It seems more and more evident to me that one of the last areas of traditional e-commerce to go mainstream is Grocery.
Most FMCG (Fast Moving Consumer Goods) brands are hugely dependent on the retailer (Multiple or otherwise) to drive volume in terms of sales. Anyone launching a consumer product first thinks about selling it to Tesco, then once this doesn’t work thinks about selling to independents (usually with an excuse about not wanting to work with Tesco!).
Apart from Diet Chef there are some great examples of brands that have grown online and are potentially looking to drive into retail as a secondary activity. Selling online has it’s advantages but also makes things hard. Delivery and distribution costs are pretty fixed no matter if you are sending 1KG or 30KG, costs of warehousing, staffing and IT are the same.
Many existing FMCG brands play at selling online. They think it will be the solution to the problems they encounter with retailers, it isn’t. On many occasions it causes massive conflict. A retailer is in control of the price that they sell the product to consumers at, you cannot specify exact retail prices – just suggest them. If you start to sell online at a lower price than the retailer they complain, if you sell at a higher price – the consumer heads for the retailer.
The advantage of selling online is not about improving margin but having a direct dialogue with the consumer lets you understand problems with your products on a daily basis. This feedback is invaluable to any FMCG brand and most spend thousands of pounds a year to get this level of insight.
There are a number of companies popping up using the Internet to sell directly to consumer but I have some simple rules and guidance that I follow to make it work.
I will cover some of the pitfalls of FMCG brands selling online in the next few blog posts.