planning for profitable growth in uk grocery ecommerce...fmcg & cpg, ecommerce & retail...
TRANSCRIPT
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Planning for profitable growth in UK grocery ecommerce12th March 2019
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Introductions
2
Gael PeignéEdge by AscentialEurope Client Insight DirectorParis
Experience18 years experience in retail analytics & consulting• Global Customer Development Director at Pernod Ricard• Global Category mgmt solutions Director at Nielsen• Senior Consultant at NPD Group
Main categories expertise:FMCG & CPG, eCommerce & Retail
David GordonEdge by AscentialResearch DirectorLondon
ExperienceRetail & retail intelligence• Retail Management Safeway• International Development Poundland• Research Director IGD
Main categories expertise:FMCG, retail channels
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A journey begins…
2015 2016 2017 2018
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UK e-grocery
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UK ecommerce
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UK ecommerce gaining share quickly
12% 13% 14% 16% 17% 19% 20% 21% 22% 23% 24%
88% 87% 86% 84% 83% 81% 80% 79% 78% 77% 76%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Ecommerce Store Based
Ecommerce+9% CAGR
Store based+3% CAGR
*Compound annual growth 2018 - 2023
3x
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…and will continue to lead in grocery ecommerce
6,3
5,1
2,9
1,1
0,5 0,3 0,2
10,4
9,1
6,3
3,3
1,71,2 1,1
0
2
4
6
8
10
12
UK France US Germany Russia Italy Brazil
2018
2023
Online share of food retail sales, selected markets
% o
nlin
e/f
oo
d r
eta
il fo
rma
t
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Leading grocers have gained from early adoption..
3,5
2,3
1,8
1,5
0,4
0,1
4,34,1
2,9
2,0
0,7
0,2 2018
2023
Gro
ss
sa
les
GB
P b
n
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Increasingly complex landscape…Fragmented chain and alternative paths to purchase
BRAND
Traditional Route to MarketRetailer (1P) fulfilment 1P & 3P marketplaces
Direct to consumer Intermediaries
1 2
3 4
1
2
3
4
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…with rising expectations
Consumer requirements …
74% more likely to purchase
again from a company after
receiving same-day delivery
43% expect ‘much faster’
delivery times than the previous
year
78% say they’ve experienced
packages arriving late
Retailer profitability.…
‘…small, loss-making part of the business’
‘…no route to profitability’
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The shrinking shelf
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Online customers get a much narrower selection at first glance
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Product search through the search engine is increasingly the common way to search online
Search engine
Menu/Taxonomy
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Browsing habits online are way faster than offline
64% of clicks are on top 3 items(range 39 - 81%)
Only 19% of clicks are past the first page of results
Top 3 Items
Remainder of first page
An additional 17% of clicks stay on the first page
90%of purchases
begin with search
80%of clicks
remain on the first page
Ove
r
*Data is based on a weighted average of top 10 to 25 search terms for 22 CPG categories
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In Amazon.co.uk, some categories are already very concentrated
Instant coffee
33%
42%
Toothbrush
38%
67%
Batteries
31%
58%
Toilet tissue
62%
78%
Top 3 weight
Top 10 weight
Amazon.co.uk 1P/2P revenue weight
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Mobile 1st page gets smaller
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…Even smaller…
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The rise of ecommerce, then m-commerce and then v-commerce shrinks the number of products browsed by shoppers
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Planning for profitable growth in ecommerce….Areas to manage
1. Range
3. Pay to play
2. Private labels
4. Supply chain
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Range
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1) Identify most segmenting characteristics (dimensions)2) Define a primary one (It could often be brands)
Total careAnti-
cavities
Sensitive Fresh
Whitening Kids
TubeHead
down tube
PumpTravel pack
Premium tier
Mainstream tier
Value tier
Benefits Formats Price tiers
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3) Define the size of each box
Size of each box is defined according to:
1. Revenue/Margin (Fair share)
2. Growth (Potential)
3. Saturation
Nb of SKUS
Sa
les
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4) Select products in each box
Range selection KPI= Velocity X Price X %Retailer unit margin
Total care
Adjust with additional metrics: Exclusive penetration, Basket size, purchaser demographic
Add innovations
Traffic X conversion
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Private labels
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Amazon continues to grow its private label offering
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Batteries example: Increased visibility for Amazon’s PL
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Batteries example: Increased share for Amazon’s PL
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Extra visibility on private labels on Amazon
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In Tesco, high visibility also of private labels in several categories
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Search ranking Cat foodSearch ranking Biscuits Search ranking Cereals
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Pay to play
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Paid search is getting the lion’s share at the top of the page on Amazon
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…Also on Ocado
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Case Study: Incrementality of #1 Organic
ASIN
• Pre/Post: Amazon Sales Increased $39k
• Amazon Marketing Services spend was $16k
• Average Selling Price was flat
• 2.4x ROI
Paid search boost sales even on #1 organic search product
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Supply chain
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The new supply chain requirements
Automated
Agile
Real-Time
Promiseable
Routes to end-consumer
Ways to deliverWays to receive
Ways to pick & pack
Ways to order
3,240
5 9 98
ORDER PICK & PACK DELIVER RECEIVE
What is required?
DriveC&C – curbside pick-upClick-and-collect(in-store) Home delivery
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Packaging optimisation
Weight and durability: Changed from glass to PET Transit performance: Redesigned packaging to avoid leaking
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Product optimisation
Ecommerce pack types: Online only (large) pack variants
Ecommerce design: New product development
Search ranking Cat food Amazon
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Borderless commerceCPG strategies to manage
cross-border sourcing
3P
Harmonisation
Third-party business model
Organisational structure
Dedicated channel strategies
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Borderless commerce - channel approach
Pack: Single bar
Convenience and Discount
Pack: 12 bars
Grocery
Pack: 24 bars
HypermarketPack: 60 bars
Amazon Item
Nature Valley’s Oats ‘n Honey Crunchy Granola Bar has an Amazon-specific pack size
Huggies sells an Amazon-exclusive ‘monthly pack’ SKU(Germany, Spain, France)
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What is the right eCommerce
strategy?
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Adapt trade strategy to ecommerce
Range Perfect page Search
Range Search Perfect page
Search Range Perfect page
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1) Select where you want to playToothpasteCharcoal toothpasteWhitening toothpasteCharcoal whitening toothpaste
Natural toothpasteTravel toothpasteOrganic toothpasteBaby toothpasteToothpaste pumpRegenerate toothpaste
Look for emerging search terms in reviews
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2) Select priority items
Select the range of products that stands a chance for each search term
Ensure these terms have a full presence across the retailers distribution network
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3) Optimize their content to maximize SEO (Traffic) and conversion
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3P can be a very viable option for secondary items
• Higher Volume• Content Control• More Promo / Program Options• Lower Fees
• Control Over Price / In-Stock• Capture Manufacturer & Retail Margin• Added Access (Seller Central)
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Concentrate forces on key items
Priority SKUS
Concentrate forces
1. Identify most important Search terms
2. Evaluate saturation and your competitive position on main Search terms & Menu locations
3. Select items with high velocity rate
4. Ensure a Max distribution across retailers network
5. Set a Search optimized content adapt to Search algorithms
6. Invest in high quality content: Videos, A+
7. Focus activation & Paid search investments on these terms
Secondary SKUS
Apply a bypass strategy
1. Aim “Niche” search terms & Menu locations
2. Evaluate distribution through 3P
3. Evaluate a seasonal strategy (when relevant)
4. Optimize basic content
5. In & Out strategy on key search terms?
Adapt packaging to ecommerceEnsure price consistency on each channel across markets
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Thank you