Consumers are buying more products online. The platforms are improving and consumer faith in online sellers is increasing. There are a number of different models used by retailers, marketplaces and processors selling direct. Your definition of your target market will help you understand where you have the best chance of interacting with the people most likely to buy your products.
Many B2C options are emerging. It is possible to sell your products directly to consumers from your own website or take advantage of increased traffic in online marketplaces.
Options to consider when pursuing a B2C e-commerce approach
If you want to sell your products to consumers there are a number of B2C strategies to consider:
- Selling direct to consumers on your own website
- Selling direct to consumers on a marketplace
- Selling to consumers through social media
Selling to consumers on your own website
Selling direct to consumers online is becoming more popular in many food and beverage categories. Consumers are looking for products online and producers and processors are improving their ability to get products to the consumer. Many food and beverage companies have a website to promote their products and share information with consumers and customers. It is a natural extension to begin selling products from the website.
Your website
Your website should be the cornerstone of your online presence, an opportunity to use photos, videos and content to reinforce your brand positioning. Effective websites are developed for your target market, functional and easy to find. Search Engine Optimization (SEO) is an important consideration when creating and maintaining your website. The proper use of the right keywords in website content, blogs and other information will raise your profile with search engines. This ensures your target market can find you when they search online.
Your e-commerce website will also require an e-commerce platform to enable the transaction of buying online. A successful e-commerce website requires traffic. If you plan to sell your products from your own website, adequate numbers of consumers from your target market are crucial. Every product will have a unique conversion rate and that can also change with the offers you promote. For example, if 45 consumers buy your product and 1,000 potential consumers visited your website, the conversion rate is 4.5%. If your plan is to sell 100 units per week and the 4.5% conversion rate is ongoing, the traffic needs to increase to 2,222 consumers.
Note: The "implementing a direct to consumer e-commerce approach for food and beverages" section has more information about creating and maintaining websites, as well as a detailed description of e-commerce platforms and the requirements to consider.
Benefits of selling on your own website
There are two significant benefits to selling on your own website:
- You can develop direct relationships with consumers who buy your products.
- Consumers buy directly from you so you receive the entire selling price, whereas in other channels there are distributors and/or retailers who capture a significant portion of this profit margin.
The benefits of developing direct relationships with consumers can have a very positive impact on your business. You can learn from these people about why they buy and what else they might buy. You can also test different promotions and special offers to understand what is most effective.
When you are selling directly, you can benefit from collecting the entire retail price for your product. For example, if your product sells for $6.99 in a retailer's store and they are generating a 30 percent gross margin, you are selling the product to them for a delivered price of $4.90. If you sell that same product direct to the consumer for $6.99, you control the $2.09 in margin the retailer is generating. Before you count all of this margin, there are two important considerations: (1) will consumers pay the shipping costs, and (2) what does it cost you to sell the product from your own website? Every food and beverage business will have their own answer to these questions.
Creating your own e-commerce offering is a rewarding and challenging task. There are a lot of components that are required to ensure a satisfying and secure experience for your consumers. There are options to consider in every stage of development if selling direct to consumers and they must all integrate for a seamless shopping experience. There are many benefits to selling direct to consumers. You control the transaction and the relationship with the consumer. You can learn from their reaction to different products and offerings. If you decide this will be part of your business model, the right resources with the right abilities are an important consideration.
The following are a handful of the many examples of food and beverage companies selling direct to consumers online, ranging from small independent producers and processors to some of the largest brands.
- Manitoba Harvest
- A wide variety of products are available from Manitoba Harvest.
- Unilever
- Unilever offers many of their brands online and free shipping over $35.00.
- Wise Bites
- Snacks free from the top 11 allergens are available from Wise Bites.
Selling to consumers on a marketplace
Many food and beverage producers and processors are exploring the concept of online marketplaces to sell their products. The two biggest benefits for food producers are that many of these websites generate a lot of consumer traffic and consumers are more likely to buy because they can make the purchase right on the marketplace website. This version of online selling is popular with consumers because they can find many products on one website, as opposed to visiting several websites for a few products. There can also be some cost savings with online marketplaces shipping products together.
There are many examples of online marketplaces. Some of these websites, such as Amazon and eBay, sell products from many categories. They attract a broad range of consumers and there is always the possibility of selling your product to a consumer who visited the site for a different product. Other online marketplaces are more specialized; for example, Localline.ca attracts consumers looking for local food products, often in a certain geographic area, while Well.ca specializes in natural health products and some drug store categories.
Marketplace websites rely on online sellers to list products for sale because that drives traffic to the website. Consumers want to see what is available and shop online. Most online marketplaces charge fees to the product sellers, with the premise being they are bringing potential customers to them.
Retailers such as Loblaw, Walmart and Target created online marketplaces. They offer the items listed in store, plus other items from the same suppliers or even suppliers they do not carry in their stores.
Benefits of selling on a marketplace
Many online marketplaces experienced significant growth in 2020. For example, in the Amazon.com announcement of financial results - February 2, 2021, Amazon reported an annual sales increase of 38 percent year over year. This is equivalent to an increase of US$105.6 billion in one year for total sales of US$386.1 billion.
One positive characteristic of online marketplaces is the number of potential customers on these websites every day. These are consumers who have made the decision to visit the website and at least explore the offering. There is no guarantee they will buy, but you do have the opportunity to capture their attention and sell your product. There are a lot of similarities between online marketplaces and getting listed in a brick and mortar retailer. In both places there are many consumers going past your product and they have access to buy. The consumers are there and it is part of your job to convince them to buy.
Factors to consider when selling on a marketplace
There are a number of factors to consider when exploring the marketplace channel:
- The exposure your product will receive.
- The resources within your business to support this channel.
- The cost of selling on the marketplace.
- The geography of consumers you want to reach, and related regulations to reach them.
- The options available to fulfill and ship orders.
Ensure your products will receive exposure and can be found
Some online marketplaces are very large and there will be considerable work required to get the exposure to your target market. Each online marketplace has their own method of ranking products and determining which items get the best exposure. Metrics that can impact this include sales, searches and when you pay extra fees to promote your product on the site. It can be beneficial to understand the metrics used to rank your food and beverage product within the category so you can put your efforts and resources into the areas that will generate a payback.
For each marketplace you are considering you could perform a brief category review. This would include searching on the website for any products that would compete with yours. You can assess all the products in your category to understand their offering, pricing, promotions, shipping costs and any other factors that might influence the consumer. This is where the consumer will make the decision to buy, so it is important to understand the other products yours will compete with. When you are reviewing your competition, there is a lot of information available about products other than just item and price. Read reviews and also see how the company responded to the comments.
Keywords and product descriptions are very important on marketplace websites. Often there are many products so consumers need to be able to find your food and beverage products easily. To improve the possibility of consumers finding your products, proper keywords can be the difference. Consider what words your target market consumers will use to type into the search, when looking for your products. These are the words to enter first. In some online marketplaces, they give you the ability to check the effectiveness of your keywords. This is a powerful tool you can use regularly to ensure consumers are able to search and find your products.
Your product description is your opportunity to explain your product and the benefits it delivers to consumers. You can include any certifications (e.g., certified organic or certified gluten free), points of differentiation, special ingredients, unique production process or other reasons consumers would want your product. Your product description can be a written description of what you would say to a person if you were interacting with a consumer during an in store demo. The language is most effective when it resonates with consumers in your target market and reinforces the top reasons they will buy.
Online marketplaces depend on good quality photos to illustrate your food and beverage product. Most often they want the photo on a white background and you usually have the option to show all sides of the packaging. This can be important if some of your key messages are on the side or back of your packaging. Consumers expect the delivered product to look identical to these photos. There can be size parameters for the photos you upload which you can check prior to having the photography done or completing it yourself.
Although your product is listed on the marketplace, ultimately it is the seller's responsibility to generate sales for products. Integrating marketplace links into your online marketing can drive traffic to your listing and increase exposure for your products.
Allocate the required resources to maintain the relationship with the marketplace and its consumers
Selling on an online marketplace is like having a separate customer to manage. The initial set up for your food and beverage business and listings of products need to be done, but the work does not finish with these tasks. There are a number of components to the relationship that require attention from your business.
Some online marketplaces have metrics they expect your business to achieve. These are usually related to order fulfillment, returns and other metrics of consumer satisfaction. If you are the only company selling the products in the marketplace, the pricing is really only impacted by what you do. If there is the possibility of distributors or wholesalers buying your product and reselling in an online marketplace, then monitoring the products and the pricing is important.
One feature of many online marketplaces is consumer reviews. This is the opportunity for consumers to rate products to help other consumers decide if they want to buy. Reviews are a great source of consumer research. When consumers rate your food and beverage product favourably, other consumers are more likely to buy. However if the reviews are not favourable, it is worthwhile to determine what is causing the issues and find solutions. A regular check of consumer reviews will ensure you understand how consumers see your products.
Many online marketplaces provide the opportunity to offer discounts, online coupons and other promotions. These will need to be initiated and executed, as they would be with a bricks and mortar retailer. One benefit of selling online is that you can measure the effectiveness of your special offers and promotions. Try different discounts or offers to understand consumer response and determine what delivers the best return. Also try different initiatives on social media to encourage consumers to visit the online marketplace, then measure the results. This is sometimes referred to as A/B testing; they expect you to try different options and measure the effectiveness. For example, use a close up photo of your product in one post and a different photo with a person in another post. Compare the results to assess if post A was more successful than post B. Consumers can react differently to food and beverage products online so having the resources to understand and assess the results can help with future planning.
Inventory management will impact your online sales results. The right amount of inventory in the right place for shipping will ensure you can fulfill orders efficiently and get your product to consumers when they expect it. If you fulfill orders within your own business, you need the products, shipping materials and timely delivery or pick up with your shipping partners. If you choose to have orders fulfilled and shipped by the online marketplace, there is a requirement to have the right amount of inventory in their warehouse when it is needed for shipping. Forecasting demand to meet online marketplace orders can take some time, depending on how many SKUs you are selling and if there is any customization to your orders.
Investigate the costs of selling and the marketplace's business model
Online marketplaces need products listed to sell, however they also need to generate fees to support their business model. It is often free to develop company profiles and list products. The fees are attached to sales and other features the online marketplace can offer. When you are investigating the fees, review any different levels for online sellers. A premium level can include lower per transaction fees and also access to some sales and other metrics that can help you in your business.
Fees related to sales are often a percentage of sales, with the possibility of a per unit fee as well. To calculate the fees you will have to pay, forecast the sales you expect on the marketplace and apply the fees. A sensitivity analysis with sales below, at and above your target will provide the best assessment of what the fees could be.
As you review the fees, it is beneficial to explore the options available for added features. Some of these might be beneficial to your food and beverage business while others might not be. When you are selling B2C, there are many consumer behaviour trends you can learn from that affect sales results. For example, if you work with certain influencers and they post early in the day, one feature is sales per hour, so you can determine if the influencer does impact your sales. Added features can also include profiles of consumers buying your products and even the first product they searched for on the marketplace. Online selling can include a lot of data to allow you to make decisions about where to invest time, resources and money in your future programs.
Navigate the regulatory and legal elements of selling your products to international consumers online
When you consider the different options in this channel, the geography of the consumers will need to match the geography you are able to service. Food and beverage products can have limited shelf life or requirements for refrigeration which can limit shipping time. Your entire sales and marketing strategy is most effective when developed to support your products in the geographical area you are able to service.
Selling online provides the opportunity to sell into many markets, but does not change the regulatory and other requirements needed to export your products from Canada or be imported by another country. If you choose to ship your products to other countries, there could be regulations and requirements such as those for food and beverage labelling, ingredients or food safety. It is the responsibility of the product seller to ensure these are in place. For more information, visit the Canadian Food Inspection Agency:E-commerce (food, plant and animal)
There can also be tax implications for exporting from Canada in selling into different countries. For example, the United States is the largest market where many of the shipping options are integrated. Regulations and taxes can change from state to state, so online sellers must review these prior to selling into these markets. For more information, visit:
- Canada Revenue Agency - How the GST/HST applies to imports and exports
- S. Food & Drug Administration - Importing Food Products into the United States
Fulfilling and shipping your orders
One of the biggest challenges with food and beverage can be order fulfillment and shipping.
When your products are listed on an online marketplace you have three options for order fulfillment and shipping:
- Select orders and ship them yourself
- Outsource fulfillment and shipping to a Third-Party Logistics (3PL) company
- Leverage the warehousing and shipping options available through the online marketplace, such as the Fulfillment by Amazon (FBA) service
There is no right answer applicable to all food and beverage products when you are considering order fulfillment and shipping from online marketplaces. Design the most efficient solutions for your business.
The right solution for order fulfillment can shift from one model to another as your business changes. If you decide to sell direct to consumers from your website and fulfill and ship your orders, consider using the same solution for your online marketplace sales. Depending on your anticipated volume and resources, in the early stages this might be the best option. This is an opportunity to assess the true cost and you will have more flexibility, for example, if you want to add trial size products or other marketing materials. Once you have orders selected and packed, in most cases you will require a third party for shipping. If you decide to sell on Amazon and fulfill your own orders, they refer to this as Fulfillment by Merchant (FBM or Merchant Fulfilled Network (MFN). Amazon will charge the shipping fee selected by the consumer and credit this back to you.
If you choose to select and ship orders within your business, processes are required for accurate orders, timely notifications of orders from the marketplace and the ability to print the order and shipping labels. Similar to orders from your own website, it is beneficial to tie order fulfillment to your inventory management system. When you select a product for an order, inventory should be depleted to ensure you know when you need to produce more product.
If you do not have the capacity or desire to select orders you might consider outsourcing this function to a 3PL company. They can offer economies of scale and more efficient physical space to select products and prepare them for shipping. This adds one step in the process in getting the order from the marketplace to the 3PL.
If the online marketplace offers a fulfillment and shipping service, this can be a viable option. They should have economies of scale which can be a core competency in their business. The fees should be clear prior to listing your products and compare to your projections for this within your own business.
One consideration in food and beverage is any unique requirements you have for your products. If they need to have refrigeration or time sensitive shipping, this can become more complicated if the marketplace is performing the task.
Online marketplaces offer the benefit of consumers visiting one location where your product is for sale. Marketplaces have expectations for execution in areas such as order fill rate and returns because consumers see that they are buying from the online marketplace, not each individual seller.
Selling to consumers on social media and through social commerce
Selling on social media has become a channel unto itself. Applications such as Facebook and Instagram were originally designed to provide people with an opportunity to communicate and share information online. They have evolved into social platforms where many products are promoted and sold. There are so many consumers on these social media platforms that it can be a good channel to promote and sell food and beverage products.
Some consumers are willing to belong to online communities within these platforms, where companies can share information, recipes and sell products. There are also many examples where consumers elect to be within the online community of influencers. These consumers are interested in what the influencer has to share and that can include food and beverage products.
Factors to consider with social commerce
The first consideration when you assess the opportunity to sell your food and beverage products online is to define your target market. Most social media platforms have segments of the population they are most likely to attract. The following Canada Post blog includes some insights about users on different social media platforms: The most effective social media platforms to target your market.
There are different social media platforms where you can promote and sell your products. Four of the largest are Facebook, Instagram, Pinterest and TikTok.
You might already have been developing an online community within some of these platforms. Within these communities you can learn more about your target market. Although there is always overlap, the social media platforms appeal to specific generations. Once you identify where you are most likely to find your target market, explore the options to promote and sell your products. If you are looking for some demographics and other statistics to help you determine which social media platform to focus on, you will find many in this blog from Hootsuite: 100+ Social Media Demographics that Matter to Marketers in 2021.
Selling on social media
There are two models of e-commerce on social media platforms. On Facebook and Instagram, you are able to buy within the social media application or visit the seller's website. On Pinterest and TikTok, you leave the social media application to go to the seller's e-commerce site. Selling on TikTok is the most recent opportunity for online sellers in social media.
In the table below you can explore some of the characteristics of selling on the different social media platforms.
| Application | |||
|---|---|---|---|
| Platform | Facebook Shop Facebook Page Shops | Instagram Shopping | Shop tab on your Pinterest Profile |
| Cost | Free to set up | Free to set up and you must have a Facebook account to connect. | Free to set up |
| Requirements | Must have a commerce account in Commerce Manager and be a Business Manager Admin with Manage catalog permissions | Must be set up as an Instagram business account and connected to a Facebook business page. | Must have a Pinterest business account and a claimed website. It does not host your catalog, your data source with your available products is hosted. |
| What can you sell | Physical goods | Physical goods | Physical goods |
| Set up | On Commerce Manager or using an e-commerce platform | Connect to a catalog built in Facebook or a Facebook Partner e-commerce platform | Connect to an existing e-commerce platform with product catalog |
| Fees | Facebook Shop fee order processed through its in app checkout - 5% on every order or US$0.40 flat fee on orders $8.00 or less | Instagram shop fee order processed through its in app checkout - 5% on every order US$0.40 flat fee on orders $8.00 or less | Connects to outside platform |
| Customization | Customize your shop in Shop Builder. Select collections, feature best sellers | Customize your shop. Select collections, feature best sellers | Pinterest is a visual search engine, a focus on SEO within the app is important to expand reach. Organize pins into catalogs or boards. |
| Shop | Facebook Shop tab on your Facebook page | Product tag on a post or product sticker in Instagram Stories will take them to a product description page. Shop button will show all shops of the accounts the consumers follow. | Explore the shop set up on profile or tag images with buyable pins. Rich pins show price information to install buttons. Shop the Look pins allows direct link to product page. |
| Note: E-commerce is changing frequently, fees and other features change often. Be sure to check all applications for up-to-date information. | |||
Paid advertising on social media
Food and beverage products are more consumable than other categories. Photography and videos are prevalent in these platforms and they often can be an integral part of promoting and selling your products. A recipe with a photo or video to illustrate the process can help consumers make the decision to buy.
In selling on social media platforms, you can learn a lot about the consumers buying your products. This might not be a definition of your total target market because it is limited to the users on the particular social media platform. If you decide to participate in paid advertising on the platform, you can use the metrics from who is buying to target this group or use a different approach to target users who are not currently buying.
Social media platforms provide the opportunity to promote products and brands. Advertising on Facebook continues to increase. For example, in Facebook's full year results for 2020 the company collected over US$84 billion in 2020; an increase of 21 percent over the previous year. In the three months ending December 31, 2020, their advertising revenue increased 31 percent.
If you decide to use paid advertising on social media, there are many demographics you can focus on. You can also decide to target your audience based on geography. Advertising rates vary depending on the amount of users your profile includes. For example, a paid advertisement on Facebook to women in Toronto would cost significantly more than a paid advertisement to women aged 35 - 49 in Toronto who have children.
As with all other e-commerce channels, considering your order fulfillment and shipping is important. If you link to your existing model, this can be a positive in terms of increased sales with the same fixed costs. If you do not have an existing strategy for order fulfillment and shipping, you can forecast your sales and find the best option. This can include doing it yourself if it is manageable or consider outsourcing it to a 3PL.
Summary snapshot: Business-to-Consumer (B2C) e-commerce for food and beverages
Options to consider when pursuing a B2C e-commerce approach
- Selling direct to consumers on your own website
- Selling direct to consumers on a marketplace
- Selling to consumers through social media
Selling to consumers on your own website
- Your website is the cornerstone of your online presence
- Your website will need online traffic to generate sales
- Selling on your own website will allow you to generate more revenue per unit
- You are able to develop relationships with consumers
- Understand and allocate the necessary resources
Selling to consumers on a marketplace
- Online marketplaces generate considerable consumer traffic
- Consumers are more likely to buy within the marketplace environment
- You have the ability to sell your products to consumers who might visit the site for some other product
- Your product description, keywords for searches and photos will generate exposure for your listings
- Online marketplaces require resources within your business to ensure you maximize the opportunity
- There are fees to sell in this environment that will reduce your margin
- There can be different regulatory requirements for markets you are selling into
- There are options to consider for order fulfillment and shipping
Selling to consumers on social media through social commerce
- Online networking platforms are evolving into e-commerce platforms
- Some consumers are willing to join your online community within a social media platform
- Consider your target market and where they are most likely to be on social media to ensure you are investing in the right platform
- If you have an existing online community within a social media platform you might be able to sell to them
- Some social media platforms enable you to sell within the platform whereas others will link to your e-commerce offering on your website or a marketplace
- Paid advertising on social media can be an effective tool to reach your target market