Online retailing among food and FMCG brands is gaining momentum. As online grocery sales grow— up 9% from 2017—retailers are increasingly becoming crucial components for brands’ digital success. Moreover, only 12% of Index brands in Gartner L2’s reports on the U.K. Food and FMCG sectors facilitate direct-to-consumer commerce. For many years, retailers have leveraged multiple merchandising and monetization opportunities to supplement the revenue of their physical stores and help rationalize their running costs. It is, therefore, a logical step to replicate this model on their online platforms.
Amazon leads the pack, with other pure-play retailers following close behind. They are masters in the art of site monetization and this additional revenue stream is fast becoming an inextricable part of their strategy—£2.1bn revenue in 2018 in the U.K. alone. The increasing importance of e-commerce, additional revenue stream and increasing threat of pure plays make a strong case for traditional retailers to change. In fact, traditional retailers have expanded their merchandising offering. Over the past year, Sainsbury’s has led this change in the U.K., continuously evolving its merchandising options from Sponsored Products at the bottom and throughout category pages to branded banners. While Sponsored Products on Sainsbury’s currently only form 1% of all search results, compared with Amazon’s 19%, this is set to shift.
Some brands are already reacting to this change. As in physical stores, achieving high visibility on retailer platforms is fundamental to maintain market share. Brands should become well versed in obtaining prime locations for their products, whether through organic optimization or leveraging sponsored listings. Here, Index brands still have an advantage on traditional retailers’ platforms and own the majority of Sponsored Products, but this is likely to change as they mimic the pure-play retailer model. Constantly monitoring and experimenting with new merchandising features on retail platforms is crucial to avoid being overshadowed by agile brands. Ignoring the digital shift is no longer an option.