Get them to crave candy: With curbside pickup growing, retailers are looking at ways to ignite sales of impulse-driven merchandise
When COVID-19 hit the United States in March 2020, food, drug and mass retailers ramped up their fledgling curbside pickup and delivery businesses at breakneck speed. The virus raced across America, causing total online sales of food and CPG products to skyrocket from $1.2 billion in 2019 to $97.7 billion in 2021. Curbside pickup, the most rapidly growing online segment for these categories, now represents 45% of channels’ e-commerce sales, according to a January 2022 Brick Meets Click/Mercatus Grocery Shopping Survey.
Despite such growth, retailers and suppliers reacted so quickly to meet consumer demand that they had little time to test concepts and fine-tune digital marketing strategies. Many impulse-driven CPG categories have suffered, since e-commerce lacks the endcaps, special displays and at-register merchandising that propel in-store, add-on sales.
Now companies are seeking effective ways to grab shoppers’ attention, particularly in impulse-driven segments such as candy, snacks, single-serve beverages, magazines, new products and seasonal goods. Consequently, AI-generated product recommendations are growing increasingly sophisticated and personalized as are banner ads, digital coupons and loyalty program tie-ins. Other strategies include placing free samples in online orders and launching interactive, online cooking forums where shoppers can immediately purchase the products.
“Retailers weren’t ready for this massive influx, which came fast and furious, with tens of millions of households buying online for the first time,” said Rob Wilson, managing director at L.E.K. Consulting. “Traditionally driven by in-store promos and displays, impulse categories are hurting. Retailers were at the basic starting point with curbside. Now it’s about getting consumers to spend more and make online more profitable.” (One supplier, Pharmacare, noted that 45% of product movement at Target now occurs outside stores.)
According to L.E.K. Consulting and OneSpace.com, online orders are typically dominated by bulk and staple items, impeding profitability. Online shoppers are 20% less likely to view new brands, half as likely to be influenced by packaging or point-of-sale, and half as likely to consider buying a different brand.
But consumers have embraced curbside pickup’s convenience, with popularity expected to continue post-pandemic. “It’s obviously the fastest growing channel for many retailers,” said Stefanie Kruse, vice president of digital commerce and omnichannel at Walgreens. “Customers have come to expect this convenience. Retailers will continue investing in capabilities and technologies to strengthen it.”
More Tailored Recommendations
Online product suggestions and promotions are the most popular marketing tools for driving impulse purchasing. Buoyed by AI, big data and other tools and technologies, retailers are better tailoring offers for specific consumers and placing them on certain pages of e-commerce sites.
“Companies are investing heavily in digital transformation,” said Andrew Csicsila, a managing director in the consumer products practice at Alix Partners. “It’s AI-driven in how they’re thinking about products and buying habits. They’re quicker with data and there’s more available. This lets them identify which consumers should want to shift brands and try things.”
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David Ritter, a managing director in Alvarez & Marsal’s Consumer Retail Group, said retailers are using new data sources like biometrics. Inputs into data models are broadening, making outputs of modeling efforts — and recommendations — more accurate. “And Kroger started syndicating its own data, which is valuable for CPGs,” he added. “Most retailers use Nielsen or IRI.”
For retailers, the personalization journey is ongoing. “Now it’s about getting smarter,” Kruse said. “We’re constantly improving and reiterating technology. Personalized recommendations are very effective if you have strong customer data and can leverage it.” Data sources include My Walgreens, Walgreens’ loyalty program. “Loyalty is a huge part,” she added. “The more you can target and personalize recommendations and cross-selling, the more effective.”
Recommendations appear in multiple locations, including digital carts. Careful not to bombard people, Walgreens backs initiatives with extensive testing. “It’s about [targeting] the right person, time and place and being one-to-one,” Kruse said. “We make sure we’re not showing irrelevant recommendations. Before introducing them, we test their impact on ordering, sales and conversion. We’re particularly careful with discreet, sensitive categories.”
Retail Media Networks
Walgreens works with suppliers on digital initiatives via the Walgreens Advertising Group, or WAG. Launched in 2020, this in-house ad agency uses data and technology to help deliver personalized e-commerce experiences. WAG’s multiple mediums include digital, social media, CTV and OTT, and traditional media.
Kroger, Target, CVS and Walmart have also launched media networks in recent years. In addition to driving online sales, retail media networks capture consumers where they shop and deepen supplier relationships. This year, eMarketer predicts U.S. digital retail media ad spending will jump 31.4% to $41.37 billion.
With elimination of third-party cookies, networks should become “more important to brands and advertisers,” said Laura Kennedy, a senior lead analyst of consumer and retail at CB Insights. “There’s an online market shift. Media networks will play a bigger role.”
For those without proprietary media networks, Eversight can help. Eversight’s AI-driven software lets retailers and suppliers micro-test thousands of digital promotions with real shoppers. Many Eversight customers aim to grow new channels and improve add-on sales. “They want to know what matters to their shoppers,” said Alex Pfeffer, senior marketing manager. “Is it free shipping? Adding a Coke? We can quickly experiment to see what matters.”
Eversight also experiments with monetary promotions. “We version campaigns around different offer structures,” co-founder David Moran said. “They can be around units, dollars or time-based components.” The company can test graphics and coupons. And software can integrate into retailers’ loyalty data, sending targeted offers, he said.
Digital Coupons and Banner Ads
Targeted digital coupons also drive CPG sales. In April 2021, redemption frequency overtook that of print circulars, according to L.E.K.’s Future of Ecommerce in Food & Beverage Report (December 2021). Digital load-to-card coupons comprised 4% of distributed coupons, but redemptions increased to 29%. Free-standing inserts comprised 90% of distribution and 28% of redemption. Boomers are the fastest growing users.
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Stephanie Rubin, customer success director, North America at eFundamentals, said Kroger’s and Ralph’s e-commerce sites sort online coupons so that “ones most relevant” to particular customers are at the top of the page. “Coupons can also be sorted by popularity and expiration date. It’s very personalized.”
Supplier-paid banner ads work well, too. Success revolves around placement, said Rod Sides, vice chairman, U.S. retail and distribution leader at Deloitte Services. “They can also be good brand builders.”
Supplier banner ads produced through retail media networks utilize such strategic placement. “They can be very effective,” Kruse said.
Rubin recommends tailoring banners around events and seasons to maximize impact. eFundamentals’ category-level banner analytics platforms automatically track activity at category level across multiple retailers. Customized data can support future media planning, measure ROI effectiveness and improve banner ad performance.
Art Rowe-Cerveny, vice president of marketing for supplement supplier Pharmacare US, has used category-specific placement to attract consumers. “If someone is buying cough medicine now because they’re sick, it’s more effective to place banners in the category page than on the main page or page highlighting the overall segment — although it’s more expensive,” he said. “Targeted displays with very targeted keyword searches also work well. Walmart and Target do this. Not all retailers do.”
Some CPG companies have used banner ads involving online games, including Nivea, Wheat Thins and Procter & Gamble. While strategies vary, the idea is to offer free games — along with points and ascendance to new levels — to consumers willing to view ads or videos. “With traditional digital ads, you bid for position,” Sides said. “These are cost-per-action.”
Last Minute Add-ons
Some experts suggest driving sales by offering “last minute” vendor-sponsored items at pickup. When a customer arrives in the parking lot and checks in via a retailer’s app to retrieve a curbside order, a limited menu of 10 to 15 items would appear for immediate purchase. The pickup order storage area would have these items in stock for curbside attendants to add to bags last minute. Products could be new, impulse-driven, seasonal or for immediate need, e.g., batteries, candles and flashlights, if there is an impending storm.
Sean Burke, a retail industry lead and associate partner at Clarkston Consulting, outlined barriers. “Last minute add-ons would depend on what stores carry and how they manage inventory. Stores aren’t optimized for curbside pickup; they can’t be flexible. There’s a cost. And would you be setting up associates to fail if they can’t find them?”
Burke suggested erecting parking lot screens for video promotions like convenience stores do at gas pumps. These could be general or targeted when a customer opens the app to check in.
Still, some add-ons are possible. This fall, customers will be able to order Starbucks beverages via Target’s app when they arrive to retrieve Target curbside orders. Beverages will be delivered to cars. The service will be expanded to more stores later this year. Target is also implementing drive-up returns. Perks are intended to improve the overall experience and make Target more competitive with Walmart. “It’s pretty compelling,” Ritter said.
Despite technology talk, experts said Target, Walmart and Kroger are among the few retailers whose online targeted marketing is truly sophisticated. Others are getting there. “Retailers with strong loyalty programs can probably do the best job,” CB Insights’ Kennedy said. “While much is suggested, I haven’t seen a lot of innovative stuff, although grocers are getting up to speed.”
Burke said some retailers still use suggestions involving related products. They are not applying advanced data that makes product recommendations based on factors such as individual shoppers’ demographics, location, history and purchasing frequency. “There’s levels to the game.”
Without COVID-19, it could have taken five years for curbside pickup to reach its current sales level. Having rushed ahead, companies are playing catch-up. Hence, many strategies that go beyond basic fulfillment are experimental. “We’re seeing movement beyond just making curbside easy, simple and fast,” Kennedy said. “They’re trying to generate more engagement to build baskets.”