In Part I of our interview with Stéphane Roger, Global Shopper and Retail Director for Kantar Worldpanel, Barcelona, Spain, he used Kantar’s data to lay out the big picture of what is happening with omni-channel today. In Part II, Mira Slott, Pundit Investigator and Special Projects Editor, explores Stéphane’s views on the significance of produce to retailers’ omni-channel efforts and the meaning of omni-channel to the produce supply chain:
Q: In Part I of our interview, you distilled your data into 10 “Ingredients” to Omni-Channel Success in the article we titled, 10 DATA-RICH INGREDIENTS TO OMNI-CHANNEL SUCCESS — Kantar Worldpanel To Highlight Fresh Data At Amsterdam Produce Summit
To summarize, these 10 ingredients are:
- The big growth in CPG is over.
- With E-commerce, discounters and cash-and-carry all growing, it is clear one needs to have a value strategy to succeed.
- Hypermarkets and supermarkets are on the decline, so the industry needs to build incremental sales in alternative channels.
- We need to change the way of approaching the market by looking at the growth from other outlets and having an advanced understanding of their makeup.
- Growth can be driven by activating the right levers in geography and demography.
- Private label branding is growing, and the possibilities for retailers to sell direct to consumers without a middleman have grown.
- E-commerce is booming, and there are big differences in geography, between countries and categories.
- While CPG in hypermarkets and supermarkets declines, fresh food is becoming the center of attention and is building in emphasis in the new model of retailing.
- The supply chain needs to develop a strategy to represent many categories and seek synergies in the omni-channel world.
- Strategies to grow and increase value should come from attracting new shoppers rather than getting more loyalty business; local brands may be the key.
Can we start this second part of the interview with your last point, which is an emphasis on local? I think many attendees at the APS will be interested to know more about how local, private label and national/global brands will play out…
A: Regarding brands, which are really important for food and fresh foods, people buy more local brands than global ones. As an example, for CPG brands overall, local brands represent 65 percent, and the local movement is growing year over year.
For food, consumers are reassured by the quality of local foods, and “locally grown” seems to talk to the heart or the memory. This is why local brands are growing, and this will continue and be more and more important for fresh food.
"For traditional retailers, it is really important to find the right range of brands in-store and online. If you're a brand marketer, you need to present a different answer to the market."
Q: Supermarkets tout the ability to customize offerings for their local markets, highlighting seasonal, locally grown varieties, featuring neighborhood farmers, etc. In creating economies of scale in purchasing and mass-scale e-commerce, is there a risk of losing customized locally grown characteristics?
Further, is there a dichotomy between niche individual customization and branding opportunities through technology and evaporation of brands towards private-label?
A: Amazon is aligning in global markets, so local players could be working with them to give a better understanding of the local regions.
For traditional retailers, it is really important to find the right range of brands in-store and online. If you’re a brand marketer, you need to present a different answer to the market.
Q: Is it important to create consistent brands and messaging across channels?
A: Providing a different brand online for retailers is not necessary, but if you want growth offline and in the online world, you need to provide something different to shoppers. For example, if you provide fresh orange juice, try having a brand for stores in 1-liter packaging, and perhaps a different type in 2 liters online. This will address different needs.
There is another point regarding branding, and that is one of value and discounting. Private label is becoming pervasive everywhere, and discounters are more difficult for brands to break into (80 percent of discounters typically carry private labels).
So, known brands will need to cope with emerging channels and unknown digitally pure players. Many brand marketers will require a re-tooling of their marketing teams and re-training of sales forces.
Q: If national/global brand marketers need to re-tool for omni-channel retailing, what areas should they concentrate on first?
A: I see two key ways national/global brands and retailers can find growth by winning new shoppers. First, look to add a presence in new geographic markets where there is emerging growth for e-commerce: India, Indonesia, Brazil, Mexico and Africa.
China, Japan and the U.S. collectively represent 70 percent of global FMCG value in e-commerce. The UK, France and South Korea are also important players, but these developed markets do not always display the fastest growth.
China’s e-commerce growth represents the biggest growth, but there is further growth driven in India, as well as in Indonesia.
Walmart’s recent acquisition of digital pure-player Flipkart in India shows its commitment to this emerging market. Walmart also launched its first “omni-channel store” close to Mexico City…
Secondly, build strategies to attract new customers online through e-commerce and offline by looking closer at demographics and who is shopping at discounters and cash-and-carry. This is important as there are pockets of consumers that are not yet tapped, such as seniors.
Q: But don’t seniors typically stay away from shopping online?
A: That may be true today, but think about seniors of tomorrow. Currently, Millennials only represents 14 percent of spending in fresh foods, but seniors represent 23.5 percent.
If look at age 60 and over in the year 2000, it was 600 million. In 2015, the number of seniors grew to 900 million, and by 2050, there will be 2.1 billion seniors on the planet.
The global population is getting older ... this should be reflected in the strategy of the industry when it comes to talking about fresh food. As the population gets older, fresh food purchasing becomes more important in choices of shoppers, so it’s a good place for growth.
Q: How does this connect to omni-channel growth?
A: Seniors today may be reluctant to buy online because of technological ignorance, fear of security of payments, and they are accustomed to buying in other channels, but we do see retail changing.
When we get older — for my generation 50 years old — we’re already accustomed to buying online, and we will keep this routine. Thanks to this concept of omni-channel, the population will get older and technology will grow with our generation, making big growth for fresh food in the next few years.
Q: What other demographic groups should brand marketers be thinking about?
A: Health and wellness is a category that is growing. Shoppers want more healthy product choices, and fresh produce is a part of that, with increasing demand from all age groups. Fresh produce purchases are influenced by what consumers see in-store, how product is merchandised and displayed, so it is important for brand marketers to play a role what consumers experience.
This is an important point for brands if they want to drive growth. People are talking a lot about Millennials. If you look at the share of Millennials in CPG, it’s only 14 percent. Hypermarkets will be a higher percent with families with children, but e-commerce will be more important to Millennials, as well.
Q: I would think seniors are most interested in health and wellness, but I am sure Millennials are as well. What I wonder about is whether the discounters and cash-and-carry will appeal more to seniors on a budget than Millennials. Will discounters be the retailer of choice for seniors while e-commerce becomes the outlet for Millennials?
A: First of all, there are two types of discounters. You’ve got Lidl and Aldi, where 80 percent of the products is sold with private labels. They are reinventing their stores, with the shopping experience moving toward fresh food being one of the key drivers.
These two discounters attract a lot of shoppers across Europe, and they are still priced aggressively. Both are not yet moving to online, still focusing on opening stores in the UK, Spain, France and resettling in U.S.
In that environment, they are planning their strategies to this shopper expectation, which is about lower price.
The other discounter, of course, is Walmart, which has seen much more renovation of its concepts doing omni-channel with stores offering click-and-collect and trying to move in that direction.
In both cases of discounters, the focus is about generating traffic, attracting shoppers more than applying loyalty programs. This means they need to meet a price proposition with a value formula and a deep understanding of what should be the right price, right packaging and pack size.
Q: You argue that on and offline integration is a must-have based on your global growth forecasts.
A: E-commerce and discounter channels are changing the nature of FMCG growth worldwide. Also, less developed markets are taking up the mantle to drive global growth. Over the next three years, there will be a major slowdown in hyper and supermarket spend.
Growth will continue at pace in the channels where it is currently seen. By 2020:
- Cash-and-carry will grow to 2.1 per cent
- Convenience will grow to 5.8 per cent
- Discounters will grow to 6 per cent
- E-commerce will grow to 7.2 per cent
Q: How does this impact omni-channel development?
A: This will create more on and offline propositions. In the past 18 months, $35 billion has been invested in alliances and acquisition in the retail industry to attract offline shoppers to online… the answer for brick-and-mortar players to maintain their position.
With over 5 billion people expected to have access to the Internet by 2020, and penetration in less developed markets, such as Africa (current internet penetration 10 percent) and Asia (25 percent) set to grow exponentially, online FMCG sales are worth a closer look.
Q: Where are the best avenues of growth for the fresh produce industry, based on your analysis?
A: Growth is coming from e-commerce, discounters, cash-and-carry and convenience.
Shoppers want convenience and value for money.
The cash-and-carry model relies on specific assortment of goods and aggressive pricing.
Brick-and-mortar stores are obliged to reinvent their hyper or supermarket model but are cannibalized by pure players that are quickly providing shoppers with an integrated on and offline experience.
Q: How do you define “pure players.” Is there such a thing these days?
A: Pure players are online players — Amazon, Alibaba, Ocado that didn’t have any physical stores — but the definition is moving to what the Chinese call New Retail, providing online and offline, the complete experience.
So, they’re “un-pure” now because they mix their business, but the great majority is still done online.
We should say omni-channel players or New Retail now.
The point is there is a movement from online player to provide complete experience with stores, but offline players are moving to the other side, more online, such as E Leclerc in France, or Walmart.
And you’ve got brands that are moving to direct consumer business, acting as a retailer; there are lots of intersections now between all these models,
My key advice: E-commerce is a must-have, and fresh produce will be the next playing ground. I call it “increment of proposition,” and looking at different types of packaging and other branding strategies to make that proposition more important is a key thing.
Stéphane emphasizes the opportunities for digital in rapidly growing markets such as Africa, India, China, etc. This is true, but for many companies entering these distant and developing markets poses great challenges.
We would suggest, though, that digital, done well, creates opportunities to enter what seem like very mature markets with relative ease.
To open a major supermarket chain in New York City, London or Amsterdam is virtually impossible. These are mature markets; all the real estate is occupied. If one is not doing an acquisition, it will take years, decades, perhaps longer to build a dominant position in the market.
But to build a highly automated and technologically advanced DC on the outskirts of town and buy a fleet of delivery trucks and vans is relatively easy. Of course, being a new entrant into a market has all the challenges incumbent in being an unknown brand, etc., so certainly it is not easy to make it a success.
Yet what was impossible before — to challenge incumbent retailers in mature markets — is now quite feasible.
Stéphane makes an often-overlooked point: Lots of people look at today’s data and declare — like it is an immutable law of physics — that the current state of things are facts one can rely on. But, in truth, the “facts” are more like a snapshot of a moment in time. Today’s seniors may never adapt to a digital world, but that may simply tell us that people are creatures of habit.
After all, today’s Millennials, when they become seniors, will probably stick to the digital habits of their youth, while Generation Alpha, born after Generation Z, will find relying on devices antiquated. They might expect implanted chips to handle things.
What we know is this: For a thousand reasons, handling produce is more difficult than handling cases of canned soup or laundry detergent, And, for that reason, the ability to create value is much greater by the retailers that succeed with produce in omni-channel.
With the help of Stéphane. we will explore these issues and more at The Amsterdam Produce Summit.
Come be a part of the exploration!
Many thanks to Stéphane and the good folks at Kantar for helping us understand such important issues.
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