There’s a great deal at stake. No doubt about it, the majority of future growth for many brands will come from digital commerce. Online grocery sales alone are projected to top $90 billion by 2020. To appreciate the dimensions—and potential—of digital commerce, look no further than Singles’ Day, China’s annual, promotions-heavy, 24-hour online-sales event, which generated $17.8 billion for Alibaba sites in 2016 alone—more than Whole Foods’ total annual revenue. Sales of FMCG represented a sizeable portion of Alibaba’s revenue.
With much of the growth now coming from sales online, brands need to follow four basic rules to capture their share.
Return to strategy. The most successful online brands view the emergence of digital commerce as an opportunity to redefine their overall strategy. But, there are some fundamental reasons why so many companies lag behind on strategy. They make small, incremental bets but never bold choices. As a result, they’re continually investing behind the curve. They also treat digital as just another channel, rather than an opportunity to revisit what drives shoppers and retailers—and to inform their strategic direction. And, they assign junior members to their digital team instead of acknowledging that success requires steady involvement from top leadership. That’s why companies like P&G tasked their most senior executives with investment choices and laying out priority actions for the organization. Among P&G’s pioneering digital moves were an early partnership with Amazon, subsequent partnerships with leading digital retailers, such as Alibaba’s Tmall, and experimentation with direct-to-consumer offerings.
The man who stops advertising to save money is like the man who stops the clock to save time.
– Thomas Jefferson
Define priority micro battles. There’s nothing democratic about digital commerce. Some product categories lend themselves to digital commerce more than others, and some markets are more embracing of it than others. The reality is that for many product categories, few business models and relatively few geographies will move the needle. Leaders invest to identify the large and important growth opportunities. To really drive a difference in sales could mean cracking Amazon in the UK and the US or focusing on Alibaba in China. In fact, four markets often account for up to 80% of online sales for categories we’ve studied: China, France, the UK and the US.
It’s best not to minimize your impact by spreading your investments too thin. Instead, zero in on the most promising battles, armed with solid research on consumers’ and retailers’ behavior. Based on our experience, leading companies take a systematic approach when choosing where to invest to deliver value—deciding on the geographies first, then the categories, then the business models. Choosing a geography requires understanding the vast distinctions among digital commerce markets.
Perfect the online shopping experience. We all know the importance of shelf activation. But what happens when a customer doesn’t come into a store? In digital commerce, the screen is your shelf. And there are fewer slots that are usually filled by digital trailblazers— since digital favors first movers. Many people assume the shelf online is bigger, but a mobile screen can only hold a handful of products. And unlike a grocery store, there are no merchandising guideposts—detailed planograms or end caps, for example. This changes the nature of how shoppers consider, find and select your brands—and you will need to adapt.
Consumer products companies hoping to win online need to determine how digital influences shopper behavior in their respective categories. Our research shows that the main reason people shop online in many categories is for convenience, not value. The trouble is, too many sites and their FMCG partners fail to provide a convenient customer experience at every touchpoint, from considering products to finding, buying and receiving them.
All online shoppers have been subjected to overly complicated website displays, confusing checkout processes, unresponsive mobile sites and other challenges. Turned off, they shift to a more user-friendly competitor. In business-to-business-to-consumer (B2B2C) situations, the retailer controls the overall user experience, but the manufacturer can make a significant difference. That’s what Unilever did when it set out to tackle one of its biggest online challenges: improving the way its products were displayed on mobile phones. The company’s initiative to produce better images on small screens has been cited as a key factor in its huge digital commerce success. With direct-to-consumer models, the manufacturers can play an even greater role.