Before COVID-19, just 13% of U.S. households purchased groceries online — but that number jumped to 35% during the pandemic. In the second of a multipart video series, L.E.K.’s Rob Wilson, Managing Director, explains key considerations for success in the CPG space, including ecommerce strategy, organization, digital shelf optimization, and Price Pack Architecture.
More on ecommerce:
Covid-19 Impact on the Foodservice Industry Part 1 – The Great Channel Divergence
Digital Grocery Lessons from Amazon’s Acquisition of Whole Foods
Consumer Health Claims 3.0: The Next Generation of Mindful Food Consumption
Read a transcript of the video below:
We're at an inflection point in Ecommerce, in food and beverage. There was very strong growth in the channel pre-COVID. And, one of the results of this terrible humanitarian crisis is a lot of us have been forced to buy more things online. We've seen the amount of households purchasing groceries grow from 13 million households in 2019 to over 43 million households today. That's a jump of 13 to 35 percent penetration over this time period and it's just a tremendous growth avenue for food and bev.
There are four key capabilities food and bev manufacturers should consider to capture the tremendous opportunity ahead of them in Ecommerce.
The first is you've got to develop an Ecommerce strategy. What is it that you're trying to achieve? What's the size of the prize? And what's going to be the return on investment?
The second, is organizing for success. How are we going to change our organizational structure in order to capitalize upon this opportunity? And we can look upon retailers for some clues. A lot of the leading retailers actually have separate organizations for their Ecom versus their brick and mortar division because they're different businesses and they're running them as such.
The third, is pricing and price pack architecture. You've got to get your pricing right in Ecom. The pricing transparency and the pace of price changes is much faster online than it is brick-and-mortar. You might see price changes a couple of times a day online, as opposed to a couple of times a month in brick-and-mortar. And, with pricing it's not just how quickly you set the pricing, your price pack architecture strategy and setting those swim lanes by channel such that we actually have different offer online and in brick-and-mortar so that we can reduce some of that price comping which can lead to a race to the bottom with our retail partners.
The fourth capability is optimizing the digital shelf. This is more blocking and tackling but it's something a lot of manufacturers get wrong. Not having the best images possible. Missing out on some important details in the description, having the nutrition facts up there, and making sure that we're monitoring online reviews such that we're driving the right types of consumer engagement.
Pre-COVID, it was predominantly younger consumers and millennials who were most likely to buy their groceries online. And, because of the safety aspects of folks just simply looking to avoid going to the grocery store, to stay at home especially during lockdown, we've seen a lot of older consumers start to buy groceries online for the first time. And, a lot of those habits are going to stick. Some of the grocery retailers were ready for it, a lot of us weren't.
There's been a lot of opportunity and consumer experience that could have gone better in both grocery delivery all the way to your doorstep as well as curbside pickup. A lot of that's evolving and moving very quickly. And it's in a really exciting time ahead and the future is bright for Ecommerce in food and bev.