There are a handful of significant things to
consider when implementing (or scaling) an e-commerce strategy at a
traditional, commercial company.
After working at P&G for almost 17 years,
I worked with both S.C. Johnson & Son, as well as Tyson Foods, to launch
and scale their e-commerce divisions—both in the United States and globally. At
S.C. Johnson, I was the Global Director of e-commerce, and at Tyson I was VP of
eBusiness. At both companies, our teams essentially started from zero and grew
to over $200 million in e-commerce revenue through a combination of assessing
different marketplaces, developing a couple critical capabilities, and slowly bringing
on passionate team members that could effectively scale our efforts.
What I learned through those experiences was
that designing an e-commerce strategy within an existing company (especially
companies doing billions of dollars in revenue all over the world) requires a
reevaluation of what your go-to-market strategy is going to be—and what new
“muscles” (capabilities) are required to succeed.
You can’t just keep doing things the same way
and hope to be okay in this rapidly evolving marketplace.
On the other hand, you can’t just list your
products on your website and expect to win. You have to understand the rules of
the game, the major players, and what levers you can push and pull in order to
successfully build your business in traditional and digital channels.
Before you dive into the strategy, it’s
important to get aligned with the words you’re using. The biggest one is to
define what you mean when you say “e-commerce.” The definition I like to use
is: any transaction that is enabled digitally (primarily a screen, but could
include voice) and can be fulfilled in a multitude of ways (parcel delivery in
a box, van delivery to a home, picked up in-store, picked up curbside, etc.).
What puts the “e-” in e-commerce is that the
arts and sciences of in-store selling that we’ve spent decades perfecting
(Category Management, displays, shelf positioning, shopper behavior, etc.)
don’t impact shoppers’ decisions. The game is won and lost on the screen. Once
your team has agreed on the definitions for the new digital commerce terms,
you’re ready to tackle the strategy.
Here are 4 things you need to think about when
launching an e-commerce strategy in an established company.
1. Are
you selling directly to consumers and/or through digital marketplace partners?
When big companies start thinking about
launching or scaling their e-commerce capabilities, this is always the first
question they struggle to answer—and sometimes just skip over.
You need to decide whether you are going to
sell directly to consumers through your own digital properties (e.g. brand
website), sell through digital marketplace partners (e.g. Amazon, Walmart.com,
Bestbuy.com, etc.), or a combination of both. The reason is that both have pros
and cons. When you sell directly to consumers, you have the ability to capture
more profit and data because purchases are happening within your closed
ecosystem. When you sell to consumers through marketplace partners, you give up
some of that profit, and usually the majority of the data. The upside is that
you can typically reach a lot more customers more efficiently through
marketplace partners than if you try to build the shopper audience on your own.
The key is to figure out which route your
company can be most successful in.
Today, you are seeing some “digitally native”
companies start online, optimize their product through direct feedback from
their customers, and then branch into marketplace partners. For more
established companies, it’s likely that you’re ready to go directly to those marketplaces. The challenge for you is how to do so and
still leverage data to help you assess performance and course-correct where
needed.
There are a variety of types of data you can
leverage that isn’t sensitive “first-party data” that you will not be able to
get from your marketplace partners. Ratings and reviews are just one example.
The feedback left here by your consumers can tell you if you’ve got a hit—and
can also be an early warning signal to brand teams of a significant problem.
2. Will
your current logistics and packaging be able to efficiently (and profitably)
service customers?
Big companies are all built on efficiencies.
Supply chain lines are designed to handle
product orders in bulk. As soon as you start introducing custom builds into the
mix, that’s when you begin to lose the benefits of the efficiencies of scale.
The reason the first strategic question (point
#1) is so important is because, if you are a large company used to running
large-scale supply chains, you are going to need to adapt some of your
processes (and potentially even the packaging of your products) in order to
achieve similar efficiencies by shipping directly to consumers.
For example, this was one of the inspirations
behind Procter & Gamble launching those small, lightweight detergent pods.
P&G (and their marketplace partners) were incurring significant expense and
damage shipping those big tubs of liquid. By creating a new product form and
packaging type, they created a proposition that could be produced at scale
efficiently, shipped far less expensively.
Sometimes the answer is a new box size or a
different product cap. The answers will vary by product type. What’s important
is that packaging and production need to be evaluated and addressed early
on.
3. What
sort of team and resources do you need in order to build a successful
e-commerce business?
Do you set up a separate team from your
existing sales group? Do you need people with expertise selling products
exclusively on Amazon? Unfortunately, there is no straight-forward answer here.
The team structure, capabilities, and funding needed are dependent on your
approach.
If you are going to have an “owned”
direct-to-consumer site, you will need to allocate headcount and dollars to
that effort to be successful. This person or team will need to execute (or
coordinate, if using external agency resources) and get the technology platform
running, create and refresh content, read and react to data, and spearhead
marketing and order fulfillment logistics.
For most larger companies, you will start by
working with marketplace partners like Amazon, Wayfair.com, and Walmart.com.
Typically, this will require bringing in some expertise to help manage the
ramp-up and train the organization on the new skills and language of
e-commerce.
For example, Amazon is largely operated via
its Vendor Central platform vs. traditional “buyer calls.” Another example is
content: getting the right keywords embedded in your written content and having
strong product images can be the difference between the top of Page 1 (a
winner) and buried on Page 348 (irrelevant).
But more importantly, the big mistake I’ve
seen companies make when executing their e-commerce strategy is that they treat
it as a stand-alone project. They fail to integrate e-commerce holistically
into the company. While there are stand-alone e-commerce retailers (like
Amazon), increasingly, e-commerce is part of retailers’ total go-to-market
strategy. As such, manufacturers must understand it, and approach retailers
holistically.
For example, there shouldn’t be a stand-alone
Walmart Stores team and an entirely separate Walmart.com team that never talk
to each other. Of course, you could (and should) resource these appropriately.
But they should be working in concert with each other. As Walmart stores also
become fulfillment centers for their .com and online grocery businesses, the
inter-dependencies of the businesses will only be increasing.
In December 2019, Kantar forecasted that
e-commerce will account for 5% of Total Food, Drug and HBC 2019 sales – with a
25% CAGR. Meanwhile, e-commerce will
comprise of 25% of “all Other Goods” sales with a 15% CAGR.
E-commerce is contributing a significant
amount of the growth to our categories—in many cases, to the detriment of store
sales. As a growth engine for our companies (and our retailers) e-commerce
should not be treated as a separate entity within a company—or “the e-commerce
team’s job.” Instead, everyone is responsible, in their own way, for making
this a successful part of the business.
4. Are
you being effective at Attention Channel Management?
Too often, the focus is only on how we will
get the product from our plant to our consumers. However, it’s just as important to consider
how to get our brands into their minds.
With the fragmentation of media, the rise of
social and influencers, and the impact of ad-blockers (and ad blindness),
throwing out impressions and hoping is an “interesting” marketing approach.
Managing the “Attention Channel” is about
being present where your consumers are engaging with your categories, and being
a part of that discussion. Ideally, adding value in the form of entertainment,
education or inspiration.
The opportunity we have in today’s digital
world is to connect directly from that “point of engagement” directly to a
“place of commerce.” Even if they don’t depart and transact, you’ve given them
the opportunity, some value and, hopefully, a positive experience with your
brand.
That’s why, when I was at Tyson Foods, we were
piloting with companies like Chicory and eMeals to enable a consumer to add all
of the ingredients they needed from a recipe on a site like Pinterest directly
to the cart of their preferred retailer.
At the end of the day, for an e-commerce
strategy to get off-the-ground successfully, there has to be leadership support
(words and actions) that it is strategically important.
E-commerce does not have to mean a massive
shift in your priorities or resources. But it does now account for at least 5%
of your total categories’ sales (and, in some cases, 5-6 times that much)—and
will continue adding 1-3% per year for the foreseeable future.
To avoid losing significant share in the midst of this
shopper shift, you do owe it to your company to at least understand what is
actually happening in your categories and have a thoughtful discussion about
what your response will be.
