New research from Profitero and Kantar Consulting reveals 76% of food and CPG brands are looking to accelerate their e-commerce investment in 2019, capitalising on the lucrative online grocery opportunity in the coming years.
According to IGD, ten leading global online grocery markets (including China, the US and UK) will experience combined growth of $227bn, at an annual rate of 20%, by 2023.
The researchers at Profitero and Kantar surveyed 200-plus e-commerce professionals from food and CPG brand manufacturers to get a pulse on how brands are evolving to tackle the e-commerce opportunity, with more than 7,000 LinkedIn profiles analysed globally to establish trends and patterns in e-commerce hiring and headcount growth.
Compared to the results of our survey last year, we see even stronger signs brands are initiating sweeping organisational changes toward e-commerce at a rapid pace.
Expected year-over-year change in expenditures on e-commerce initiatives
Source:Profitero e-commerce benchmarking survey 2018
Brands more than doubling their e-commerce headcount
Source:Profitero's LinkedIn analysis
If 2017 and 2018 were about getting the foundation in place, 2019 will be all about acceleration.
To help food and CPG brands get a head start on their 2019 e-commerce strategy, we’ve summarised five key takeaways from the research.
1. Brands must act now to build digital capabilities or risk being left behind
Some 76% of brands surveyed are increasing their investment in e-commerce, with 35% spending more than 10% of their channel revenue on digital tools, solutions and agency support. It’s clear brands who fail to keep pace risk losing long-term competitive advantage.
2. The arms race for e-commerce talent is set to intensify
Our analysis reveals that, compared to 2017, the number of people with e-commerce job titles grew by 83%, on average. Some brands, such as Heineken, have expanded their e-commerce headcount by 500% or more in the past year.
“If 2017 and 2018 were about getting the foundation in place, 2019 will be all about acceleration”
While the best e-commerce performers have historically concentrated on “sales” fundamentals, outperforming now requires switching attention to “experience” fundamentals, ensuring brands are correctly represented, discoverable and providing an engaging experience via online content.
The significant over-investment in increased e-commerce headcount by many brands is a very positive industry move. Typically, however, e-commerce teams have been largely under-resourced with existing staff having to cover a wide range of brand and category responsibilities. Increased investment in both headcount and data analytics (see our fourth takeaway below) must coincide with a clear focus on priority actions and products that will drive the biggest uplifts to ensure brands are not wasting these new resources.
3. Outsourcing e-commerce functions is an effective way to get the job done
There’s no doubt that finding – and then keeping – the best digital talent is a big challenge, so it’s no surprise brands are increasingly leaning on agencies to fill resource gaps and support critical e-commerce functions, especially in areas that require heavy specialisation and are hard to build in-house.
Two-thirds of brand respondents said they outsource SEO/SEM, with half outsourcing product content creation. The sales impact of making simple content changes to a product page can be seen in this example from a global pet food manufacturer: their sales grew 66% faster than the category simply by adding enhanced content images and video to their Amazon product page.
4. 2019 will be the “year of e-commerce data analytics”
The rise of algorithmic-driven retail means data analytics is no longer a nice to have but a central commercial function. Some 73% of brands will spend a portion of their e-commerce budget on data analytics services, with 41% of brands planning to expand their e-commerce data analytics headcount in the coming year.
Monitoring performance and understanding which digital shelf levers on which to take action becomes increasingly crucial as brands make the transition from establishing an e-commerce presence to accelerating growth and improving performance.
Having an e-commerce data analytics solution in place – and, more importantly, drawing relevant insights from the data to help drive outperformance – can give brands a leg up on the competition.
5. Focus on profitability and flexible selling models
As Amazon grows as a channel, managing intensifying price competition and selling profitably online has emerged as one of the biggest e-commerce challenges – none more so in the US. More than half of respondents in our survey (55%) said pricing and profitability was their number-one e-commerce challenge to tackle.
At the start of the year, we noted that Walmart, Jet and Target were locked into fierce price competition with Amazon within online grocery. Our latest Price Wars report shows that Jet.com has separated from the pack, lowering grocery prices by 5%.
To overcome profitability challenges, brands must carefully manage promotional activity to avoid triggering “race to bottom” price matching across retailers. They should also consider 1P/3P hybrid selling, which 55% of large brands and 74% of small brands are already pursuing or exploring.