As we inch towards the lifting of the remaining COVID restrictions in England on 19th July (or at least the vast majority), the food and drink industry is preparing for the closest thing to a return to shopping normality since the start of the global pandemic early last year.
While it has been a truly grim 18 months for millions – I myself have got to know the virus quite intensely over the last few weeks – the clear and obvious consumer move towards online grocery shopping has opened up huge opportunities for retail brands in the realm of D2C (direct-to-consumer).
But with the country closing in on a welcomed ‘reopening’, what’s next for food and drink online?
This was one of the key questions addressed last week at The D2C Summit by Bread & Jam, the UK’s largest community of food and drink entrepreneurs, with their latest action-packed event seeing hundreds of omnichannel F&B challenger brands, industry experts and investors gather virtually to plot and discuss the next phase of online grocery.
And with no restrictions on logging in at home while struck down with COVID, I was there on the Wednesday to watch the conference unfold, with one of the morning webinars – ‘Trends In A Post Covid World: Is It Time to Bypass The Retailer?’ – providing multiple nuggets of insight on the immediate future of D2C in the UK.
Led by the ever-energetic food business consultant, strategist and podcaster Fiona Fitzpatrick; the 30-minute webinar featured a presentation from Sally Ball, e-commerce offer lead at Kantar Worldpanel Plus, on shopper purchasing behaviour over the last year, as well as expert opinion from both Wilfred Emmanuel-Jones MBE (founder of The Black Farmer) and Anthony Fletcher, ex-CEO of Graze and former innovation manager at Innocent Drinks.
Dynamic D2C and an opportunity with small baskets
According to data from Kantar Worldpanel Plus, 22.4 million UK households shopped online over the four weeks to 30th June. The average for those households, over those four weeks, was two shops, spending an average of £33.06 per trip.
And, considering these numbers, Sally Ball said that the draw of Amazon for brands big and small cannot be ignored.
“If your [brand] objective is to reach as many buyers as you can online, you might want to consider that, if you take all those people who’ve shopped online in the last four weeks, just over half of them (58%) have bought something from Amazon,” she said, with Kantar drawing from data not only from grocery, but from the whole of the e-commerce market.
“Their baskets are a little smaller than average, at around £18 each time, but they count for 28% of e-commerce trips, and 15% of the sales.
“This varies massively by industry, and I’m not saying that this is the same picture for just grocery (because we know it isn’t). But the data does show you that, of the potential shoppers you might want to attract to your brand, they’re very likely to have Amazon as a destination shop.”
Sally went on to reveal that the online share of FMCG grocery sales in the UK hit 15.2% in February 2021, which is almost double the share seen in January 2020 (8%).
And while the share has now dropped slightly to 13.2%, Kantar believe there is indication that this could be the ‘new norm’ for online grocery.
So, what is the next big opportunity for food and drink online?
“The next big opportunity is probably with smaller baskets,” said Sally. “We tend to associate online grocery with big trolley shops, but our data shows that just 17% of online sales come from these ‘basket missions’.
“Huge steps are being made to maximize different solutions across this area, with online really widening its net to appeal to a broader group of shoppers and needs – such as the rapid delivery market, which is attracting the attentions of both ‘pure play’ and omnichannel retailers.
“Rapid delivery can still be considered niche as it’s currently being used by only 4% of online grocery shoppers – but a smaller basket on average of about £27 appeals to a younger shopper.
“Then there’s the meal subscription market which, again, has a smaller basket size (£30 on average) and is still niche, appealing to less than 3% of online grocery shoppers.
“But both are examples of the widening of the online grocery net, opening more opportunity for brands.”
The importance of relationships and the rise of the tiny team
Wilfred Emanuel-Jones MBE, founder of The Black Farmer: “If there’s one key learning everyone should take away from this session, it’s this: The trouble with D2C is that analysts are the ones that dominate it, but it’s really a relationship business.
“For a consumer to go out of their way and to place an order with you, they expect a lot more than they would from an Amazon, from the supermarkets – you really need to think ‘relational’ rather than ‘transactional’.
“Not doing so is the biggest mistake people make [when launching an online offering].”
Anthony Fletcher, ex-CEO of Graze: “If I was to take a ‘10 year view’ on D2C, one’s ability to run things cheaply has improved massively. For example, you can outsource a lot to different SAS systems [for data analysis], which are very sophisticated.
“Pricing [structures], international currencies and shipping means that you can have tiny teams to run businesses, which is something that’s changed a great deal in this arena.
“Of course, if you want to get bigger and command more of the market, you need to be in more channels. But, conversely, maybe there’s a group of consumers out there that are more ‘your’ consumers and the people to target first, and online really lets you do that. There are plenty of case studies that prove that it’s a very valid way to think about D2C.
“I remain of the view that, if done well, D2C is one of the best ways to build your brand as a challenger. I’m also of the view that D2C done the wrong way can lose you a lot of money and suck up all your time. Sadly, both are true.”