At this year’s edition of the Amsterdam Fresh Produce Summit, Stéphane Roger of Kantar Worldpanel discussed FMCG (fast-moving consumer goods), with particular reference to fresh food and online retailing. Globally, fresh food (a wider category than fresh produce) accounts for almost 29% of total FMCG sales.
In China fresh food makes up more than half of FMCG purchases, in Europe that figure drops to 22%. At the same time, categories like avocados, berries and organic food are still growing at a brisk pace.
“Fresh food is a door into online grocery, like Fresh Direct in the USA,” Roger said, “but its share in online retail is still very low.” In China fresh food’s share in online trading is 1.3%, France 1.9%, in Germany and Spain 0.5% while in the UK, probably as a result of Ocado, it stands at 6.7%.
Roger is of the opinion that fresh produce is undertraded online, across all markets, which is partly a reflection of the challenges posed to fresh food retail by ecommerce. However, it is a vital playing field for retailers with new vistas opening up like voice-activated shopping (he notes that 7% of US consumers and 5% of UK consumers already use a voice device).
The focus of the 2018 Amsterdam Produce Summit was the phenomenon of omni-channel retail, which refers to a seamless, frictionless integration between online and offline (O+O).
In China and Europe customers undertake over 100 shopping trips every year for fresh food which goes down to 39 trips for the entire year in the US. Research further shows that older people buy more fresh food than younger demographics. “Fresh is going to become even more important as the population grows older.”
Shoppers buy more bulky products online
The big growth is over, he says, and now is a time of retail concentration and price wars to win market share. “We have to ask ourselves whether online adds value or whether it’s pure cannibalisation of bricks and mortar retail.” Winning over new shoppers will depend on moving into emerging markets like Brazil, India, Indonesia, Colombia.
Differentiation within product lines for online and offline shopping will be necessary to stimulate spending and address the different needs of shoppers. For example, shoppers seem to buy more bulky products online, so specific pack sizes for ecommerce can accommodate this.
Private labels still have a great future, he feels, as hypermarkets and supermarkets are struggling and discounters are on the rise, and in this he is supported by Prof Manuel Gómez of the Charles H Dyson School of Applied Economics and Management at Cornell University (right), who noted that 70 to 80% of the world’s food is produced by small-scale farmers who benefit from private labels.
Offline touch points to compensate for sensory absence in digital space
In Prof Gómez’s presentation he emphasised the need for retailers to maintain more out-of-store relationships with customers, through developing more consumer touchpoints across digital platforms and smart devices. This is what omni-channel means: the synergetic management of the consumer experience across various channels, because online and offline shopping complement each other.
Online shoppers rely heavily on user recommendations
One important way of bridging the sensory absence in the online retail environment, is through user recommendations and ratings, which are playing a large role in helping consumers make their choices.
Another could be the controversial matter of price personalization: different customers pay different, discreet prices for identical products which, he noted, 64% of retailers have earmarked as a priority during the next three years.
Prof Gómez referred to research that has polled consumers on their reasons for both online and offline shopping and found that there are compelling reasons for both modalities. The top reasons that shoppers give for preferring online shopping are, of course, lower prices and convenience, while the main reasons for offline shopping are the desire for a sensory engagement with products, particularly in the fresh produce sector.
Long tails and superstars
There are interesting trends: online consumers appear to be two to four times more price sensitive and responsive to promotions. Urban online shoppers are more price sensitive than rural consumers – but when shopping offline the inverse is true! There also appears to be more evidence of brand loyalty online. Customers who shop across multiple channels spend three to four times more than customers only shopping in one channel.
Consumers who visit a retailer’s website are more likely to also spend more at the physical store.
In online retail there are “long tails and superstars”, Prof Gómez said, which means that the online environment is tough for smaller brands because large brands dominate.
“The pendulum will swing back to offline to reach equilibrium but the difference is that these swings will happen increasingly faster.”