Stepping up omnichannel marketing
Online-dominant companies are presenting formidable competition for physical retailers as consumers seek broader assortments and home-delivery convenience. This is particularly true for heavy, frequently purchased items like cat litter and dry dog food.
In addition to eroding profits and market share, e-commerce decreases destination purchasing and eliminates many of the impulse buys that drive categories like toys and treats in stores.
In 2017, Statista.com said online pet sales grew by about $3.4 billion, compared with growing by about $317 million in physical stores. Much activity came from Amazon and PetSmart’s Chewy.com. Momentum continued into 2018, with Amazon generating nearly $800 million in pet products sales during the first half alone, a 30%-plus increase over the same 2017 period, One Click Retail said.
“This puts everyone in a market share battle,” Jim Okamura, partner at McMillanDoolittle, said. “It’s forcing retailers that can’t compete on broader selections to choose categories and effectively use space. That’s why they’re going towards higher margin specialty items and private label. It’s not unlike what’s happening in other retail categories.”
Astute retailers are fighting back. In addition to offering premium products, they are improving bricks/clicks integration and partnering with Instacart and others to promote and efficiently deliver online offerings.
“Lines between physical and online shopping continue blurring,” Jean Broders, senior brand manager at World’s Best Cat Litter, said. “Retailers are stepping up their game by improving websites, offering easy online ordering and in-home delivery or in-store pickup. They’re becoming more sophisticated in their capabilities and with service partners.”
Some, including Publix, Costco, BJ’s Wholesale Club, CVS Pharmacy and Kroger, offer two-hour online home delivery powered by Instacart, thus catering to the convenience factor.
Yet retailers are challenged in making consumers aware of expanded online offerings. Kroger runs online and TV ads; Publix promotes products across channels. Still, few have cross-channel programs targeting customers with specific offers. Hence, the in-store customer who sees cat bowls in five designs may be unaware that the chain’s website features 12.
“It’s about driving traffic efficiently across channels,” Okamura said. “The old big-box model doesn’t suffice. Consumers don’t shop nice, linear paths. How do you place yourself where people get the message?”
The key could involve better use of big data, CRM systems, AI and other technologies that pinpoint and target individual buying patterns. “The beautiful thing for food, drug and mass is their very rich data and insights, be it loyalty or other rewards programs,” Jon Weber, managing director at LEK Consulting, said. “There’s lots of information at their disposal and much you can do to understand consumers with a rich CRM system. They must also market extended online offerings at shelf or via digital and circulars. Otherwise, consumers won’t get it.”
But for now, Okamura said, “every retailer is at a different stage of digital transformation.”