How Consumer Brands Can Capitalize on the Online Grocery Trend

The grocery market is just too massive for innovators and entrepreneurs to ignore. Based on research from Nielsen TDLinx and Progressive Grocer, the U.S. accounted for nearly $650 billion in grocery sales in 2015.

Keep in mind that there are no more valuable e-commerce carts than those devoted to grocery. Unlike every other category, this one has no true seasonality of purchase. The items may vary between holidays like the Fourth of July and Christmas, but chances are that shoppers put that two-liter bottle of Coke in their carts each week no matter what time of the year.

Furthermore, online grocery is finally starting to take off in the U.S., having learned important lessons from the late 1990s that saw the implosions of companies like Webvan. Keep in mind that fresh online grocery was expected to grow in the U.S. from 8 percent penetration in 2015 to 26 percent in 2016, while staples forecast to increase in penetration from 16 percent in 2015 to 28 percent last year, according to Morgan Stanley.

Online grocery is the last frontier of e-commerce — and the only area expected to grow CPG sales. Brands can no longer sit back and hope that shoppers who pull their products off the shelf at the grocery store will automatically put the same products into their e-commerce carts. As with any major transformation of an industry, there needs to be innovative thinking and some risk taking. Success is usually not about relying on traditional approaches.

Consider that the moves brands have already taken to reach younger shoppers with new media habits will be even more important when it comes to getting a competitive edge in online grocery. With an increasingly larger share of grocery shopping done on mobile devices, advertisers need to understand that the cramped views posed by mobile screens make it doubly important to stay top of mind in the midst of a brutally competitive category where generics are just one swipe away. Additionally, cutting-edge innovations with the Internet of Things and voice activation mean that brands must consider how to ensure they're on the verbal lists that shoppers are dictating to home AI systems like Alexa or Google Home. While these systems are likely some years away in terms of going mainstream, woe to the brand that operates at the status quo.

With these challenges in mind, what should CPG brands and retailers be doing now to meet the demands of online grocery?

• Use sponsored products to drive awareness and sales. Sponsored products are relevant to the purchaser, allowing shoppers to find products in large-cart-size, multiple-SKU categories like CPG.
• Cross-sell for impulse purchasing. There’s a reason a display of bananas may be in the cereal aisle and Oreos are near the dairy section. This same experience can — and should — be emulated online.
• Use paid search to help increase organic rankings. The "winner take all" world of online grocery — where carts are persistent and brands are powerful — favors products which broke through early in the evolution of e-commerce.
• E-commerce media requires an always-on strategy. E-commerce has fundamentally changed retailing seasonality. Make sure your brand budget caters not just to traditional retail seasons like holidays and spring, but throughout the entire year.
• Prepare now for the voice-activated future. Retailers and brands own powerful relationships with consumers that if cultivated will transition to the voice-activated future. Make sure you're the brand or retailer on the tips of their tongues as more and more consumers begin to use these devices for product ordering. This takes compelling marketing that only you control.

Online grocery is still an emerging market and will see further changes and volatility. However, for CPG brands there's little time to waste when it comes to positioning themselves for the growth opportunity.

John Roswech is executive vice president, brand solutions at Criteo, a performance marketing technology company.