E-commerce. It is still accounts for a small part of spending on packaged food but it’s a channel growing rapidly and any supplier worth its salt needs to be reshaping its organisation to try tap into that growth – and the growth expected to come in the years ahead.
The savvy packaged food manufacturer will be monitoring developments among the major e-commerce retailers closely. This week, there was another notable announcement.
On Monday (18 June), Google unveiled plans to invest in JD.com, one of China’s largest e-commerce players, as part of what the two companies called “a strategic partnership”.
The US tech giant has put US$550m into JD.com but, in a sense, the level of investment is less important than how the businesses plan to work together.
The details announced on Monday were limited but Google and JD said they plan to join forces in a range of ways, including on the “development of retail solutions in a range of regions around the world”, including south-east Asia, the US and Europe. There was news of one specific initiative: JD also plans to make a selection of high-quality products available for sale through Google Shopping in multiple regions.
What does it mean for suppliers? Put simply, as well as having to get to grips with the strategic moves in e-commerce from the major bricks-and-mortar retailers (witness Kroger’s recent announcement with UK online pureplay Ocado), as well as working to adapt to the rise of Amazon in FMCG and as well as tapping into the growth of JD.com’s Chinese rival Alibaba, Monday’s announcement from Google and JD.com presents another consideration for suppliers as they draw up plans for the channel.
Don’t forget JD.com has another notable shareholder – the small matter of Walmart. And, over the past year, Walmart and Google have announced a number of their own initiatives.
Some industry watchers believe the tie-up between Google and JD.com could present openings in a number of regions. “if entry into the world’s largest e-commerce market (China) isn’t currently a consideration, this broader partnership between Google and JD.com will provide further incentive and opportunity,” Andrew Pearl, director of strategy and insight for EMEA markets at for e-commerce analytics firm Profitero, says.
“Equally, although over 90% of FMCG expenditure still takes place in brick-and-mortar stores, suppliers may need to revise which retail partners could be providing growth in the next five to ten years. In the UK for example, the usual focus on the top 6 supermarket retailers and Amazon may now have to be revised to include JD.com – with expansion opportunities both in Asia and potentially now US and European markets.”
Those opportunities could take some years to come to full fruition. Google’s experience in e-commerce is growing but remains limited (versus the likes of Amazon). JD.com may have international ambitions but its expertise, for now, is in Asia.
All that may mean some in packaged food may consider a Google-JD.com partnership as of less strategic importance than, say, Ocado or Amazon or Alibaba. In a fast-growing channel that is still relatively fledgling, it will take some shrewd judgement to place bets on the right horse.
However, the astute packaged food manufacturer will be analysing now how to react.
“For e-commerce teams within FMCG suppliers, workload has now increased further to include optimising content not just for Amazon but also Google capabilities, with the tech giant now able to promote both Walmart and JD.com products on its voice-controlled Google Assistant programme,” Pearl told just-food this week. “Suppliers need to rationally estimate the ‘size of the prize’ to allocate resources accordingly.”
E-commerce remains a small chunk of the spend on packaged food. But the signs are it won’t stay that way forever. And, as we all know, in markets like North America and western Europe, growth in packaged food can be hard to come by.
Pearl adds: “Ignoring these developments is no longer a sensible option however, with many smaller, pure-player brands gaining category leadership on Amazon, significantly out-performing household favourite brands with much larger budgets. First-mover advantage in exploring opportunities with the Google-JD.com partnership may therefore prove to provide the most exciting growth potential for FMCG brands over the next five to ten years.”
E-commerce should be a critical part of your playbook in the years ahead. And that playbook should now include the Google-JD.com axis.