Shopper Marketing Trends Report 2018

Heading into 2018, are brands and traditional retailers positioned to succeed in e-commerce? Wall Street withheld its vote of confidence when, on June 16, retailers and grocery manufacturers lost billions of dollars in market capitalization. That was the day Amazon announced its purchase of Whole Foods.While the market sent its message about manufacturers’ and retailers’ prospects in an Amazon world, we asked six industry insiders (see their headshots and titles at the end of this report) to weigh in on how manufacturers and retailers can protect their profitable physical businesses while ramping up competition in e-commerce channels, where sales are scanty but growing.This virtual roundtable discussion complements the results of our annual Trends survey, which asks some of these questions and many more.Just how big of a factor is e-commerce in the retail landscape as we head into 2018?Sam Gagliardi: IRI tracks over 300 categories, and 65% of them are showing real dollar sales growth greater online than in-store. So while e-commerce is still a small percentage of business – from 2% to 10% depending on the category – and most buying is still happening in-store, online is the only reliable place for growth in the industry. Brands and manufacturers need to rapidly adjust their business to be digital-centric. The issue is that they’re all waiting for the business to get there, but online, first movers have the advantage.Leslie Danford: Very little of our category (spirits) sales come from online, but our e-commerce investments enhance our shoppers’ path to purchase because, as we know, prior to purchasing, they are researching products digitally at home or even while at the store shelf. E-commerce enables consumers to jump straight from discovery and inspiration to having products delivered within an hour. This change is compacting the path to purchase and making it less linear. All of this adds up to a big impact as well as little visibility. With limited available data, particularly for bricks-and-clicks customers, the true impact of e-commerce on our sales is difficult to measure. What is clear is that e-commerce is sure to shake up the existing sales and marketing approaches in 2018 and beyond.Megan Harbold: The dollars are still obviously much higher in-store today, so brands should not forget that. However, growth online is not projected to slow down anytime soon, and the more you invest now and the more you develop a history and relationships with e-retailers now, the better your chances of long-term success. This likely means overinvestment and poor returns for a few years, but if you wait, you’re dead.Did Amazon’s purchase of Whole Foods mark a critical shift for e-commerce strategy?Gagliardi: It should, because these are two retail formats where smaller, more regional, more local brands can dominate. That translates into more competition and substantial downward pricing pressures and, potentially, no top-line sales growth going forward for the industry.Alister Greenwood: I agree it’s pivotal in terms of where e-commerce is heading; the new retail landscape will be a convergence of online and offline. What it signifies from Amazon’s point of view is that the rest of the industry has something it can’t ignore. It is threatening, but at the same time, it suggests we should breathe a sigh of relief because we have something valuable that Amazon wants.Harbold: It signals that Amazon is extremely interested in consumables and interested in continuing to bridge the gap between the digital and physical. It also signals Amazon’s understanding of memberships and value. As they look to drive Prime membership, what they’re really doing is padding their profitability again and again.Can Walmart and Target successfully compete with Amazon over the long haul?Diana Medina: I think so, though it won’t be easy. Amazon creates new expectations in the minds of consumers, and some of the things we’ve seen from Walmart in the grocery space and also with free two-day shipping is that they understand the need for flexibility and agility. At the same time, if you look at what Amazon is doing, they’re trying to increase their presence offline and glean insights and data from those interactions.Gagliardi: Anyone can successfully compete with Amazon if they differentiate themselves from Amazon. Their biggest challenge is to take the advantage that they have right now, which is current in-store traffic, and convert that traffic to buying electronically via their own sites. The way they do that is by getting to know their customers better with the help of data and then marketing to those customers so they don’t lose them to Amazon.Amazon offers a range of advertising opportunities. Which have proven most effective for brands?Marianna Zidaric: In fact, each e-retailer has its own advertising opportunities and platforms. Because each differs in terms of targeting methods and placements, each plays a different role in your sales funnel. Specific to Amazon, Kindle is fantastic for driving awareness and encouraging the purchase of new products. It has stunning campaigns that you can create, and it’s uncluttered. Elsewhere, you could be working on pay-per-click (PPC) models to reach customers further down the purchasing funnel, setting your budgets and optimizing keywords to drive efficiencies and ROI for your brand.Gagliardi: In terms of Amazon’s advertising opportunities, AMS (Amazon Marketing Services) paid search is by far their best solution. In fact, we’ve seen disproportionate amounts of activity in the in-store physical world that was driven off of that paid search. So, if I were running a team right now, that’s where I would be doubling down with most of my investment.Are Amazon’s third-party sellers a threat or another sales avenue for brands?Gagliardi: Most brands are using first-party sellers. Those third-party folks are not operating within normal pricing parameters, and that’s causing brands across the board to reduce their price. There’s going to be substantial downward pricing pressures across the industry that will really limit any type of revenue growth.Zidaric: Walmart is another retailer that has opened up a marketplace for third-party sellers, but only as a first-party vendor can we really control our brand destinies. It’s super important for us to make sure our product is properly represented – that it’s got the right images, the right classification, title, descriptions and content. We don’t want our customers to have the wrong impression of what the brand is. Plus, we want to control the FRPs (full retail prices), so the customer is getting the product at the right price.How do you measure e-commerce success? What metrics are you using?Danford: While data is very limited for our e-commerce revenue, we have established metrics that quantify progress where we know e-commerce readily impacts buying behaviors. One way we’ve augmented sales, volume and profit metrics is by scoring our digital shelf presence in terms of content accuracy. We regularly audit retailer websites to score our presence in terms of product images, search-optimized product titles and product descriptions. This allows us to measure tangible progress on a secondary metric that we know positively influences omnichannel conversion and brand engagement, even where other data is lacking.Greenwood: One of the metrics we use is share because, for measuring purposes, it provides a simplicity that everyone understands. Ultimately, you want to replicate your in-store share online. However, in a Walmart store you’re probably up against a few hundred other items, whereas on Amazon it could be thousands or tens of thousands of products in that same category space, so that admittedly presents a challenge.E-retailers want more and better information from brands about products on the digital shelf. What’s the holdup?Zidaric: The digital shelf evolves at such a rapid pace, with e-retailers constantly looking to remove site friction and improve their overall site experience, so there are frequent backend adjustments and it’s a moving target for the manufacturers they work with. If you don’t have a centralized, dedicated e-commerce team, it’s difficult to keep up with all of their new forms and how they want the information to be served to them. You have to be nimble and flexible to accommodate each retailer’s needs.Gagliardi: It’s not about just sending over information; it’s about cultivating your brand presence in a way that matters for online. Folks just want to send stuff over, to stick it up there, to check the box that they’ve done it. But the digital shelf – and, more specifically, your product page – is your billboard, effectively your new packaging and your opportunity to stand out. Retailers do have different expectations and requirements when it comes to your data components, so it helps to find the right data partner to manage that. There are companies like Salsify and ItemMaster that will take your raw data and put it into the correct format for the different e-retailers.Are brand marketers using content syndication to optimize their digital shelf presence?Danford: We are working with third-party partners to push content directly to pages featuring our products on retailer websites, including basic product images and information, videos and recipes, and user-generated reviews. This allows us to deliver continuity and a strong brand presence across all these product pages. Syndication services allow us to directly update and enhance our digital shelf presence without making additional demands on already resource-constrained retailer teams.Harbold: Content syndication is definitely at play, though I think the very notion of this practice goes against the shopper marketer perspective. Content on Amazon should not be the same as on Walmart.com or Target.com. People who use these services for just blank copy-and-paste are not truly getting the best value from their brand equity and prove they aren’t in touch with the shopper at that retailer.Medina: Beyond the digital shelf, content syndication can help brands communicate with consumers where they are, which includes blogs and social media in addition to retailers’ sites. Separate from syndication, social media offers both a tremendous store of information about consumers and at the same time, it’s the perfect platform to expose people to your brand and products. Social media influencers impact purchase decisions online so working with them is another key strategy.

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