If the current growth rates remain constant, online FMCG sales will exceed those from physical stores by the next quarter century. For professionals that work in fresh and perishable food categories, that statistic might seem absurd, as these products have been notoriously difficult to sell online.
Typically, when these professionals think of e-commerce, they envision customers ordering products from Amazon.com or another online retailer and having them shipped directly to their homes via FedEx or UPS. This fulfillment option obviously does not make sense for fresh or perishable food items such as milk, bread and cheese, as these products are likely to be damaged or go bad before they arrive at a customer’s home.
For this reason, fresh and perishable food and beverage has significantly lagged other categories in terms of digital commerce adoption. However, with the growing popularity of fulfillment options such as click and collect and on-demand delivery, more and more consumers are now ordering fresh perishables online. This presents a major opportunity that can no longer be overlooked by brands such as Danone, Bimbo Bakeries, Dole and Tyson.
Mission Impossible…Not Anymore!
When it comes to online grocery shopping, home delivery is currently Americans’ preferred fulfillment option, with 69% saying it appears to them in a recent Nielsen and FMI survey. This makes sense, according to Nielsen, considering that delivery has been around longer than other fulfillment options for online grocery. However, when it comes to fresh and perishable categories, services like Fed, UPS and USPS simply don’t work.
As a result, many grocers are partnering with on-demand delivery service providers such as Instacart and Shipt. This innovative fulfillment option takes the impossible mission of shipping fresh and perishable food to customers’ doors and makes it a reality. Consumers place their orders online via the Instacart or Shipt app, and the company sends a trained personal shopper to the store to collect the items and deliver them to the customer’s home. Rather than having to build an e-commerce infrastructure from the ground up, grocery stores can pay these companies a fee to have their customers use the platforms. Today, Instacart is estimated to work with 58% of grocery retailers, including the eight largest grocery retailers in the United States.
The Power of Click and Collect
While Americans’ prefer home delivery of grocery items ordered online, Millennials, who are an indicator of future trends, would rather use click and collect. This fulfillment option still allows them to place orders online, but rather than having to wait around for a delivery, they can pick up the items at the store whenever it’s convenient for them.
Click and collect also provides the added benefit of allowing online customers to check the quality of their items before completing the transaction, which is especially important for fresh and perishable foods. In fact, when it comes to curbside pickup fulfillment in particular, fresh and perishable categories have the highest consideration — 50% would consider it, and 34% even prefer this type of fulfillment for fresh products.
For retailers, implementing robust click-and-collect capabilities requires more overhead than using a service like Instacart or Shipt, but that hasn’t stopped many of today’s top grocers from doing so. According to Progressive Grocer, the total number of U.S. grocery retailers adding click-and-collect fulfillment options grew 53% between 2015 and 2016. The largest grocery retailer, Walmart, has doubled its click-and-collect locations in the last year.
Which Retailers Are Most Important?
To determine which grocery retailers are most important for fresh and perishable food brands to focus their e-commerce efforts on, one must examine three important areas that affect buyer behavior:
- Physical locations: Both click and collect and on-demand delivery require a large network of physical stores and/or warehouses. The clear winner here is Walmart, as 90% of the population lives within 10 miles of a Walmart or Sam’s Club store.
- Consumer trust: Buying fresh food online requires trust in the store and in the person picking the items. Pure-play grocers like Kroger or Safeway have an advantage here, as they are known for quality in fresh and perishable categories.
- Speed: Becoming the market leader in online grocery requires a first-mover advantage. In the short term, major retailers like Walmart and large national grocers like Kroger will maintain the competitive edge. Alternatively, if Amazon can overcome its challenges in relation to fresh grocery quality and can also open more Whole Foods or Amazon Go locations, it could be a huge contender.
What Should Brands Do?
Thanks to fulfillment options such as click and collect and on-demand delivery, an increasing number of consumers are now buying fresh and perishable food online. To stay competitive in this new marketplace, brands need to focus on increasing their products’ search visibility and conversions on both grocery retailer websites and delivery apps like Instacart.
- Optimize for search. Search visibility means that when consumers search for keywords related to your product, your products appear as close to the top of the search results as possible. Start by compiling a list of relevant keywords you want your products to rank for. These should include both broad and specific terms, as well as branded and unbranded keywords, and they must be relevant to the products.Next, optimize your product page content to include these keywords. Incorporate these terms in a natural way, avoiding “keyword stuffing” that can negatively impact customer experience. Once you’ve optimized your listings, monitor your products’ rankings for target keywords across retailer websites to see how your efforts impacted your search visibility. Continuously optimize content for the best results.
- Optimize for conversions. Once a customer has found your product via site search, the content on the product page allows them to research the item and determine if it is a good fit for them. First and foremost, this content must be accurate, and it should provide everything the customer needs to know. Take advantage of all of the available content options, including photos, titles, bullet points, descriptions and enhanced content. Expand on the information on the product packaging, further demonstrating how the product will benefit the customer. Use this opportunity to answer any common questions or concerns consumers have, as well as to explain how the product compares to its competitors.
Digital’s influence on consumer buying behavior is becoming increasingly stronger. Regardless of the types of products a brand sells, a total neglect of e-commerce will end up hurting sales, both online and offline. Even fresh and perishable food brands must start investing in digital marketing initiatives across retailer websites, ensuring products have maximum search visibility, high-quality content, and reputable customer reviews. This ensures the best chance of winning in today’s omnichannel environment.
Joshua Schall, MBA has an 11-year background in the emerging and intersecting CPG/FMCG categories of functional food and beverage and nutritional products.
He currently is the owner of J. Schall Consulting, an Austin, TX-based boutique management consulting company that focuses on digital growth strategies for CPG/FMCG brands that range from pre-launch to portfolio companies with $500M in yearly revenue.
Joshua enjoys an active healthy lifestyle but still finds himself spending way too much time scanning social media and digital grocery aisles for new consumable brands.