The step-change in ecommerce growth means the world’s biggest brands and manufacturers are thinking differently about how they seize opportunities online.
What would you say are some of the most significant differences between ecommerce and traditional bricks & mortar retailers?
In most markets, we grew up with the physical store mindset as our background and our foundation, so we know how to win in-store. A physical shelf is well-defined, but what is a shelf online? You can guide store traffic, but what does store traffic look like in an online environment?
Online is fundamentally different. You don’t have the limitations of physical store space. You don’t have the same physical capital to move items. You don’t have the limited hours.
We’re using old ways of thinking for a new medium, asking, “how do we replicate what we’re doing offline, online?” I don’t think that this is right. And it comes down to the difference in terms of winning.
Offline, you have a defined competitive set. Online the competitive set is limitless, and it’s global. I can click on Alibaba, JD, eBay, Amazon and Google. So, to win in that environment, it becomes about capturing full consumer value. In the old world, it was about wanting consumers to buy a specific item at a price. In the new world, it’s also about getting consumers to subscribe to music streaming, video streaming, web hosting capabilities, etc. It’s about developing a consumer ecosystem.
How do you go about setting targets online vs. offline?
I think that the reality is that we’re not there yet, and we’re not there yet from a data availability standpoint. Once we can track it properly, we can set objectives online. Our struggle is getting data access rights.
In a lot of cases, we just don’t have good enough data to be able to set meaningful metrics of what success looks like. The metrics of granular sales and share data is paramount in our ability to accurately track success online, but right now, it is limited because we don’t have the same access to retailer data the way we do offline.
With the growth of ecommerce models and platforms such as Shopify, how do you go about approaching these different models?
Strategically, it’s balancing the risk vs. reward, so we know we have to have relationships with these players. Instacart is probably the best example. Five years ago, it wasn’t even on our radar, so we didn’t do anything with them. Now, if we don’t partner with Instacart, we lose. We decide on resourcing based both on current sales and expected growth.
Thinking about the future, what do you see as the biggest opportunity online?
There are some really bad websites out there (and some really good ones, too). But there’s very little guidance and standardisation to say what makes one better than another. I think our opportunity is to really let consumer and shopper insights drive design rather than letting technology drive it.
There’s a lot being trialled online right now without anyone asking the question, ‘should we do it?’ Or starting with the current consumer purchase barrier to drive penetration and what technologies can overcome those barriers.
What do you see as some of the pitfalls caused by the growth of online?
Margin profitability is at the top of the list. Retailers have been saying we need to win ecommerce at any costs without fully recognising what that actually means. When a product is purchased in a physical store, there’s some margin play there. But as soon as consumers use online, they are sending someone else to drive to the store for them, walk to the aisle, pick up the item, do the whole checkout process, and then bring that item to their door. Whilst still paying the same price as going to the store.
The cost to serve models isn’t there yet. And that is the number one barrier because consumers are not willing to pay for that convenience and luxury yet. So as more volume shifts online, the retailer mix of profitability becomes a very real issue, and it highlights that the last mile is the future. How do you solve that problem of getting the product to the consumer’s door?
Two markets where online has exploded are China and South Korea. There, you’ve got a massive, relatively cheap labour force that can drive these products. They can get products into consumers hands quicker and more efficiently. They can make those 30-minute deliveries. The US and Europe don’t have that same luxury. We’re still shipping heavy products and big baskets at the same cost, which are margin dilutive in a lot of cases.
I don’t think we will ever be in a situation where consumers will accept paying for the value of delivery. If anything, the expectations are going to change. For example, for someone from China or South Korea, the US or European online experience is terrible. Next day delivery is no longer good enough for them, they want anything and everything in 30 minutes, and their reality is, they get things in 30 minutes. They expect it to be fast, free, and won’t settle for anything less. In the US and Europe, we’re looking at next day delivery as being great. And even then, we expect it to be free.
You create great customer experiences through your retail partnerships, but how do you maintain this online?
We don’t do it today as a manufacturer. I think it really comes down more to the retailer than the product itself. When a shopper is evaluating their experience, their satisfaction with shopping an item will be based on the retailer.
How is its website set up? How was the shipping? What is its return policy?
If you’re looking at where we do play a role, it is making sure that what the retailers feature leverages our best-in-class knowledge and insights. We aim to make sure that when someone is buying a P&G product, they are clear on all the benefits it provides.
Providing robust content that negates the need to physically handle the product itself, that’s one of the big online barriers we’re trying to overcome. So, it’s making sure we have the right content packaging and marketing material that does all of that virtually for them.
Which brands outside of FMCG for you admire for doing a good job online?
Nike has done such a good job with its customisation, ease of shopping, free shipping, and ability to maintain consistent price points. When comparing Nike products in a sporting goods store vs. its website, nine times out of 10 (if not every time), it will be cheapest on the site.
I would say Starbucks is another. Starbucks is best in class in terms of mobile app usage. One of the new shopper expectations is relevancy through personalisation. Through my data, they know my purchase tastes, and they tailor their messaging and offers based on this.
We find privacy is a big issue, and it becomes a barrier when data is shared without benefit or value. But if you’re leveraging my information to optimise my shopping experience in a way that I recognise, it is meaningful and rewarding.
How is ecommerce going to change and develop over the next five to 10 years?
Exponentially! I think that the biggest shift that we’re going to see is the ubiquity of artificial intelligence and machine learning. We’re at the cusp of it now, but it is going to become a reality that when we go on a retailer’s website, we all get completely different experiences. Individualised personalisation is going to come to life online.
Mobile is the other big shift we will see. Thinking about mobile penetration, I can envision a universe where it becomes 100%. When you look at South Korea and China, 80 to 90% of purchases are already via mobile. The fact that we still use a laptop to make our purchases is such a dissatisfier. I think it is going to become the payphones of the future—a relic.
Payment options will also be vastly different. The move to a cashless society is inevitable in the near term, and I think we’re going to move to facial recognition or biometric thumbprint scanning. Eventually, just having a mobile will make touchless checkouts the reality everywhere.
