Fundamental data such as sales and category share is the lifeblood of today’s best-performing brands in the brick-and-mortar world. Their long-term strategies and everyday execution — for example, knowing which categories and retailers they should be under- or overinvesting in — are measured and closely managed by these critical indicators.
However, despite the exponential growth of the online channel (digital sales are growing by 14.6 percent year-over-year compared to total retail sales growth of 3.7 percent), most brand manufacturers have been at a massive data disadvantage online compared with offline.
Data on the total online retail market (e.g., category size, growth rates, brand shares) are largely unavailable at the level of detail and frequency that brand manufacturers have come to expect for brick-and-mortar retail. That lack of intelligence could be costly for brands as we enter the hypercompetitive holiday season.
Estimating Share of Category and Sales on Amazon
As the rate of e-commerce growth has steadily outpaced total retail growth by a multiple of three to four times, Amazon.com’s growth has outpaced e-commerce by one to two times, giving it a dominant lead in many of the world’s most mature e-commerce markets. And as the world’s largest online retailer, Amazon is fast becoming a key account or strategic customer for many global consumer packaged goods firms.
For example, global brands such as Kellogg’s are prioritizing working with Amazon, as its general manager of global e-commerce discussed in a presentation at this year’s Grocery Manufacturers Association Leadership Forum. And major manufacturers such as Hershey’s estimate Amazon’s share of the confectionery category to be as much as 40 percent.
This holiday season will likely set another record for online sales (the National Retail Federation predicts that online sales will increase between 6 percent and 8 percent), largely driven by Amazon. New research reveals that more than four in 10 shoppers turn to Amazon first when searching for products online. Furthermore, Amazon is also becoming a go-to destination not only for holiday gifts but, as its consumable goods and grocery offerings expand, for holiday pantry and food products too.
To collect actionable data about their performance on Amazon, consumer brands are increasingly turning to e-commerce data analytics firms such as Profitero. Having an understanding of its position on Amazon is critical for a brand to attain competitive advantage. For example, the chart below shows how three categories stack up in terms of overall market share concentration on Amazon. Within the cold and flu relief category, the top 10 brands are shown to account for 57 percent share of the category. In the “jar candles” category, the top 10 brands account for more than two-thirds of this category on Amazon.
Having intelligence on how pricing, promotions and other variables affect share of category in near real time enables brands to react quickly to competitors’ moves and/or shoppers’ preferences. This data enables heads of e-commerce to know the total sales for a product category every day, how those sales compare with competitors, how fast those sales are growing over time, and whether and by how much product share is growing in a particular category.
You can’t manage what you can’t measure, and tools that enable brands to assess their performance and make adjustments in near real time can be a game changer, especially with the critical holiday buying season upon us. These tools will ultimately enable heads of e-commerce to work smarter by helping them focus on the key indicators they need to win in the online channel.
Keith Anderson is the vice president of strategy and insights at Profitero, which provides real-time e-commerce analytics to retailers and brands.