Implementing a direct to consumer e-commerce approach for food and beverages: A step-by-step model

There are four basic components you need to consider as you begin selling your products direct to consumers on your own website:

• Establishing your website and online presence
• Understanding your potential consumers and consumer traffic
• Selecting an e-commerce platform
• Fulfilling and shipping orders

There are many more options and additions you can explore, but these four are the core of your ability to sell online.

Establish your website

The core of your online presence is your website. This is your opportunity to showcase your products, share insights to encourage people to buy and conduct online transactions. There are a wide range of investments you can make in websites, from developing the site yourself with your own images, to hiring a professional web designer who works with photographers, designers and copywriters. A number of website design applications are listed in the table below. The best solution is one that supports your brand and your products, as you have defined them.

Food and beverage are exciting topics for websites because there are so many things you can share with the marketplace. You can help consumers understand how to use your product and get all of the benefits it has to offer. People are eating and drinking every day so there are often many different ideas and suggestions you can share.

The opportunity and purpose of your website

Websites can serve many purposes. The most effective support your brand positioning, provide a reason for target market consumers to visit and stay on the website and ensure consumers have a positive shopping experience. When your website design and functionality resonate with your target market, you have the best chance of success.

This is your opportunity to tell your story and explain the benefits of your products. Consumers are investing their time to visit your website, so you want to develop these relationships. Photos and video can be very effective to reinforce your story and how your products are positioned.

When you do get consumers to visit your website, provide them with many reasons to stay there. This helps you build a rapport with them and it is your opportunity to deliver value. This value can be in the form of information, how to use your products or some of the unique qualities your products deliver.

One benefit of selling products on your website is that you can learn a lot about the people buying, or not buying your products. There are a number of metrics you can review to understand consumer behaviour. It is possible to compare one offer to another to determine which is most effective. When you sell on your own website, you can learn from the results and invest in promotions on other websites you know have been more successful on your own. The following insights from Google explain some possibilities: Back to Basics: How to measure the value generated by your digital marketing efforts.

Websites need to be current and if they do not change, consumers will not be as interested to keep visiting them. This can be one of the most effective means of getting prospective buyers engaged with your offerings.

Building your website

Prior to developing your website, you need a domain name, which is essentially your address online. There are a number of applications that access a common database of domain names. Once you decide what you want your online address to be, the next step is to search one of the applications to purchase the domain name you desire. The fees for domain names can range from a few dollars to thousands of dollars, depending on the value assigned to the online address. You can search any of these applications to determine if the domain name you prefer is available and at what cost. Once you confirm the domain name, also known as "claim" the name, you can begin to build your website.

There are many options to build websites. As above, you can build your own, hire a web designer who uses a public platform or hire a web designer who will build a custom website unique to your needs. The following table summarizes some of the choices when building your website.

Understand your potential consumers and consumer traffic

E-commerce is exciting because there are so many possibilities to sell your products. millions of consumers are online all the time and many are buying products. It is also a very crowded space with new websites and e-commerce offers being added every day. To deliver the sales you desire you need your e-commerce website to be a destination for online consumers.

There are different strategies to develop an online community and encourage visits to your website. Some producers and processors rely on social media while others will maintain their own email or phone (for texting) list. The right strategy for your business will depend on your target market, products and the buying decision. For example, if you need to sell a lot of products to meet your targets, you might consider working with a high profile influencer to encourage a lot of consumers to visit your website. Recipes are great opportunities to drive traffic to your website. Consumers are eager to find new and interesting ideas with food and beverage products. With more millennials shopping in grocery stores, this generation looks to social media and other sources for information about products they might purchase.

Selling online is similar to other channels, in that there are a number of potential customers and a percentage who actually make the decision to buy. Every product will have its own conversion rate of website visitors to actual buyers. This is an important metric to understand because when you know your conversion rate and the sales you have planned for, you can calculate the number of website visitors you need to generate those sales. Conversion rates change with the value proposition and other factors, so it is a metric to track regularly. 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.

Select and implement an e-commerce platform

Online consumers need a place to buy when they visit your website. It is possible to construct your website with e-commerce capabilities that are part of the platform you select or design a website with an integrated e-commerce platform. As you explore the options of e-commerce platforms, it is beneficial to have an idea of the business you want to develop.

Each e-commerce platform has its own capabilities; find the best fit with the business you plan to build. For example, if you are going to start with a few items and plan to offer a basic online store, you could select one of the less expensive options that allows you to explore the online channel for a small investment. If you plan to sell more products to consumers from different countries with different currency options, you will need an e-commerce platform with more capabilities that likely costs more. Similar to some other choices to make when selling online, there are a number of factors to consider.

Factors to consider when selecting your e-commerce platform

One consideration is how the e-commerce platform is hosted. This is the online engine that powers your e-commerce application. If you want to keep your online business model simple, opt for an option that includes website and e-commerce hosting from one place, for one fee. If you believe there are benefits, such as advanced analytics available from a separate hosting provider, there are platforms that are designed for this.

Cost of the service is another factor that can influence your decision. When you sell online, there are three fees to be aware of within your e-commerce platform:

1. fees for the platform and any additional features
2. payment gateways
3. transaction fees

If you decide to integrate an e-commerce platform, you can choose free open source software or one of the applications that charge a monthly fee. Two of the free open source software options are Magento or WooCommerce. You can also opt for one of the platforms that charge monthly fees such as BigCommerce, Shopify or Squarespace. If you decide to select one of the free open source applications there are still fees for obtaining a URL, hosting, and SSL certificates. Each of the platforms that charge monthly fees offer different pricing levels and as you increase your monthly fee you receive more services. There are many extra features and some can be very beneficial to your business. In the previous table you saw a breakdown of some features offered within each platform. This is another decision where it is beneficial to have a plan for your e-commerce business. For example, you can assess if inventory management or currency conversion are options you should select and pay for or not.

One feature that offers benefits to many online sellers is the "abandoned cart" feature. In platforms that include this feature, you are able to connect, usually via email, with consumers who have abandoned items in their virtual shopping cart on your website. This can add to your sales because these online shoppers visited your site, selected items and went as far as putting them in their virtual cart. For example, if shipping fees are not disclosed early on or some other reason, they decided not to complete the purchase transaction. A simple reminder will sometimes entice them to buy and your investment in the abandoned cart feature will deliver a return.

Payment gateways are the applications that allow the online shopper to pay for the transaction. Some e-commerce platforms allow you to connect with many payment gateways and others are more restrictive. Shopify, for example, allows you to connect to more than 150 different payment gateways whereas Squarespace is limited to Paypal and Stripe. If you believe your target market for online shoppers will not be restricted by only Paypal and Stripe, then Squarespace can work in your business. If you plan to sell into markets where these are not as broadly accepted, then consider an application where more payment gateways are available. Payment gateways charge processing fees which add a cost to your business.

Similar to the monthly fees, your transaction fees can range from zero to a percentage of sales. Some platforms such as Shopify give you the option to select their own payment gateway or use a separate plan; they charge a fee plus you pay the payment gateway processing fees. In the table below, the different fee structures are summarized.

E-commerce platform security is an important issue. Consumers are concerned about information theft and overall confidentiality when shopping online. This is not an extra option, it is what they expect. Most e-commerce platforms support security during the online transaction, however updates can be required to maintain the latest level of security. If you select one of the open source software options, security is a factor you have to monitor to ensure you have the most up- to-date patches from your provider.

Options for e-commerce platforms

The table below includes some options to consider for e-commerce platforms in your food and beverage business. These applications update their offering, pricing and features so it is beneficial to review the links and select the option that will deliver the best fit, features and cost for your business.

Creating product listings on your e-commerce platform

After you have selected the right e-commerce platform for your business the next step is to implement and create your product listings. There are three components to a good product listing:

1. Great product description to entice consumers
2. Clear photos from all angles
3. Product reviews or testimonials

When you write product descriptions, explain the benefits of your products. Include any certifications (e.g., certified organic or certified gluten free), points of differentiation, special ingredients, unique production process or other reasons that will entice consumers to buy.

Consumers appreciate good quality photos that illustrate your product. They expect the product they receive to look identical to these photos. Most product photos are on a white background with photos of all sides of the product included.

Online shoppers look for reviews from other buyers or testimonials to reinforce their decisions to buy. Include these with your product descriptions. Some platforms provide the opportunity for consumer reviews and maintain an updated list for others to see. Online sellers must monitor these reviews carefully to ensure they are positive. They can also be a good source of consumer research about the product, for example, if a consumer suggests a different size.

Some e-commerce platforms provide the opportunity for you to create an online storefront. This is a destination within your website that is more consumer friendly than just a list of items for sale. The different themes listed in the table above are examples. These platforms evolve quickly and it is beneficial to review their offerings when you are making decisions.

Depending which e-commerce platform you select, you can generate a lot of information to help you operate your online business. The amount of information can be overwhelming, so it is a real benefit to have a person in your business assigned to monitor the metrics and develop conclusions from the results. For example, if you offer a bonus product with purchase and see a 20 percent sales increase, this might be more beneficial than a 10 percent discount that generates a 15 percent sales lift. You would want to assess the cost of the bonus product relative to the discount and any additional shipping costs associated with the bonus. Analysis of the results can be very helpful in determining what strategy to pursue into the future.

Fulfill and ship orders

Once you have your website built with an e-commerce platform and consumers ordering products, you need to select the products they order and ship the products to them. This can be as simple as selecting one shelf stable product and shipping it, to something as complex as selecting multiple refrigerated or frozen products that fit in different boxes. Your solution for order fulfillment and shipping can be designed to deliver the most efficient solution. For most options of selling food and beverage online, this component of your business model needs to be effective and efficient.

In-house order fulfillment vs. Third-Party Logistics (3PL)

One decision is whether you will perform the order fulfillment yourself or contract the services of a third-party. In most cases you will require a third party for shipping. The right solution for order fulfillment can change as your business changes. In early stages, the best option might be to select the items and prepare them for shipping within your business. This is an opportunity to assess the true cost and you have more flexibility if you want to add trial size products or other marketing materials.

The most important components of order fulfillment if you choose to do this within your business are to have accurate orders, timely notifications, the ability to print the order and to print shipping labels. It is also beneficial to tie the order fulfillment to your inventory management system. When you select a product for an order, inventory should be depleted to ensure you understand your available inventory on hand and when you need to produce more products.

When your business grows you might consider outsourcing this function to a 3PL company. They have more economies of scale and more efficient physical space to select products and prepare them for shipping. In this Canada Post article there are some good insights to selecting the right 3PL partner: Is your business ready to outsource fulfillment? We asked the experts.

Some e-commerce platforms have integrated order selection and shipping. This will allow you to be notified of orders when they are completed and in some cases, manage your inventory. If you decide to use 3PL, your e-commerce platform will need to notify your fulfillment and shipping partner of the orders.

Shipping your orders

Once you decide if you will select your own orders and get products ready, there is one final step to get the product to your consumer; shipping. Given the increases in online shopping, shipping online orders has increased exponentially. Finding the right solution for your products, geography and consumers is an integral part of your online sales strategy. You need to consider cost, time of delivery and complexity of one versus many shipping options.

Shipping food and beverage might require some category specific solutions. Producers and processors are shipping frozen, refrigerated and shelf stable products. If you are curious about how they do this, order their products online to have access to their shipping methods. If your product requires specific shipping requirements, it is worthwhile to consider the alternatives prior to developing your shipping strategy. If extra packaging is required to maintain the cold chain, that can add weight and/or size to your package, which could increase the cost. Shipping perishable products can be time sensitive, which could restrict which geographic markets you can service with your shipping provider. These are all considerations to review when determining which service provider you will use and which markets you will target.

Determining who you use for shipping is one decision and whether you will charge consumers separately is another. According to Canada Post, in their article The Consumer Speaks: 10 trends that could define e-commerce in 2021, 84 percent of consumers are more likely to support a retailer or online seller that offers free shipping.

It is likely that online marketplaces such as Amazon that offer free shipping with a subscription to their Prime feature, have changed the perceptions of what consumers are willing to pay for shipping. If you decide to offer free shipping, forecast the shipping charges in an average order and include it in your prices. Shipping will impact your margin and it can be close or even more than the margin earned by retailers for the same product in a bricks and mortar store.

Shipping costs

Shipping is a variable cost. In their blog post, How Can I Reduce Shipping Costs as a Small Shop, Shopify provides some suggestions to help companies reduce their shipping costs.

Shipping costs fluctuate and some companies use different combinations of size, weight and distance to determine their rates. Once you have selected the optimal size and weight of packaging, it can be beneficial to compare shipping options. If you decided to use an e-commerce platform such as Shopify, they offer discounts with Canada Post which could be advantageous over other options. These rates change so a quarterly comparison can lead to some less expensive options.

Time for shipping can be a point of differentiation, especially in food and beverage. Some consumers are willing to pay a premium to have products delivered the same day or in some metropolitan areas, within a few hours. Some shipping companies offer these services for a premium and they can be very expensive. Including them in your offering depends if your consumers are willing to pay the extra fees and if premium delivery is important to them.

There are a number of shipping companies you can consider for your online business, such as Canada Post, DHL, FedEx or UPS, many of which have specialized services and solutions for small-to-medium-sized businesses. You may also choose to use one shipper or a combination of multiple shipping companies.

If you decide to use more than one shipping service and don't want to compare the options regularly, there are applications and services that will do the work for you and offer logistics solutions. For example, once you enter the parameters, they will search the available shipping options and find the best solution for you. This can save some money on shipping but add complexity to your business if you are working with multiple shipping companies.

Summary snapshot: Implementing a direct to consumer e-commerce approach for food and beverages

Establish your website

• Your website is your opportunity to showcase and sell your products
• Consumers are interested in your story and how your products benefit them
• Website metrics enable you to learn a lot about the people who visit the site
• Websites with enticing information, photos and videos can be a destination for consumers
• There are many options when considering a platform to build your website

Understand your potential consumers and consumer traffic

• There are many potential consumers online, so it is a crowded space to promote and sell your products
• Your online community is your opportunity to communicate directly with potential e-commerce customers
• Many food and beverage categories offer opportunities to provide information such as recipes that resonate with consumers
• Once you establish a conversion rate use this to determine the traffic you need to generate on your website

Select and implement an e-commerce platform

• Selling online from your own website requires an e-commerce platform
• There are many options for you to consider, with different capabilities, when selecting an e-commerce platform
• The abandoned cart feature can be a powerful tool to generate sales from consumers who were very close to buying
• The payment gateways supported by your e-commerce platform must be aligned with the methods of payment your target market will use
• Online security is a very important consideration when selecting your e-commerce platform
• Great product listings and photos on your e-commerce platform are important
• Online reviews from other satisfied consumers can influence people to buy
• E-commerce platforms can generate a lot of data about your e-commerce consumers and what they are buying

Fulfill and ship orders

• Fulfillment and shipping needs to be effective and efficient
• There are options such as in-house or using a 3PL company
• Your solution to order fulfillment and shipping can evolve as your business changes
• Shipping food and beverage products can require specialized solutions which can cost more
• Online marketplaces often offer free shipping to subscribers which will impact how much people are willing to pay for shipping in your website
• Regardless of the shipping option you select, e-commerce consumers will expect the product to arrive in the right condition within the expected timelines