FMCG brands had a tough time last year. Bottom lines continued to be chipped away by supermarket discount own-brands and rising household costs made the battle for basket space even more competitive.
With nearly a third of global FMCG sales arriving via ecommerce, brands are investing time, money, hopes and dreams in their online channels. But the internet comes with its own challenges – most notably the seemingly unstoppable dominance of Amazon.
Over Black Friday, Amazon accounted for 55% of all US online transactions. Naturally most of these transactions wouldn’t have focused on FMCG products, but the sheer power of the model provides lessons for sector. You’d be forgiven for questioning how anyone else could possibly compete with breath-taking supremacy. But the harsh truth is that while there is a way for both retailers and brands to wrestle control back from Amazon, many aren’t even trying.
Direct Selling
Amazon is the world’s best known digital shopfront, and its main strength is in the sheer scale of its digital warehouse. Customers can search for the products they want, order them and then forget about it until they receive a knock at the door. The breadth of products ‘store out back’ certainly plays its part, but customers return time and again because of the purchasing journey is simple and accessible. They may not always be the cheapest, but they’re certainly the most convenient. Their digital shopfront is open for business, and business is booming.
The relationship with the retailers still exists, but brands are able to play a far bigger role in the buying journey.
Traditionally, while brand marketing has been direct to consumer, the sales process has been largely left to retailers. Shoppable technology changes this dynamic and has the potential to turn the direct-to-consumer marketing approach on its head – any call to action or content on a brand’s website can act as an online checkout, enabling customers to purchase directly from online content or add items to retailer basket. The relationship with the retailers still exists, but brands are able to play a far bigger role in the buying journey. This gives brands power to create convenient, frictionless shopping experiences.
Yet many either aren’t pursuing shoppable, add-to-basket technology or have only taken a half-hearted swing. In recent months, some brands have even announced they were discontinuing their direct selling approaches, preferring to work closely with Amazon.
To me, this seems like turkeys welcoming an exciting new partnership with Christmas. Of course, Amazon’s colossal traffic means that brands who partner with Amazon now may see short term benefits, but they’d be monumentally naive to believe this is a viable long-term strategy. Amazon flexed its FMCG muscles with this year’s Whole Foods acquisition, and the giant’s ambition to expand into new markets can’t be underestimated. I expect that it won’t be long until Amazon’s own-brand products begin to feature across its digital shopfronts. FMCG brands are most vulnerable here – we’ve seen the impact that discount retailer own-brand products have had on premium FMCG sales. What will happen when Amazon uses their brains (data) and brawn (traffic) to launch their own? How will brands compete once their supposed partner is rigging its online shelves in its own favour?
The Solution
In order to stage a real fightback against Amazon and preserve their stake in the long-term, brands must look to invest in their own digital shopfronts. This isn’t just about generating sales through setting up an online shop – the aim here is to fundamentally change the relationship between brands and retailers. The focus for brands should be on using shoppable technology to capture and convert their own traffic.
Brands already pay for campaigns to drive traffic to their owned media – why not give customers something useful once they arrive by providing convenient commerce? Each sale can be linked to the content it came from, providing transparent data on which marketing is turning the dial and persuading consumers to buy. This sort of activity naturally lends itself to FMCG brands in particular, as consumers appreciate the ability to replenish a supply at the click of a button – but there’s also tremendous potential for other sectors too.
Brands already pay for campaigns to drive traffic to their owned media – why not give customers something useful once they arrive by providing convenient commerce?
For example, I’m amazed and more than a bit frustrated that beauty brands haven’t become major shoppable tech players. ‘Get the Look’ content is everywhere and incredibly popular, with consumers devouring video tutorials and advice articles at a rapid rate – yet how many sales is this content driving? It’s often impossible to know, since there’s no direct link outlining whether that reader remembered that beauty brand the next time they were browsing a retail website or instore. All that content may grab eyes, but it’s a huge missed opportunity to win customers. ‘Get the Look’ seems something of a misnomer when it’s so hard to buy the products at all, let alone in one-click.
Shoppable technology provides a way to turn wasteful online marketing into a direct checkout, linking any piece of digital content and the online sales outlet of the consumer’s choice. Suddenly the beauty brand is able to provide both useful content for customers but also an instant checkout where they can act on that information.
This tech can also be deployed across online advertising campaigns rapidly and at scale, providing digital shopfronts on not just the brand’s website but wherever their advertising is placed – all that’s needed is great creative to support it. The benefits can be tremendous: brands receive more oversight of how their marketing activity is impacting sales; relationships with retailers improve as brands demonstrate how many sales their content is generating; and most importantly, the brand creates a new shopfront in a space where footfall is vastly greater than the highstreet.
While nobody over the last decade has been shy about talking up the potential of ecommerce, it’s disappointing that brands in general haven’t been more adventurous in this space. FMCG should be particularly red-faced as shoppable tech lends itself perfectly to the need to regularly replenish supplies and we know that consumers value convenience – it’s driven Amazon’s success, which up to now has seemed unstoppable. We now face a real opportunity for brands to prove that defeat isn’t a foregone conclusion and that they can become real power players in the purchasing journey – by beating Amazon at its own game.