Shopper Marketing for E-Commerce Lesson One: Setting the Stage Contents Acknowledgements 3 Introduction 4 A Concept Long in the Pipeline 5 Why We’re Here: Technology Changes 6 Why We’re Here: Demographic Changes 7 Why We’re Here: Pervasive Usage 8 Why We’re Here: CPG Usage 9 Why We’re Here: Shoppers Already Are 10 Why We’re Here: Your Future Depends on it 11 Size of the Prize: Shopper Trends 12 Size of the Prize: Beyond Sales 13 Key Definition: E-commerce 14 Key Definition: M-commerce 15 Key Definition: Omnichannel 16 DSM ≠ E-commerce 17 But It’s Not DSM or E-commerce 18 It’s DSM and E-commerce 19 E-commerce Fundamentals 20 What’s Next? 21 2 2 © 2016 Path to Purchase Instute Copyright Acknowledgements No part of this publicaon may be reproduced, re-presented or disseminated in any form without wri9en permission from the copyright The Path to Purchase Institute is owners. grateful for the collaborative All content in this workbook was obtained from the digital archives of relationships it maintains with many of the Path to Purchase Ins0tute (p2pi.org) the marketing industry’s foremost or was thought leaders. readily available in the public domain. No responsibility is accepted by the A special note of gratitude goes producer, publisher, or printer for any out to Catapult for generously infringement of copyright or otherwise, arising from the providing its time and talent as the contents of this publicaon. Every effort course’s official Industry has been made to ensure that credits Collaboration Partner. accurately comply with informaon supplied. We apologize for any inaccuracies that may have occurred and will resolve inaccurate or missing informaon in any subsequent reprin0ng. All data presented in this workbook is intended for illustrave purposes only. No responsibility is accepted by the producer, publisher, or printer for any factual inaccuracies contained Therein. 3 We'll kick off the course by Setting the Stage for all the information and all the discussion that will follow. We'll begin by simply explaining why we're all here conducting a course on Shopper Marketing for E-commerce — looking at the changes in the marketplace … and in society … that have driven a surge in e-commerce activity over the last few years — especially in regard to packaged goods. We'll then look at some topics that will help us better understand the potential opportunity that's out there because the obvious opportunity that product manufacturers might see at the moment is vastly different than the almost guaranteed opportunity that awaits them in in the future. And the shift is happening far too quickly for companies to hedge their bets any longer. We'll spend a little time running through some Key Terms & Definitions just to make sure we're all on the same page. And then we'll start looking at the critical issue of Digital Shopper Marketing vs. E-commerce, what and where the differences are and, more importantly, where the areas of commonality and points of intersection exist. Title of the book 4 So let's begin with a little bit of history. The launch of Amazon.com in 1995 is often viewed as the unofficial start of e-commerce, even though there were retail marketplaces on the early Internet Service Providers like AOL and Prodigy and commercial transactions even before that. And here’s a little trivia for you. Peapod, the online grocer owned by the same Ahold USA that operates the Stop & Shop and Giant supermarket chains, has been around longer than Amazon — so long, in fact, that they originally had to provide dial-up modems for their customers because so few of them actually had Internet access yet. But for all intents and purposes we can claim that the birth of e-commerce took place in 1995 with the launch of Amazon. Because it really wasn’t until Amazon came along that anyone really began to take notice. E-commerce in general, and even Amazon in particular, was originally considered to be inconsequential to retail overall, so non-threatening that retailers like Barnes & Noble and Target originally used Amazon as their e-commerce “supplier.” Target was still using them as recently as 2011. And even though it was eating up product categories like books and consumer electronics for years, Amazon wasn’t considered a legitimate threat in the CPG space until the early 2010s, and it only really started worrying traditional retailers when it began expanding the AmazonFresh home delivery service in 2013. So the impact that it's had on the industry in just a few years is pretty incredible, and we'll be be breaking that down in detail in Lesson 4. 5 But in many ways, the concept of e-commerce was a little bit ahead of its time, because online shopping and buying didn't catch on until most of the shopper barriers — security, reliability, simplicity, convenience — were either actually eliminated through technology or were at least eliminated perception-wise. It took awhile for online shopping to truly become easier than visiting a brick-and-mortar store in the minds of most consumers. So on this page you see some of the key advancements in technology that made this happen. • In 1993 the introduction of a graphic user interface made the internet appealing and accessible to the mainstream population after years of being the domain of scientists, professors, government agencies and computer geeks. • One year later Yahoo! launched, becoming the first widely popular search engine (soon to be overtaken by Google of course), and the new information age began. • Then Amazon arriving as the first well-known e-tailer, first as a specialty store dealing only in books and music. • And then we fast-forward 12 years to the arrival of the iPhone, which began turning mobile phones into pocket computers. • One year later came the App Store and a variety of shopping-enhancing tools and services. • Fast-forward to 2013 when mobile transaction technologies start freeing consumers up from such “antiquated” notions as wallets and plastic credit cards • And then along came Amazon Dash in 2015 to make the notion of mobile wallets seems antiquated and literally simplify the act of shopping down to a simple, single click of a button. 6 And of course we had to wait for consumer awareness and acceptance to catch up with the technology. Even 10 years ago, a lot of consumers were very cautious about providing much personal information on the Internet. Today, many of us have our credit card information saved on dozens of websites and we almost never think twice about it. Now adoption progressed steadily but somewhat slowly until the Millennials came of age, the first inherently digital generation. And then it wasn't just digital activity that became pervasive, but mobile activity. Millennials now are the largest generation worldwide: 1.8 billon of 7 billion. And in a couple more years they'll will be earning more then the Boomer generation that has dominated the consumer marketplace for so long. Millennials have become the key shopper demographic, and they are totally comfortable with e-commerce. 7 And so the bottom line is that e-commerce is now pervasive. It has reached 90% penetration among U.S. consumers. And while it's still only 7.3% of total retail sales, you can see that it's growing at a much faster rate than overall sales. And the retail industry experienced a real watershed moment in 2015, when 102 million U.S. consumers shopped in brick and mortar stores over the Thanksgiving Weekend — and 103 million shopped online. 8 This growth now is also having a major impact on CPG, a marketplace that long thought it would never need to worry about e-commerce because people would never take the trouble to go online and buy toilet paper or shampoo or cereal and especially not fresh vegetables or frozen food. That would just be silly, right? Actually, no, and now as you see here the majority of growth in packaged goods sales over the next few years is also expected to come through e-commerce. 9 And so all those myths about e-commerce that were held for so long have all been shattered, especially when it comes to the packaged goods arena. It’s only for young people. Yes, Millennials are leading the charge, but they're not the only generation that's shopping for groceries online, as this age breakdown from MyWebGrocer shows. • It’s only for certain categories. Truth is, if people buy it, they'll buy it online. Some more than others, for sure. But everything is fair game. • Online grocery shopping isn’t worth the effort. This one may have been true for many people years ago, but with home delivery no longer requiring people to wait by the kitchen door all day long and especially with curbside pickup a growing option, online grocery shopping can be a very convenient option. • They definitely won’t buy fresh food. This one may have held true longer than the others. But the barrier has been broken here as well, and many online shoppers are now perfectly content to let someone at the store select fresh food for them. 10 And so to explain why you're here in the simplest but most dramatic terms. It's because your future depends on succeeding at e-commerce. Because the same marketing levers that drive e-commerce also have a significant impact on offline sales, and that's a topic will be discussing several times during the course.