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Can Food Companies Get People to Make Impulse Purchases Online?

With more consumers buying groceries online, big brands have to rethink the way they sell

Spurring impulse purchases is just one challenge big food brands face as they try to win customers online.
Spurring impulse purchases is just one challenge big food brands face as they try to win customers online. ILLUSTRATION: ROB SHEPPERSON FOR THE WALL STREET JOURNAL

As consumers increasingly shop for groceries online, giant food brands are scrambling to keep up.

Consider just one small fact: Consumers who buy groceries online usually stick to a list of must-have items. That has left some big food companies scrambling to find new ways to persuade them to add that last-minute chocolate bar or bottle of water.

Hershey Co. , for instance, is working on a technology to make it easier for online shoppers who pick up their orders at stores to throw in a piece of candy or a pack of gum at the last minute. As customers arrive at the store and an employee prepares to bring their groceries out to their car, an offer would pop up on a smartphone app, suggesting they add something extra to their orders. The idea is to mimic the experience in the checkout lane, where 56% of shoppers always or often purchase a snack, the company says.

Figuring out how to drive impulse purchases is just one of the challenges that multibillion-dollar food brands face as they gear up to win customers online. They also have more competition from startups on e-commerce channels, where it is possible to build a consumer following without a massive marketing budget and where newer brands perceived as less processed and more healthful tend to be popular.

As food makers and retailers test new technologies and develop e-commerce strategies to compete in this changing landscape, the overall grocery-shopping experience for customers is likely to shift dramatically, food executives and analysts say.

“Food is changing like it’s never changed before,” Kroger Co. Chief Executive Rodney McMullen told investors earlier this month. “It will be anytime, anything, anywhere that they want it.”

Amazon.com Inc.’s recent acquisition of Whole Foods Market Inc. and its big push into the grocery industry is generating a new sense of urgency among food makers and traditional supermarkets to keep up with the e-commerce giant.

Campbell Soup Co. , Conagra Brands Inc., Kraft Heinz Co. and others, have said they are investing more to build sales online, hiring e-commerce experts and making adjustments to their supply chain and distribution systems to serve e-commerce needs.

The stakes are high. While e-commerce represents a small segment of food and beverage sales today, at about 4%, it is expected to account for 8% of such sales, or $70 billion, by 2021, according to Inmar Willard Bishop Analytics, a Chicago-area consulting firm.

Online ShoppingThe percentage of shoppers who buygroceries online at least occasionally isexpanding rapidly, led by millennials:THE WALL STREET JOURNALSource: Food Marketing Institute, U.S. Grocery ShopperTrends, 2017
%All shoppersMillennials (age 18-38)Gen X (39-52)Boomers (53-71)Mature (72-plus)2015’16’170204060

One big challenge for behemoth brands such as Campbell’s chicken-noodle soup and Mondelez International Inc.’s Oreo cookies is that they don’t always have the kind of leverage online that they are used to having in brick-and-mortar stores. For decades, such brands controlled grocery-store aisles, commanding prime shelf space and funding expensive advertising displays. Online, however, the playing field is more level, as the internet has provided a quick, cheap and easy sales platform for newer, trendier food companies to reach consumers.

David Ciancio, senior customer strategist for consumer-data firm Dunnhumby, says that foods viewed as healthful and consumed as part of a routine—such as breakfast bars made with ingredients perceived as simple or nutritious—do better online because they are habitual and therefore ripe for automatic reordering. Processed foods and items bought on impulse, such as candy, typically suffer in the transition to online, he says.

Many websites have no way of presenting impulse-related food items as pop-ups when shoppers check out, and buying online doesn’t offer immediate gratification. As such, online shopping lends itself to more “list-driven” shopping, says Paul Weitzel, vice president of Inmar Willard Bishop.

Hershey CEO Michele Buck, who took the helm in March, said on an earnings call in July that the company plans to continue working with retailers to find ways to drive impulse purchases online. “I can’t tell you I have the answer to that right now,” she said, but “we are doubling-down” on e-commerce.

Some companies are looking toward new technologies to help them drive more online sales in general. One idea, from InContext Solutions, which has developed virtual-reality software for retailers, is to provide virtual shopping to consumers who own VR headsets. By one day enabling people to virtually unwrap candy bars and look inside boxes of cereal while they shop, the technology could make food look more appealing than on a 2-D computer screen, InContext says.

Elsewhere, Instacart, an online grocery-delivery service that partners with many major retailers, is working with hundreds of brands, ranging from large companies such asUnilever and PepsiCo Inc. to smaller niche sellers, to put samples of items in customers’ deliveries.

Mondelez, which hired a vice president of global e-commerce about a year ago, says snacks are relatively underdeveloped in e-commerce today, generating just 2% of overall online grocery sales in the U.S. and 15% in China.

The company is trying a variety of strategies to drive sales online, including subscription options on Amazon, where shoppers get a lower price on products such as belVita breakfast cookies in exchange for signing up for automatic reorders.

Mondelez says it is aiming to generate at least $1 billion in e-commerce revenue by 2020, up from about a third of that now.

Campbell Soup recently created an e-commerce business unit for North America and named Shakeel Farooque, a veteran of Amazon and eBay , to lead it. The company says it is working with retailers to capture more sales online and investing in a network of distribution centers in states such as Texas and Ohio to better serve e-commerce customers. It aims to generate $300 million in online sales over the next five years.

An advantage

One benefit big food companies have online is that store brands, called private label, aren’t as popular as they are in stores. General Mills says that in the U.K., where online shopping is more prevalent, its market share is almost 30% higher for e-commerce than in physical stores.

PHOTO: JOE TABBACCA/BLOOMBERG NEWS

Company executives say getting products such as Cheerios cereal and Progresso soup into the customer’s first online order is a priority for them because people often reorder past purchases out of convenience.

General Mills say best-selling products tend to come up early in search results, though many retailers offer paid search advertising that can drive placement.

In addition to paying for placement, some food manufacturers are striking partnerships with other brands to give shoppers discounts if they purchase two products together. Companies are using customer analytics to figure out if a frozen-dinner buyer might also buy snack cakes, for example, says Bill Bishop, co-founder of consulting firm Brick Meets Click.

“There is a tremendous focus on paying to move up [in search results]. The question is, is it worthwhile,” said Mr. Bishop. “You have to get to the granular data.”

Ms. Gasparro and Ms. Haddon are reporters for The Wall Street Journal in Chicago. Email them at annie.gasparro@wsj.com and heather.haddon@wsj.com.

Filipino Food

An Asian cuisine that’s largely been ignored is about to take over America

The rich flavors of the Philippines could find a receptive audience in America soon, according to chef Andrew Zimmern.

The globe-trotting host of “Bizarre Foods” has praised Filipino food for some time now.

“I think Filipino food is… you know, I’ve been calling it for five years. It’s just going to keep getting more and more popular,” he recently told Business Insider.

And it’s about time — the food of the Philippines is almost uniquely positioned among global cuisines, enjoying a wide range of influences that make it not only delicious, but also surprisingly accessible to the American palate.

Filipino cuisine is a complex and fascinating tapestry of Malay, Spanish, American, Japanese, and Chinese influences, thanks to the island country’s fraught history of Western colonization and various occupations.

The pre-colonial Philippines was a center of trade between China, India, and Southeast Asia, bringing tofu, soy sauce, stir-frying, congee, and biryani into the culinary fold.

The arrival of — and bloody conquest by — the Spanish in the 1500s brought chili peppers, tomatoes, corn, and potatoes from South America, as well as an affinity for garlic and onions. The widespread use of Spam in Filipino dishes harkens back to America’s 48-year annexation, having wrested it from the Spanish during the Spanish-American War.

Vinegar, plus a profusion of aromatic garlic, are key elements of Pinoy cooking. The trendy flavors of Spanish, Indian, and Japanese food are all present, and there’s a fantastic and frequent play between acidity and sweetness throughout.

All of this comes together into a unique and broad culinary culture that seems poised for the American market.

Jollibee 8Diners seeking a classic Italian-American take on spaghetti will be surprised by Jollibee’s version. Hollis Johnson

Take the spaghetti served at Jollibee, a fast-food chain that is ubiquitous in the Philippines and is looking to spread stateside. The sauce leans toward the sweeter side, balancing out garlic and tomato with a sugary lightness — and chunks of Spam and sausage make a salty counterpoint. It’s an entirely unique take on the pasta dish, yet it has a comforting familiarity to it nonetheless.

And while many are put off by Pinoy foods that are unorthodox by American standards — balut, a boiled duck embryo, or diniguan, a stew of pork offal and pig blood, come to mind — the sheer breadth of meals and culinary traditions means there’s bound to be something for everyone.

With its close proximity to Spanish, Japanese, and Chinese food, which American palates crave more and more, it’s the perfect time for Filipino cuisine and its unique medley of influences to take over.

B2B vs. B2C

B2B customers being left behind in rush to support B2C demand, FedEx executive says

B2B customer expectations, historically low, are starting to increase, Rude says.

By DC Velocity Staff

Carriers serving the business-to-business (B2B) and business-to-consumer (B2C) channels need to do a better job of delivering the same levels of service to traditional B2B customers that the B2C segment has come to expect, according to a top FedEx Corp. executive.

Speaking earlier this week at a conference in Chicago sponsored by technology provider project44, Mike Rude, director of international marketing for Memphis-based FedEx’s Services unit, said B2B customer expectations are “far below” those in the B2C world, where consumers expect to order and receive products when, where, and how they want them. However, B2B customers are starting to expect comparable experiences from their providers, Rude said.

Up until now, Rude said, carriers have failed to give the B2B channel what it needs to meet or exceed expectations, despite having mountains of data and a track record of IT innovation. This failure, he said, manifests itself in the proliferation of shipment audit companies that make their livings correcting errors made during transactions, he said.

Rude used blunt rhetoric to describe the industry’s shortfalls in managing B2B expectations, saying that “we’ve left our customers behind,” and that “we have the opportunity” to deliver a robust experience but that “we are letting it pass.”

The B2B customer has long been predominant in the worlds of all transportation carriers. At FedEx and at its Atlanta-based rival UPS Inc., the B2B space has generated the largest revenues and margins because of the carriers’ ability to deliver multiple packages per driver stop. By contrast, the B2C segment has been marked by a dearth of package density, as drivers generally deliver one or two pieces per residence. However, the projected growth of deliveries to consumers living in densely populated urban areas is likely to create a level of density the B2C segment has never seen.

The explosive growth of e-commerce demand has turned the traditional parcel carrier model on its head. At FedEx, much of the future investment will be earmarked for its FedEx Ground parcel unit, which handles most of the company’s e-commerce traffic. At UPS, B2C shipments are expected to have overtaken B2B volumes by the end of 2017.

Rude said B2B shippers expect their carriers to deliver an end-to-end integrated experience supporting a product lifecycle approach. He also urged providers not to focus on trying to be the next Uber, and to instead give customers what they want and need.

“Do what matters to your customer,” he said. “Don’t try to be cool.”

New Amazon DC

Amazon to open robotic DC in Bolton

Amazon UK is to open a robotic fulfilment centre in Bolton next year. The new site is set to create 1,200 full-time permanent jobs.

Amazon has opened fulfilment centres in Daventry, Doncaster, Warrington and Tilbury this year.

“Our ability to expand in the North West of England is the result of two things: incredible customers and an outstanding workforce,” said Stefano Perego, Amazon’s director of UK customer fulfilment. “We are thrilled to begin recruitment for 1,200 new permanent roles in Bolton with competitive wages and comprehensive benefits starting on day one.”

♦ Earlier this year Amazon was reported to have opted for a speculative big shed at Harworth Estate’s four million sq ft Logistics North scheme in Bolton totalling 357,700 sq ft. The unit, known as 360 at Logistics North, is being brought forward by First Industrial with the backing of US property investment company Exeter Property Group. The building has 15m eaves, 34 dock and two level access doors as well as 74 HGV and 280 car parking spaces. (Logistics Manager, January 2017)

Uber vs Taxis

New Yorkers now use Uber more often than taxis

hailing cab new york cityFlickr / Jason Lander

Uber has made a concerted push to expand its reach in New York City, and it’s starting to reap the benefits.

For the first time ever, more people are using Uber in New York than the city’s classic yellow taxi cabs, the New York Timesreported this week. On the average day in July, for example, Uber completed 289,000 rides while New York taxis recorded 277,000 trips, according to the report.

Uber’s new lead is the result of sending thousands of black cars to New York’s outer boroughs, such as Queens and the Bronx, according to The Times. Cabs can be hard to find in those areas, which also lack easy access to public transit.

The total number of New York taxi trips fell 11% to 123.7 million in 2016, and industry revenue dropped 9% to $1.8 billion, according to Crain’s New York Business. Meanwhile, Morgan Stanley estimated that the share of ride-hailing trips accounted for by traditional taxis fell from 84% in April 2015 to 65% in April of last year, as app-based competitors, including Uber, Lyft, and Via, gained market share.

New York is one of Uber’s biggest markets, but its ascendance in the city hasn’t been easy, thanks in part to several run-ins with the Taxi and Limousine Commission.

Taxis likely won’t disappear anytime soon, but it’s clear they’re now operating in Uber’s shadow.

Cost of Ecommerce Fulfillment Errors

The Actual Cost of Ecommerce Fulfillment Errors: Lost Customers, Lost Profitability

With consumer expectations continually on the rise, and the willingness for leading e-commerce retailers to fulfill them, many brick and mortar retailers find themselves struggling to adapt to the speed and complexity of omnichannel order fulfillment. By Michael Womeldorph

For years, brick-and-mortar retailers have carved out their niche by providing excellent in-store customer service.

But for those now entering the e-commerce fulfillment arena – and providing customers with the option to buy online and pick up in stores (BOPIS) – the challenge of preserving their hard-earned reputation just got bigger.

To say that online customers are demanding is an understatement.

One order error is often all it takes for online shoppers to permanently take their business elsewhere.

Retailers risk not only losing their online customers but also eroding the loyalty of their existing clientele.

There’s no question that e-tail giants have raised the bar for e-commerce fulfillment.

Today’s consumers expect nothing less than 100 percent order and inventory accuracy.

Multichannel Shoppers

According to a 2015 study by IDC, multichannel shoppers are 30 percent more profitable over the lifetime of the customer than traditional shoppers, making the potential impact of getting orders wrong even greater.

Here are a few online customer characteristics to keep in mind when considering their importance to your business:

  • They are less loyal than traditional customers
  • They expect fast delivery time and will jump to a competitor if the predicted delivery time is too long
  • They are very price-conscious and can perform price comparisons quickly at no cost
  • They expect a flawless customer experience at every touch point, or they will choose another retailer

Atoning for order mistakes can also cut into retailer profitability. Let’s examine an order pickup scenario that is more common than it should be.

An online customer shopping for a toolset confirms that the item he’s looking for is available at a local home improvement store and will be ready in 2 hours.

The internet e-tailer has changed the game

For more than a decade, traditional brick and mortar (B&M) retailers have faced a new omnichannel reality: internet e-tailers have changed the game. Driven by the consumer preference to order online from any of their connected devices, e-tailers have adapted their business model and distribution networks to fulfill service level agreements (SLAs).

Unlike B&M retailers, e-tailers aren’t concerned about building storefronts; they’re focused on delivering products to customers from their distribution centers (DCs) — providing two-, next- and same-day shipping to meet SLAs.

Consumers have also realized that there’s no substitute for actually seeing, inspecting and buying a product at a store. There’s no waiting or asking questions about quality. When presented with the option to buy online and pick up in store (BOPIS) or pay more to expedite the shipping of an online order, many consumers are making the drive to the nearest store. Thus, store order fulfillment processes have become increasingly complex as they take on their new role of e-commerce warehouse.

An opportunity to differentiate

While traditional B&M retailers have struggled to compete, they have a unique opportunity to give consumers the best of both worlds: online and in-store shopping options. To differentiate, B&M retailers must create an exceptional customer experience at every touch, whether that’s in-store service or the ability to ship directly to regional customers.

But inaccurate inventory levels, process unpredictability and a lack of visibility to labor effectiveness are traditional retailer roadblocks to achieving omnichannel fulfillment success. Increasingly complex store processes can take their toll on the customer experience and squander the opportunity at hand. For example, the inability to efficiently fulfill BOPIS orders — without sacrificing existing customer service levels — can damage the brand and cut into profit margins.

To succeed, B&M retailers need to get serious about omnichannel fulfillment processes by turning their stores into warehouses and enabling DC-like efficiencies.

Once at the store, the shopper discovers that the order was ‘shorted’ the toolset, as there is a disconnect between what the online system thinks is on the shelf and what is actually on the shelf. To make up for the inventory mix-up, the store manager grants the shopper a discount on a larger toolset – making it even cheaper than the original item and reducing or eliminating the profit on the item.

Let’s add up the full costs of this botched transaction: the time the store associate searched for the item; the discounted price of the more premium tool set; and the loss of confidence by a customer who has many other retailer options.

So how can retailers fix this problem?

By combining a voice-based task engine with labor management software, retailers can gain visibility to inventories on hand and add efficiency to all in-store fulfillment processes. By checking the SKUs for each item picked or put away as an item movement occurs, there is greater synchronization between the online inventory and the physical inventory, in real time.

Honeywell Intelligrated’s Store Solutions is designed to do just that. With Store Solutions, retailers can validate the activity of each SKU with every transaction – whether that’s stocking, picking or returns – resulting in a view of actual items in inventory that can drive order accuracy levels to as high as 99 percent.

The benefits of meeting online customer expectations are gaining their all-important loyalty and securing their repeat business. And with the efficient management of labor, retailers can add predictability to all in-store order fulfillment processes.