whether it is your own website, social media or an online marketplace like Amazon, you can offer discounts. Test different amounts to see what will get people to react. There are also different forms of discounts too. You can offer a simple reduction in the price, a multi buy where they save so much when they buy 2 or more and you can also offer a discount on one item when they purchase another. Lots of options to spend your money.
Do the math
When you build your digital strategy you will need to budget the amount you can afford to spend. No doubt it is exciting to think you have all of that retailer margin to use…
Trust us, it will evaporate quickly
1. Start with your delivered price. This is how consumers will compare you to other channels.
2. Subtract any shipping and order selection fees. This is where you would include any fees charged by Amazon or other online marketplaces.
We can call this your FOB price for e-commerce.
3. Compare your e-commerce FOB price to your cost of goods. This is the margin and profit you have to work with.
4. Subtract the profit you want to make on your products.
5. You are now able to see the amount per unit you have to invest in e-commerce.
Certainly some of this will depend on volume. Perhaps you have certain economies of scale to strive for.
The amount you invest will not be easy to calculate per unit, so you will need to use your crystal ball to forecast e-commerce sales. Once you have a sales forecast, you can multiply the units sold by the margin per unit to understand what you can afford to spend.
When you know the amount you have to spend you can see how it compares to the costs such as:
- Building an e-commerce web site
- Social media posts and ads
- Influencer campaigns
- Discounts on your own platform or online marketplace
- Content creation for your posts
- Internal or external resources to make all of this happen
E-commerce can be a viable option when you have a plan and understand the math. The expenses are different from retail but they are there so it is important to consider them.
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!
FCC creating peer groups for food manufacturers
It is very exciting to be working on two peer groups with FCC. All of the information about the groups is included here. If you are interested in either one of the peer groups just use the link at the bottom of the page.
Kraft Dinner Flavour Boost
When I saw this in our house I cringed. Our 13 year old daughter was excited to try cotton candy and butter chicken. The cotton candy was a bust but the butter chicken was something that might appear on the shopping list again.
From a retailer’s perspective if these sell it is a win. An additional purchase with every box of Kraft dinner would add up and likely the margin is higher on these packets than it is on the box of KD. Consider the options for your products where you can generate the additional, higher margin purchase.
Food prices up and down
We see articles about food prices in the media. Overall perception seems to be prices are going up and consumers might even be changing purchasing behaviours. Beef for example has really increased so people might be shifting to more poultry or other proteins.
Suppliers need to talk to retailers about their costs. If inputs are increasing it will have an impact on product cost. The following table is a reference across a number of categories. You can see where your product or comparable items or other items in your category are shifting. Although there are many increases there are decreases too.
