Positioning your business for 2022
How is it the first week of November? We are going into our second holiday season under the weight of the pandemic. Food service is starting to rebound and consumers are feeling pressure from rising prices and challenges to in stock positions in retail.
Between now and the end of 2021, we will share 10 SKUFood insights to help you make the most of 2022. We try to help you see the entire value chain and prepare your business to respond to changing customers and consumers. Each week we will share a different theme and some ideas and opportunities for you to consider.
E-commerce is here to stay
We know a significant percentage of sales shifted to e-commerce since the onset of the pandemic. Retailers have made investments and consumers have adopted online as another channel where they buy food and beverage. It is very difficult to quantify the percentage of food being purchased online. Our estimate is 10-12% of the market is now being purchased online. This would include three segments of the market:
- Direct to consumers
- Third-party marketplace such as Amazon
- Retailer’s websites
Producers and processors can choose to sell on one, two or three of these channels. The right solution depends on many factors such as the resources in your business, the complexity of shipping your products, the category you compete in and your current business model.
Direct to consumers
Selling direct to consumers has relatively low barriers to entry. You need a website with an e-commerce component and the ability to ship orders to the customer. It is not too complicated to get into but requires a lot more than that for success.
Once you determine how to build the basics the bigger challenge is to drive traffic to your website. The Internet is a very crowded place and there are a lot of people trying to get consumer’s attention. You really do need an integrated digital marketing strategy to get the attention of consumers, build relationships and entice them to the point of purchase. You can have a great product, but they might never see it or commit to investing the time with your brand.
One clear benefit of selling direct to consumers is the opportunity to develop direct relationships with consumers. You will know who is buying, how they react to certain offers and how much they buy. All very valuable information if you have the commitment and ability to use the data.
Third party marketplace
We are all familiar with the enormity of Amazon. The model is simple, but selling successfully on Amazon requires focus and resources. The idea is they drive a huge amount of traffic to their website and consumers can find almost anything they want to buy. Your challenge is to be found and deliver a value proposition that is effective in a crowded space.
You will need to invest considerable time and resources to learning about Amazon and generating the sales required for an acceptable return. You do have to be approved to sell food and beverage and there are some basic requirements to your listing like keywords, product description and good photos. You should think of Amazon as another customer, just like a bricks and mortar retailer. Getting your product listed and available for sale is not the finish line.
One consideration is whether you will use the marketplace fulfilment option. Amazon calls this Fulfilment by Amazon (FBA). This is a benefit because Amazon shoppers who are Prime members (a significant proportion) will get free shipping. This is almost expected now. The extra shipping costs can be the deciding factor in the purchase decision. When shoppers get all the way to putting you in their cart and then do not buy this is called ‘abandoned cart’ and is a big focus for e-commerce. Converting these people to buy is usually worth a lot.
Selling on any marketplace requires you to monitor your sales, listings, inventory and your category all the time. Most are operated by systems so you need to be prepared to do a lot of the work yourself. There are companies out there that will help you, for a fee.
Retailer’s websites
Most major food retailers have implemented some form of e-commerce. Some are using the click and collect option where consumers create their order online, pay online and drive to the store to pick up a prepared order. Others, like Sobeys have invested heavily with a dedicated warehouse for order fulfillment and include delivery. The jury is still out as to which is the best option. We do see in other markets where the time between order and delivery has been reduced significantly and is a real point of differentiation. Canada does not have many markets where the density of population is conducive to a return for delivery. It is very expensive and options like Free Shipping with Amazon Prime de-value the service.
If you are selling into any of the major retailers your product should be available on their website. Yes it is their website but you have a responsibility to make sure consumers can find your item and buy it. I can’t tell you how many products I have searched for that do not show up. Remember they are managing over 30,000 SKUS and it is not like a store where a hole on a shelf is noticeable and needs to be filled. Let them know if your item is not there, cannot be found in search or the photo is wrong. My experience has been they appreciate the help. It is better for both if they sell more.
Watch these websites and look for opportunities to get exposure. They have invested a lot in e-commerce and need a return. They had to survive online in 2020 and 2021. In 2022 they will be looking for more and trying to generate more sales and profits.
E-commerce is another channel
Sales of food and beverage continue to be fragmented. Food drives traffic so people selling many things like to include food. This can be challenging, because every channel and every customer you add increases your cost of doing business. E-commerce needs to be a consideration for your business in 2022. It is not right for everyone but if your competition is on there you could be losing share to them. It is challenging and the return is not always as high as it appears at first. Yes if you sell direct you keep the money retailers would make in margin but there are a lot of costs to consider.
If you have any questions or require help figuring out your e-commerce strategy, you can always send me an email peter@skufood.com or call me at (902) 489-2900.
Peter
As we approach a new calendar year, we will continue to share insights to help you position your business for increased success in 2022.
“E-commerce is a channel you have to consider in 2022 for your food and beverage business”
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!
Overcome the barriers to purchase
Two things that do not go together are brushing your teeth and orange juice. The challenge for Tropicana is that people would likely brush their teeth in the morning and skip the OJ. Another chance for consumption lost. To address this Tropicana are testing a toothpaste that will not ruin a glass of OJ.
We do not all have the capacity of Tropicana but the point is if there is something that reduces the likelihood consumers will use your product find a solution. Another example is lactose free butter. We see dairies working on both options to ensure they do not lose the chance for a sale.
IKEA address in-stock position
There is no doubt supply of goods in many categories are being impacted. Some of it is hard to figure out but you can rest assured retailers are trying to get stock for their stores. You have heard me say before in 2022 service level will differentiate you from the pack.
In this letter the CEO of IKEA Canada shares some of the issues. The best part of the letter to their online community is the bottom. They tell you what you can do to make it as good an experience as possible. Be up front with your customers about what you can and cannot do. If you cannot fill P.O.’s tell them and get them changed so they know what you can do.
US Export capacity
It has been a privilege to work with the team at Aliment to support businesses from Atlantic Canada build capacity to export to USA. We have 4 webinars planned that are packed with great information from people who know how to do this. The team is from across North America who will be delivering the sessions and I know I am looking forward to learning a lot.
Food & Beverage Atlantic US export capacity
Virtual Presentations November 17
When is Peter speaking?
Food & Beverage Atlantic
Selling in Quebec when you aren’t local -November 16
Foodpreneur Advantage
Creating your best pitch for national retailers -November 23
Newfoundland and Labrador Federation of Agriculture
Getting more NL products in the shopping cart -November 27
Gander NL
