Profitero Blog
Digital Outperformance: Analytics-Driven Strategies For Retail’s Fastest Growth Channel

This is part 1 (of 2 posts) in which we summarize Keith Anderson’s recent presentation at the Spring 2016 Virtual LEAD Marketing Conference: Digital Outperformance – Analytics-Driven Strategies For Retail’s Fastest Growth Channel.  View the on-demand webinar.

Many retailers and CPG companies have begun to appreciate that we’ve been going through a period of fairly transformational change, at least for the last five years, and possibly longer.

Industry commentators continue to talk about how the consumer is in control, and part of this empowerment has been the endless choice they enjoy not only at retailers such as Amazon (who Forrester just estimated accounted for 60% of total US eCommerce growth in 2015), but also through increasing numbers of new entrants that are creating more choice for consumers than ever before. Companies such as Jet, Instacart and Boxed on the retailer side, and the Honest Company and Dollar Shave Club on the brand side.

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On the horizon, with Dash buttons and the Amazon Echo, we’re now entering a world where there may be no shelf. In other words, so much of consumption in a few years could be driven by automatic replenishment or spoken voice commands that brands are starting to explore these new consumption dynamics and think about how to ensure their products are discoverable in these new paradigms.

Signs that the eCommerce channel is maturing

When you look at where the industry is headed, we increasingly see a little bit of a divergence in the role that insights and analytics play given the pace of change and intensifying competition. At Profitero, we spend a lot of our time working with major CPGs in the industry and we recently conducted a survey not only among our customers, but the industry at large. We received more than 80 responses from leading brands worldwide to assess how they are organizing and budgeting for eCommerce.

Having worked in the CPG industry in eCommerce for the better part of the decade, there are strong signs that the channel is maturing. Our survey revealed that almost two-thirds of the industry now has one or more eCommerce directors, and among those, 38% have an eCommerce director with prior experience at a CPG – somebody who’s fluent not only in eCommerce and digital retailing, but also in the consumer packaged goods industry, which is often the harder thing for a new leader to learn.

Despite eCommerce still accounting for low to mid-single digit shares of overall sales across all channels of distribution, both the selling opportunity as well as the influence of the channel is behind a lot of the investments we see brands making.

Insight becomes currency

The first thing that we see many brands looking at is the shopper itself. The shopper shelf sales framework is a really key part of the way Nielsen (with whom we recently formed a strategic alliance for CPG eCommerce measurement) views measurement of the total consumer and the total eCommerce channel. While we at Profitero do not provide shopper analytics, it is important to understand the demographics, attitudes, and behaviors of shoppers, not narrowly in the context of eCommerce alone, but in the broader, total market context.

Then we believe you have to understand the retail environmental context, both physical and digital. In the same way that you care about whether your products are at eye level in a physical store, this equally applies to Amazon or Walmart.com. That is, if somebody searches for your products, you want to make sure that you have optimal placement. Just like in a brick and mortar store, if you’re not available on the shelf, you can’t convert that shopper. Analyzing the presence of your brand and competitors’ brands in the retail environment itself is therefore pretty fundamental.

A lot of what you can take action on in that retail environment, we think of as input or drivers of your business, and sales and market share are really the outcomes. In other words, focus on what you can manage actively, things like pricing and promotion and stock availability and discoverability, and then link it to the outcomes. What we found is, in the online channel, largely due to unavailability of those kinds of metrics and analytics, a lot of brands have focused on maybe one or two of these three pillars.

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It’s only now that brands are beginning to have the ability, driven by availability of the data, and secondly, availability of internal resources, to get the complete picture of what drives their performance online, so they’re starting to look at the drivers of their business. They’re starting to look at the outcomes, their sales and their share, and they’re starting to close that loop between looking at the drivers, looking at the outcomes, and continuously refining their approach so that they’re focused on what moves the needle.

Measure, benchmark and optimize for search

So what are the key performance drivers? If we look at the way shoppers discover and consider products, search is, certainly at Amazon, but at many online retailers, the dominant pathway to products. More shoppers go to Amazon before Google when they know what they’re looking for, and either want to find it or research it, according to a survey conducted by BloomReach last year.

Similar to the way that in a physical store, brands want to make sure that there are clear sight lines to an aisle and that their products are placed prominently either on the endcap or at eye level in the physical aisle, more and more brands are optimizing around their placements in search results. What they’re measuring is for both branded and unbranded terms, an unbranded term being something like cinnamon rolls, and a branded term being something like Entenmann’s.

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We help our customers monitor their performance on a daily basis for terms that we help identify, which is critical given the intent that is signaled by a search on a retail site. The shopper who is searching for a product on a retail site is much closer to a transaction than somebody who starts at Google. Knowing what they’re searching for and monitoring your placement for those search terms is absolutely key – maximizing the number of products you’ve got on the first page of results and your position on those top five positions above the fold is essential to success in the online channel.

Profitero Webinar – How Global Brands are Budgeting and Organising for eCommerce: Join our live webinar on May 24 2016 at 9am ET/2pm BST to find out the results of our survey and see how you benchmark.