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Achieving eye level in the online store: How FMCG Companies Can Beat New Competitors in the Digital Channel

How CPG companies can overcome the challenges of the new digital landscape with its new online "shelf".

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Achieving eye level in the online store: How FMCG Companies Can Beat New Competitors in the Digital Channel

  1. 1. Achieving Eye-Level in the Online Store | 1 Achieving Eye-Level in the Online Store How Leading FMCG Brands Can Beat New Competitors in the Digital Channel © Copyright Clavis Technology 2013, All Rights Reserved. US: Cambridge Innovation Center, 1 Broadway 14th Floor, Cambridge MA 02142 th EMEA: 7 Floor O’Connell Bridge House, D’Olier Street, Dublin 2, Ireland © Copyright Clavis Technology 2013, All Rights Reserved. T: US 1-800-693-9591 T: EMEA +353 1 254 3440 E:
  2. 2. Achieving Eye-Level in the Online Store | 2 TABLE OF CONTENTS Introduction 1 Rapidly changing retail landscape 1 Beat emerging competitors online 2 How the Consumer Decides at the New Online Shelf 3 The online consideration set 3 The First Moment of Truth 4 Online Shelf Placement to Beat the Competition 5 Audit the Online Store to Succeed in the Digital Channel 6 About Clavis Technology 7 © Copyright Clavis Technology 2013, All Rights Reserved.
  3. 3. Achieving Eye-Level in the Online Store | 1 Introduction The market for consumer packaged goods (CPG) is changing rapidly as more and more consumers opt to perform their weekly grocery shopping online. It makes sense. Who really wants to spend their weekend pushing a cart around a supermarket when online shopping offers a perfectly viable alternative? In this white paper we’ll explore what the switch to online means for leading consumer brands in the food & beverage, personal care and ‘Online shopping household products categories. Big brands have learned how to will make up 25 % dominate the limited shelf-space of major supermarkets, but will that of US consumer continue as they are faced with the endless aisle of the Online Store where new competitors are finding it easier to make an impact? packaged goods A recent study by sell-side research outfit Sanford C. Bernstein predicts spending in the that online shopping will make up 25 percent of US CPG spending in the next 5-10 years. 1 next 5-10 years. There is definitely a “perfect storm” of factors contributing to this growth, ranging from the rise of the so-called millennials’ (the generation born between 1982 and the early 2000s) to the popularity of online ratings and reviews with mothers – who still carry most of the responsibility for grocery shopping. Rapidly changing retail landscape Some CPG brand leaders have been slow to react to the new retail landscape, and that procrastination has allowed emerging brands to grab virtual shelf space in leading online stores. Until recently the eCommerce market was such a small proportion of the overall retail sector that many big brands had felt they could ignore the encroachment of new competitors, but that situation can’t last much longer. 2 As marketing and media industry paper of record, Ad Age, put it in a September 2013 article , online CPG is “fast becoming a significant market that could shift market share to smaller players and disrupt pricing and other key parts of the industry's business model.” The article continued, “e-commerce seems to be democratizing 'shelf space' as top brands do not dominate the e-commerce channel as much as they dominate brick-and-mortar retail”. 1 Fast-Rising e-Commerce Could Jolt Package-Goods Giants. Bernstein Report Finds Niche Brands Gobble ‘Shelf’ Space Once Owned by Leaders, Jack Neff, Ad Age, September 26, 2013. 2 Fast-Rising e-Commerce Could Jolt Package-Goods Giants. Bernstein Report Finds Niche Brands Gobble ‘Shelf’ Space Once Owned by Leaders, Jack Neff, Ad Age, September 26, 2013 © Copyright Clavis Technology 2013, All Rights Reserved.
  4. 4. Achieving Eye-Level in the Online Store | 2 Ad Age gives several examples of leading CPG brands that are being outsold online by smaller, niche products. If the people running these emerging companies are smart – and we’ve no doubt they are – it won’t be long before they start to use their online bridgehead to occupy more and more shelf-space in traditional retail stores. Beat emerging competitors online The threat is real, but the battle isn’t lost yet. Right now is a good ‘To succeed online you need to know that your products are always EyeLevel on the online shelf time for brand owners to take stock of their eCommerce strategy. Recognizing the significance of the online store is a first step in the right direction. Brands must give the online store the same attention as they give to the most important brick and mortar stores and retailers. To achieve success off-line you already invest in retail store audits to monitor in-store brand standards, promotional compliance, product placement and stock availability. To succeed online you need to do the same, so that you can ensure that your products are always Eye-Level on the online shelf, in order to beat new competitors, grow your sales, protect your brands and comply with regulations. © Copyright Clavis Technology 2013, All Rights Reserved.
  5. 5. Achieving Eye-Level in the Online Store | 3 How the Consumer Decides at the New Online Shelf Young, tech savvy consumers are starting families and indeed doing what comes naturally to them; purchasing their groceries where they do just about everything else, online. But what does this mean for how consumers pick the products they buy? In theory how the consumer chooses to fill his/her basket in an online store is not much different from a traditional brick and mortar store. What is different though is how they find your products and what competitors’ products are available to replace yours. The so-called “consideration set” – the subset of brands that consumers evaluate when making a purchase decision – is still central to how the consumer ultimately decides. It exists because consumers have limited information processing abilities, so their decisions are limited to the comparison of a handful of brands. Put simply, your brands need to be in the consumer’s consideration set if you want them to be added to their basket. With a frequently purchased category such as consumer packaged goods, consumers often face information overload. To circumvent the information overload problem they narrow down product choices to simplify their decision by considering anything from price to the popularity of an item. If a purchase is unplanned, a consumer can only buy it if they actively notice it, so in a traditional brick and mortar store, shoppers buy products that enter their consideration set inside the store. Brands spend a great deal of time and energy on assortment, availability, shelf-placement and store promotions for that reason. The online consideration set In the online store information load and search tools have a very significant influence on how consumers form 3 their consideration sets, resulting in smaller sets . So instead of seeing the many choices of the endless aisle, an online consumer actually chooses from an even smaller set of options than his/her brick and mortar counterpart. The online consideration set is effectively limited to the products that show up at, or near, the top of a search results page, or appear close to the top of the category page when a consumer trawls down through the menu structure. Online promotions and merchandizing, and suggestions such as “People who bought product ‘A’ also purchased product ‘B’” can also result in your products getting into the consideration set, while in the online context ratings and reviews play a very significant role in determining which products actually make it into the consumer’s basket. 3 Consideration sets in online shopping environments: the effects of search tool and information overload, Jose F. Parra and Salvador Ruiz, October, 2009. © Copyright Clavis Technology 2013, All Rights Reserved.
  6. 6. Achieving Eye-Level in the Online Store | 4 The First Moment of Truth Let’s take as an example a consumer looking to buy some pasta sauce. She made some excellent homemade sauce last month, but now wants something yummy to have on hand for quick meals her family can easily make in the busy weeks ahead. She goes straight to, where she has begun to do a bit of her grocery shopping along with other household items she purchases there. She has a favorite brand that she can’t quite remember the name of so there is the potential, if she does not find what she is looking for, of something else to catch her attention. You can almost hear the drum roll as she keys the phrase “pasta sauce” into the search bar on the home page and we approach the critical first moment of truth for the brands. The site search delivers dozens of options, but what our consumer initially sees is the top three items on the search page. These are two different variants of a well known brand, Ragu, and something completely unrecognizable to this consumer, Scarpetta pasta sauce. Scarpetta is not the brand she was looking for, nor has she ever heard of it, but she assumes it must be popular, and therefore good, because it is at the top of the search on for pasta sauces. © Copyright Clavis Technology 2013, All Rights Reserved.
  7. 7. Achieving Eye-Level in the Online Store | 5 When she clicks through to the landing pages for each of the top three sauce options, each has some basic product information, an image and three or four marketing bullets. They all have many positive consumer reviews; however the Scarpetta landing page has additional pack images that show “Fast and Easy” cooking instructions, Nutritional Facts, and Ingredients – information that is missing from the landing pages of the other two options. If she scrolled further down the search results page she would see many more recognizable brands. Instead our shopper is in a bit of a hurry so she decides to take a stab at this new product and buys a pack of four which includes “Tuscan Vodka”, “Arrabiata”, “Puttanesca” (her favorite flavor) and “Marinara”. It was more than she had initially planned on spending, but she had recenlty had some good homemade sauce recently and the product’s packaging images hint at homemade, reminding her of that experience. Online Shelf Placement to Beat the Competition In our example – based on real Search and Content Integrity results in – something went wrong here for some major brands. This Scarpetta sauce, although it might be excellent, is not the most popular – many major brands didn’t even make it into our consumer’s consideration set, while the two products that did failed to impress at the first moment of truth because their landing pages were missing some key pieces of content. We all know that store appearance drives shopper attitude in ‘Online represents a real traditional stores. The online store is no different. Unless your opportunity for forward product is at “eye-view” on the search results page it will be difficult to get the shopper’s attention and consideration. thinking brand owners Shoppers are brand loyal in categories that are important to to increase market share them, but in most cases they still consider more than one option while shopping in those categories. Knowing where your brand is positioned and what competitor brands are being considered by online consumers is an important step in developing a strategy to compete in the changing retail landscape. © Copyright Clavis Technology 2013, All Rights Reserved.
  8. 8. Achieving Eye-Level in the Online Store | 6 Audit the Online Store to Succeed in the Digital Channel The brands that succeed online will be those that manage to adapt the techniques and discipline that have enabled to them dominate the bricks and mortar world. Sales, marketing and category management leaders in top brands pay close attention to physical store audit results, mystery shopping data, and other analytics to help them plan distribution strategies, execute in store promotions and collaborate with retailers. To succeed in the changing retail marketplace brands need to adapt similar strategies for the online retail environment. It’s only with clear intelligence and insights, about how your products and brands are performing in online stores, that you can take the right action to improve your product’s digital presence and performance. To beat the emerging online competitors you need to need to be able to answer questions such as : How are our online Are our product promotions actually images present executed? and up-to-date? What do consumers say How does our digital product portfolio compare to competitors? about our products online? Do we have the right mix of products in the online channel? Do our product pages have all the Do online additional information needed to stores use reassure consumers? accurate, • Do our product pages have all the consumer- additional information right Are our products in the needed to reassure consumers? aisles (menu categories)? • Do our product pages have all the additional information needed to reassure consumers? © Copyright Clavis Technology 2013, All Rights Reserved. friendly descriptions?
  9. 9. Achieving Eye-Level in the Online Store | 7 Clavis Technology worked with a team from the Massachusetts Institute of Technology to develop a value framework for calculating the potential sales uplift that brands can expect by optimizing their digital channel presence and performance. The framework is based on published industry research and statistics from organizations such as Nielsen and GS1, and Clavis Technology’s experience working with leading consumer goods brands. The studies show that by optimizing their online store presence, CPG manufacturers can deliver sales growth that is between 15 and 30 percent over and above the industry average. With the dramatic rise in online grocery shopping there is a real opportunity for forward thinking brand owners to increase market share, despite the challenge of new emerging competitors. About Clavis Technology Clavis eCommerce Insight is the leading cloud-based Online Store Audit & Analytics platform for senior Marketing, Sales and eCommerce management in large Fast Moving Consumer Goods (FMCG/CPG) manufacturers around the world. The solution brings the concepts of mystery shopping and physical store audits to the emerging digital channel, providing FMCG Manufacturers with the competitive insights they need to grow their online and off-line sales, protect their brands and comply with regulations in key markets. For more information go to © Copyright Clavis Technology 2013, All Rights Reserved.