E-Commerce: Lifeline or Flatline?

Bricks and clicks can coexist, so how can c-stores play both sides?

THE PLAYER: TRADITIONAL CPGS

THE GAME: REFOCUSING THE ‘ENDLESS AISLE'

Half of all predicted growth in CPG sales between now and 2018 are expected to come from e-commerce, according to statistics furnished by Profitero. And Amazon will lead the way.

Establishing an Amazon strategy is essential, but what is the CPG online category-management strategy? And how does it differ from, or even complement, in-store initiatives?

“Our strategy, when it comes to online selling, requires us to refocus the ‘endless aisle’ online for shoppers, and drive them toward points of conversion (to online but also multichannel buyers),” says Chuck Van Hyning, e-commerce director for Chicago-based Wm. Wrigley Jr. Co.

“While some of the tactics are similar (online vs. traditional methods), selling impulse items online requires different techniques,” he says.

In a side-by-side comparison of buying gum online vs. in-store, Van Hyning says either way, “gum is typically considered an unplanned, incremental purchase, as half of gum chewers are out of stock on a daily basis. Search dynamics are very important online, and shoppers tend to focus only on the first few search results. It’s not uncommon for a shopper to go no further than the top six results on the first page of search.”

Inside the store, consumers are exposed to a great deal more varieties in what is a macro presentation of the category lineup; online, it’s more insular.

“Online might actually offer a broader variety, but shoppers are narrower about what they see and select,” he says.

In partnering with online sellers, Wrigley gives consumers another opportunity to easily  and regularly stock up on gum through subscriptions, or replenish through programs such as Amazon’s Dash Button service.

To that point, Bishop says larger brands must differentiate themselves online. “An  example is Dollar Shave Club, which created a subscription program tied to online engagement,” he says. “It’s not impossible for big brands to (craft a defined online program), but they can’t do it without changing their strategy—making it different from brick and mortar.”

Is your store losing sales to e-commerce? Are major CPGs losing brick-and-mortar sales to online cannibalization? For guidance, Bishop evokes the 90-10 rule: “Most large-size brands generate the majority of their volume from 10% or less of the U.S. consumer base,” he says.

In fact, online retailers could be creating loyal customers who are just as likely to shop convenience to make their favorite purchases. Many online buyers of, say, Orbit gum might not have been regular users but became loyalists thanks to the power of the online search, which translates to incremental business growth.

“Orbit performed well and brought in new online shoppers through the Amazon Dash  program,” says Van Hyning. “But customers are not replacing instore trips. … Online shopping just proves to be another channel to purchase product.”

Continued: Small, Niche Brands: Born Online, Democracy Rules