E-commerce is a tremendous growth opportunity for the Australian grocery sector. While currently only representing 3.8% of dollar sales for the grocery channel, online has grown by more than 30% over the past year and is expected to contribute up to 30% of total grocery growth by 2020. The number of online shoppers has also increased to nearly 30% of the population (up from 18% in 2017) as more Australian consumers become accustomed to anywhere, anytime shopping.
This ‘30-30-30’ realisation highlights the reality of digital in the grocery space. It is no longer what’s next, it’s now. And manufacturers and retailers can no longer afford to sit on the sidelines. It is imperative to focus on strategies that will allow you to share in the estimated $2 billion that is expected to shift online by 2020.
The implications of this 30-30-30 opportunity were presented at Nielsen and Profiero’s recent webinar on Embracing Connected Commerce. The webinar also revealed that this online growth opportunity is in stark contrast to the low growth environment currently being faced by the grocery sector. Between now and 2021, the total market is only expected to generate 2-3% headline growth, driven by slow predicted growth for bricks and mortar stores (1-3%) across the two major supermarket chains. There is also a significant difference in basket size across physical stores versus online. The average online basket value is worth more than two times an average trip in-store – $50 compared to an online basket valued at an average of $115.
Outside of online, discounters (e.g. ALDI, Costo and Chemist Warehouse) are another growth avenue for grocery brands. Dollar sales for these retail outlets are expected to increase by 15% over the next three years.
HOW TO WIN IN THE ONLINE GROCERY SPACE
As bricks and mortar stores continue to battle through a deflationary environment, lifting your game in the online space is the most surefire way to ensure your brand will grow.
1. Review your online strategy with existing and emerging retailers: Cementing your partnerships with all key online grocery retailers is crucial. Woolworths is Australia’s largest grocery e-commerce retailer and is set to grow further with its expanded same-day click and collect service. Coles is putting similar focus on e-commerce, and announced increased investment in digital opportunities earlier this year. It’s also important to ensure your brands are available in other major online retailers outside of just traditional grocery including Amazon, Chemist Warehouse and Pet Circle (where appropriate). Even if these retailers are not driving a lot of volume for your brands today, they should still be part of your sales strategy for the very near-term future. Consumers will undoubtedly become more and more accustomed to shopping online and open to exploring alternate retailing options if there is an offer of good prices, service and convenient delivery and/or pickup options.
2. Focus on the basics: During the webinar Profitero discussed how we can help you understand how to prioritise the performance drivers of your products and the retailers that will drive your online sales, taken from their eCommerce Acceleration Playbook.
Availability: Are your products available where shoppers expect to buy? How much are out-of-stocks costing you?
Traffic: Make sure shoppers can easily find your products within the category. Category search words and page placement can have a big impact.
Conversion: Better content boosts conversion as it is critical in convincing shoppers to buy. Review your product information online. Look at where you can upload additional images and video content.
3. Families first: Families are big spenders online and they are increasing online spend at a rapid rate. Families represent more than half (51.8%) of online FMCG sales compared to just 35.4% of total market. And their total market spend is stable (+0.2%) over the past 12 months versus a significant 55.6% increase in their online grocery spend in the same period. Ensuring you have plenty of product information of your brands across all your online retailing sites is crucial for converting these shoppers.
The future of the Australian FMCG industry hinges on manufacturers and retailers embracing the online growth opportunity. Online is providing new avenues to grow in an otherwise stagnant grocery environment; and is creating new ways to connect with consumers while providing exciting touch points along the shopper journey.