Member Article

5 ‘etail’ tips for food and beverage manufacturers

Online retail is still a new frontier for food manufacturers – here are 5 tips to help you make the move.

Online retail is exploding in almost every sector except food manufacturing. Which means that there are plenty of opportunities to steal a march on the competition for forward thinking businesses.

But are you ready to sell to etailers?

1. Start small

With ecommerce accounting for just 3.7% of global grocery sales, your business cannot realistically expect online channels to dominate your sales streams just yet. But this is not reason enough not to enter into agreements with etailers.

The market is expected to grow to 5% by 2016 and keep increasing from there. Food and beverage manufacturers entering the etail space need to set low but realistic expectations. Early adoption will then help them establish a foothold in the market.

“The e-food sector offers enormous potential, for two key reasons. Firstly, the current market share is still extremely low in almost all countries (single-digit or even less), which means there is huge scope for growth. Secondly, consumers are increasingly comfortable with using the Internet in general and e-commerce in particular.“ - E-Food: An Emerging Trend with Major Challenges, Intershop’s Whitepaper.

2. Get your branding in order

Internet sales are largely driven by keyword searches. It is important then that branding and product names are as keyword friendly as possible.

“If you have the wrong words at the beginning, someone who is accessing through a mobile (phone) might just see ’frozen pea’ and have no idea what size pack it is, if it’s peas and sweetcorn, peas and carrots or just peas.“ - Cheryl Calverley, General Marketing Manager at Iglo Group.

This means applying similar keyword research techniques to your food products as to your website.

And while you’re thinking differently, consider how your products are sold. Rather than focusing on single items of inventory, bundling multiple products to create gift sets and hampers is another way to boost online sales and average transaction value.

Finally, give some thought to the challenges your shoppers face online identifying:

• Portion sizes.
• Weights.
• Nutritional information.
• Dietary needs and allergen information.

You need to think very, very carefully about how to communicate this information clearly and easily. Otherwise you risk disappointing customers and generating a huge number of product returns.

“Consumer confidence is always important, but even more so in the case of food. Offline retailers already have that trust; online pure players seeking to enter the market have a long and difficult task ahead of them.“ - E-Food: An Emerging Trend with Major Challenges, Intershop’s Whitepaper.

3. Package for shipping

To minimise costly waste and ensure your products arrive at your customer’s house undamaged, your existing packaging may need redesign. Factors to consider include:

• Weight – the heavier an item is, the more it costs to ship, directly affecting profitability.
• Strength – weak packaging could lead to your product being crushed in transit, disappointing buyers upon delivery.
• Volume – many internet shoppers favour bulk buying groceries online so you need to ensure your packaging can accommodate this need too.

Because the food etail market is still developing, you need to be prepared to experiment to find a solution that is both cost-effective and agreeable to your customers.

4. Incentivise and advertise

With only a few established grocery etailers, your business has a good chance of carving out a niche online. Advertising will play a large part in ensuring customers find your brand and product online.

Most businesses are already aware of online advertising, and 65% expect to be using social channels within the next five years. This figure is also surprisingly low, providing further incentive for early adopters.

The online marketing process also makes it much easier to collect customer data for future campaigns. Offering vouchers and loyalty schemes will help build a community of repeat buyers – helping to establish a core on which to build your etail strategy.

5. Modify your supply chain

Depending on the preferences of the etailer, you will need to adjust your supply chain accordingly. This may involve shipping to the etailer’s warehouse or drop shipping to the customer’s door direct.

The revised supply chain also needs to be able to maintain traceability in the event of an audit. This will mean working with the etailer to develop an innovative solution to record items at every touchpoint through the use of barcoding or similar.

“Global food traceability technology sales are expected to surpass $14.1 billion by 2020, with an average annual growth rate of nearly 9%.“ – Allied Market Research.

You will also need to adjust your returns process, particularly for fresh food items that are affected by expiry dates. The process needs to be made as simple as possible to ensure customer satisfaction and that returns are received before product expiry.

Your etail readiness checklist

If your food business is serious about adding online retail you will need to be able to address each of these issues:

• Very small sales volumes initially.
• Certain products may need to be rebranded to cope with the unique challenges of online retail.
• Packaging may require redesign to cope with domestic post and couriers.
• The use of online advertising and social media channels to promote etail activities.
• Supply chain adjustments to cope with the addition of new channels.

Get the eGuide: Financial Control in Food Manufacturing: A Senior Manager’s Guide and learn how to transform your profits. Copy and Paste this link into your browser: http://bit.ly/sanderson_eguide

This was posted in Bdaily's Members' News section by Paul Bywater .