Selling your products online is similar to other channels, in that consumers will make a decision to purchase your products based on a number of factors. As you market your products in this channel, there are some differences to consider. Consumers are making the decision to buy with access to different information such as price comparisons or consumer reviews. Online marketers are aware of the differences and dedicate resources to deliver the most effective marketing strategy.
Pricing
There has always been a lot of emphasis on pricing in food and beverage categories. Retailers printed weekly flyers, in-store signage in every category and even public address announcements in stores were all used to draw attention to pricing. When people are shopping online, pricing continues to be a significant factor in the purchase decision for many consumers.
In online shopping, consumers have tools they can use to compare prices. Comparison Shopping Engines (CSE) are websites designed to allow consumers to compare prices from one website to another. Suppliers register their products and the website will search for the item across a number of platforms. These sites can be popular with online consumers because they compare price, shipping options and if offered, product reviews.
CSEs are a powerful tool to compare your offering to others in the category. These can be valuable tools within your business. If you monitor them regularly, you will see the promotional patterns from your competition.
- Flipp
- Allows consumers to compare flyers and prices at different retailers.
- When an item is entered Google Shopping will compare online offerings.
If you are selling your products direct to consumers on your own website, you determine the price. Consumers want to know the final delivered price, so it is important to display shipping costs if they are extra, and options for faster delivery. If you are selling your product to retailers, it is likely they will check your website price. Balancing pricing among channels will ensure you keep your online consumers buying, as well as maintain your relationships with existing retail and distribution customers.
If you are selling products on a third-party marketplace such as Amazon, pricing is more complicated. Although you are selling your products on their platform, the marketplace will still perceive shoppers to be its customers. The marketplace likely has rules related to pricing that are important to understand. Although the marketplace does not control your pricing, they will probably influence it. For example, on Amazon you can create a reference price. This is essentially your Manufacturer's Suggested Retail Price (MSRP), the price where you generate a substantial number of your sales. It will also be used to calculate savings if you put a deal or Temporary Price Reduction (TPR) on your product. You can also set minimum and maximum prices for your products. These will be in effect if another seller on Amazon offers the same product at a lower price. According to the Amazon Marketplace Fair Pricing Policy for Canada, Amazon checks other online platforms to compare prices and they expect you to offer their customers the best deals. The system will adjust your price within the boundaries you create.
Pricing is an important component of your online selling strategy. New consumers, your existing retail customers and online sellers will likely check your price and the delivered price. When pricing rules are in place on marketplace websites, it is beneficial to have resources within your business checking these prices regularly to ensure they are priced right for the market - and your business.
Margins
As in selling in any channel, when you sell online, a thorough understanding of all costs will ensure you can calculate accurate margins. It is possible you will have a higher selling price, but you will also experience costs that are not associated with selling to retailers or distributors. Once you calculate all these costs, you can determine if the margins achieved through e-commerce are right for your business.
In food and beverage categories, most producers and processors now have some presence online. Consumers and retail customers will search for products or information on websites or social media. There are a range of costs associated with having a presence online and selling via e-commerce that need to be included when calculating your margins. Costs include, but are not limited to the following:
- E-commerce platform for selling on your website if you sell direct
- Fees for e-commerce transactions
- Fees for e-commerce platform premiums if you select these options
- Fees for e-commerce marketplace premiums if you choose to pay for these
- Security to protect consumer information during the purchase process
- Temporary price reductions for online offers
- Social media advertising to promote your online offers
- Influencers, if you choose to pay these people to promote your products
- Packaging required for shipping to the final destination
- Order fulfillment and shipping (net of any shipping fees collected from shoppers)
- Delivery to third party marketplaces if you pursue this model
- Delivery to 3PL if you elect to use an outside resource for order fulfillment and shipping
- Customer service for B2C or B2B relationships
- Managing and allowing for product returns
- Providing samples if you are selling B2B
- Virtual trade shows for customers and/or consumers
- Human resources associated with developing and executing your online selling strategy
Opportunity costs can also be considered when determining the best overall sales strategy for a food and beverage business. If you have access to retailers and distributors, you have the opportunity to complete larger transactions to one customer, whereas if you are selling direct online or through a marketplace, you will process a lot of smaller transactions. Your business can invest more time and resources per unit for the online sales because the units are often much smaller.
Once you determine the fair market price and consider all costs associated with e-commerce you can calculate your margins.
Promotion
Creating a presence is just the starting point for your digital marketing strategy. To generate sales, it is necessary to develop campaigns that resonate with your target market. Once you have their attention, the next step is to influence them to visit the places online where they can buy your products.
There is not one strategy that will work for every product or category. Understanding your target market, where they can be found online and providing a value proposition they see as enticing are unique to every food and beverage product and category.
Creating a presence could include some or all of the following:
- Developing your website and direct B2C e-commerce platform
- Consistently executing on social media
- Listing your offerings on third-party marketplaces
- Building your own online community
- Generating public relations, such as social media mentions that will be viewed online
Once you have created the presence that will appeal to your target market as you have defined them, the next step is to promote your products to them. Similar to selling in other channels there are many options available to promote your products. The resources, effectiveness and costs can vary from a small investment to a significant investment. The amount you decide to spend will need to be realistic, given the sales and margin expectations you have for your e-commerce business.
To promote your products online, you could consider the following options:
- Paid advertising on social media
- Paid advertising on search engines such as Google
- Paid advertising on third party marketplaces such as Amazon
- Email or text campaigns to your online community
- Temporary price reductions on your own website or third-party marketplaces
- Share information such as recipes or other useful information to entice your target market to click through to buy your products
- Engage the services of an online influencer to promote your products to their online community
- Offer enticing pricing to get your products into subscription boxes
Online promotion is a constant learning experience. You can select any or all these tactics to promote your product. The most important consideration will be what works best within your food and beverage category and fits within your budget.
A benefit of online promotion is you can determine the effectiveness of your initiatives. Set sales targets for each promotion based on what you would expect to sell at the price and the exposure you are investing in. Once the promotion is finished, consider an A/B testing approach to assess the results and determine if the return on your investment was acceptable.
There are many opportunities to promote products online. Finding the best option for your products and your category is the challenge. For most products, the learning is ongoing and needs to evolve as consumers and platforms change.
Influencers
One component of an online promotion plan can be working with an influencer. An influencer is a person who has cultivated an online community of followers. Consumers follow influencers because they see value in their posts, recipes and ideas. If these consumers just wanted information about your product, they would follow your social media channels.
Influencers earn revenue from product posts that generate online conversation and change consumer behaviours. They should be eager to find innovative ideas and opportunities to promote your product within their community. The most effective relationships with influencers occur when they want to use your products, not just someone with access to a group of followers to read your script.
It can be exciting to find influencers with large numbers of followers. Even with tens of thousands of potential consumers, you might not get a return on your investment if you assume some percentage will react to the post and support your products. Unfortunately, the size of their online community is not the best predictor of success. Thousands of followers who do not react or interact with the posts are not likely to become engaged and support your products.
Prior to working with any influencer to promote your products, understand the composition of their community. They should be able to help you understand if the consumers they interact with match your target market. The influencer should also be able to provide a profile of the people within their online community. There are a number of ways to increase followers, even adding 'bots', as in robots or internet bots, to increase the number of followers. They are not always real people who will purchase products.
If the influencer is working with some food and beverage brands, review what they are saying about the products and what they share with their community. Their posts should be in line with your approach. If your item can be used as an ingredient, the recipes they post for other products should be comparable to the level of complexity you expect to see for your target market.
Influencers who are leaders in their segments want to develop relationships with products and keep their community engaged. They do this with posts that add value to community members and the right products. When you find a great fit and you can trust them to build on your story, it can be very powerful.
If you decide to work with an influencer, it is beneficial to pay close attention to the interaction and reaction to their posts. When people in their community take the time to comment and interact positively, you know they see value in becoming involved in the conversation. When you see consumers share posts, it is a good indication they like the idea or product and want to communicate this to their online connections. This is positive for your business and the influencer. This is an indication they are interested and there is a potential they will buy.
There are a broad range of influencers with online communities. To have the best chance of success it is important to find the right fit. For instance, you could take one or a combination of the following approaches:
- You could work with a number of micro influencers who each have small online communities that are very targeted. An example is working with an influencer who is known for engaging with people in Alberta who like to bake at home with local products.
- You can also work with macro influencers, such as celebrities or athletes who have developed huge online followings because of the public awareness surrounding them. An example is working with an Olympic athlete influencer who has more than 100,000 followers with a more general profile, but is interested in healthy eating and shares diet and nutrition information.
Fees associated with influencers are usually tied to the size of their online community and the effectiveness of their posts. Similar to other promotion strategies you can invest resources with different options to find the best results for your product and your category.
Subscription boxes
One method of selling online that has been increasing in popularity is subscription boxes. Some consumers purchase subscription boxes as gifts while others buy them for their own personal use. The more category specific options are more likely to be purchased for a buyer's own consumption. The convenience of having products delivered when and where they want can be beneficial to people. There are three different business models for subscription boxes:
- Offered by companies selling one particular product or line of products, the boxes are delivered to replenish a consumer's supply at regular intervals, like monthly. An example is a baby food company providing a well-balanced selection of different foods to feed the average 18-month-old for 30 days, or a speciality snack company preparing a selection of healthy food items for a specific diet or fitness plan.
- Meal kits, which include all of the ingredients, in correct proportions with step-by-step recipes. An example is a box that contains four meals for a two-person household, delivered weekly.
- A curated box of different products assembled around a theme. An example is a box grouping a number of food and beverage products produced in Atlantic Canada for summer bbq's or a bi-monthly gift box for pets that includes samples of food, new toys and treats.
Subscription boxes are popular with online sellers because they result in many sales to one customer. If you can entice the online baby food shopper in the first example to enrol in your subscription box program, you will have them buying your products - conveniently for them - while they need them. You reduce the risk of losing the consumer to a lower priced alternative or switching brands for one of many other reasons.
Curated subscription boxes can include a number of different products from different producers and processors. This is an opportunity to generate product trials, with new consumers who might not have purchased your product previously. Some curated subscription boxes are very popular and there is competition amongst suppliers to have their products included. If you decide to pursue curated boxes, it is beneficial to ensure consumers receiving the boxes will be able to also purchase your products separately. For example, if the curated subscription box is being distributed across the United States, you will need to ship there from your own website or have your products available on a marketplace such as Amazon.com.
If you plan to offer your own subscription boxes, your e-commerce platform must be able to manage the different transaction types. One benefit to you is that consumers pay in advance. Your e-commerce platform will need to generate orders at the appropriate time to have the product selected and shipped to the right place. It is beneficial to be paid at the beginning of the cycle and as you have some indication of the product inventory that will be required.
Subscription boxes can be an integral component of your online strategy. The assurance of orders months ahead and the opportunity to have consumers see your products in new markets can deliver a return on your investment.
Product bundles and bulk formats
Order fulfillment and shipping can be significant challenges for selling food and beverage online. Consumers are familiar with retail prices they pay in stores. If you are selling the same product online, shipping costs can be a significant proportion of the final delivered price. For example, if a company producing honey in B.C. is selling 500ml jars for $9.99, the cost of packaging and shipping could be equal to the cost of the product.
According to Canada Post, three out of four Canadian online shoppers abandon their carts before they buy. This means they have made the decision to put the item in the virtual shopping cart, but they leave the website without buying. One reason for abandoned carts is that shipping costs are too high for buyers as a percentage of the total delivered price. For more details and ideas to avoid cart abandonment, see the following article by Canada Post: Selling north of the border - How to prevent Canadians from abandoning their online carts.
One method of reducing shipping costs per unit is to bundle products together, so if you have more than one Stock Keeping Unit (SKU), create bundles. If you only have one SKU, it might be possible to consider working with producers and processors that have complementary items. You could create bundles that are more enticing to consumers, such as a product sampler selection of four of your most popular offerings. You could also create a bulk grouping of one SKU, selling a six-pack of the same item to your consumers.
With $50 worth of product, a $10 shipping fee is much more reasonable to many consumers. Often you can add more product to the same box without proportionately increasing the shipping fees. The cost to process an order with $50 worth of product is not five times the cost to process a $10 order.
The following are a range of examples of companies that have bundled their products:
- Chickapea
- Provides six-pack bundles of their products, as well as various bundles.
- Clearwater Seafood
- Offers consumers dinner packages.
- Ethical Bean
- Ethical Bean offers incentives for consumers to buy bundles.
- Floating Leaf
- Consumers can purchase 6 packs of various SKUS at Floating Leaf.
- Made with Local
- Combinations of different products at Made With Local offer better value for shipping.
- Smak Dab
- Multi packs at Smak Dab give consumers the opportunity to try different SKUS.
Another benefit of bundling products together is it can provide more products to consumers and reduce the need for them to buy elsewhere. They have more of what they need which will either increase their consumption or remove those products from the market to buy later. They have your product, so they do not need to consider a competing brand.
Bundling can be an effective strategy to reduce order fulfillment and shipping costs per unit, increase your average order and ensure consumers are using your product for longer periods of time.
An Omni-Channel approach
Most consumers used to look for food and beverage products in bricks and mortar stores. This is changing as these products are available across many channels, while also being promoted online. Consumers expect to be able to buy products when and where they want, be it online, at a physical store or other channels. For this reason, many food and beverage companies are shifting their marketing and sales to an omni-channel approach.
This strategy is developed around the consumer with the emphasis on trying to make it as easy for them to buy as possible. Consistent branding is key to ensure consumers recognize your products each time they encounter them, regardless of whether it is in a physical store, social media or an online marketplace.
If your product is available in many places, your strategy is most effective when you are able to anticipate the consumer's needs in that channel. For example, in a bricks and mortar store, they might need a recipe to use your product that night in a meal, whereas if they are visiting an online marketplace they could be shopping for gifts and want the product gift wrapped. If you are able to anticipate these consumer needs, you have a better chance of getting them to buy.
A multi-channel strategy is having your products available in many different channels such as traditional food retail, mass market retail, specialty stores, your own website and online marketplaces. An omni-channel strategy anticipates the needs of the consumer when they are in the specific channel.
This strategy is complicated in that you must have the resources to anticipate and offer the right promotion, information and/or value to consumers in each channel. Consumers can change quickly so this is a strategy that requires constant focus and updating. Each time you alter one channel it can have an impact on other channels.
Summary snapshot: Marketing food and beverages online
Pricing
- Consumers are aware of pricing when buying online as they are in store
- Comparison Shopping Engines (CSEs) allow consumers to compare prices online
- Shipping costs impact the final price and influence a consumer's decision to buy
- Research pricing rules if you are selling in online marketplaces
Margins
- There are different costs to selling online that will impact your margins
- Cost per transaction is different online, especially when selling B2C
- Some fees for selling online are for a period of time and others are per transaction
- E-commerce fees can be lower however they can be recurring
Promotion
- Develop online promotions to resonate with your target market
- There are many options to promote your products such as social media, within marketplaces or your online community
- Test the effectiveness of your online promotions by measuring sales and other metrics
Influencers
- Influencers can promote your product to their online community
- Finding an influencer who has an online community that is aligned with your target market will be most effective
- There is a wide range of influencers from people who can reach a community of a few hundred to millions
- Cost of working with influencers will relate to the size of their online community
- Review the influencer's posts about your products and monitor the interaction with consumers
Subscription boxes
- Some processors offer subscription boxes to consumers to supply their products at regular intervals to replenish their needs
- Meal kits are supplied to consumers with recipes and prepared portions
- Curated subscription boxes bring a number of products together from different processors
- Subscription boxes can be an opportunity to promote your products to new markets
- When consumers subscribe, they are less likely to consider competing products during this time
Product bundles and bulk formats
- One opportunity to reduce shipping cost per unit is to sell bundles of products
- If you have a limited number of products it is an opportunity to ship your products with other processor's items
- When consumers buy a bundle of your products, they are less likely to search for your competitor's products during the time they have a supply of yours
An omni-channel approach
- Offer your products in different channels to make it as easy as possible for consumers to find your products
- Anticipate why they might buy in each channel and develop your promotions to appeal to these needs