Online ordering has taken center stage this year as shoppers hampered by the outbreak of COVID-19 have turned to previously available but underutilized channels to complete their purchases.
As consumers look more frequently to retail grocers’ online channels, there is an emerging phenomenon that threatens to jeopardize brands’ revenue and put competitors’ products in customers’ pantries.
It’s called involuntary sampling. Although it might sound foreign, it is something that all online grocery customers have experienced.
Here is what it looks like. When placing an order through a company’s website or mobile application, we have all checked out a full cart of groceries containing products from almost every aisle of the store.
Seemingly, there are no issues after completing your online transaction. However, when it comes time to do the shopping, your in-store surrogate shopper cannot find your favorite product because it is not on the shelf.
So, what do they do? They find an alternative for your originally requested item.
If you have not specified what you would like as a replacement, when your shopper grabs an alternate, it could be a product from a competitor. If this happens with your order, this is a possibility for it to occur with every store transaction.
Over the course of a day, that can add up to thousands of purchases that can put others’ products in your customers’ hands. Not only is your brand missing the revenue from these transactions, but your customer is also getting to “sample” a competitor’s product without consciously choosing to do so.
This threat to brand loyalty has become more prevalent with increased online purchasing, but there are ways to eliminate the issue.
Why Retail Logistics Matters
When your item is replaced by a competitor’s because it is not on the store shelf, that costs you in revenue, but that could potentially be just surface damage to your business.
Not having your product in the store can subject you to more long-term issues.
First, it can erode your retail revenue.
Out-of-stocks are a costly reality in many of the country’s largest retail outlets. As a result, many big box stores have created incentive programs to ensure suppliers hit on-time delivery metrics.
For example, Walmart—often known for being the first mover in retail compliance programs—just upped its on-time delivery threshold for suppliers to 98%. For brands that cannot hit that metric, they face a fine of 3% of the cost of goods sold for the late order.
That translates to an impact on your bottom line and can mean lost transactions when your product is not in-stock.
Second, late delivery can also jeopardize your retail relationships.
Impact on Retail Relationships
In a Zipline survey of retail buyers, respondents overwhelmingly responded negatively about delivery issues.
Survey responses showed that:
- 100% of respondents said that a vendor’s ability to deliver product on-time impacted their willingness to work with them
- 73% of respondents said they had ended vendor relationships over delivery issues
Moreover, when an order is late, product can be missing from the shelf leaving you vulnerable to consumers either involuntarily or deliberately choosing your competitor.
Alternatives More Popular Than Ever
According to a McKinsey report, “78% of consumers have tried new brands, places to shop or methods of shopping so far during the pandemic.”
The largest driver of that change? Product availability.
According to an article published in Retail Dive, “Product availability was the number one reason consumers sought out new retailers or products in the past couple months.”
If your brand is out of stock, shoppers have proven that they will find a substitute through surrogate shoppers choosing them or through their own alternative means.
Competition Increasing with Rise in Ecommerce
In the post-COVID retail environment, it is as critical as ever to find reliable and proven ways to separate your brand from that of your competitors.
E-commerce is an increasingly crowded channel and can be difficult for CPG brands to differentiate themselves from the rest of the pack. However, it is critical to do so.
Online spending has seen a massive uptick since the start of the pandemic, even boosting verticals that were previously lagging like grocery orders.
While only 3 percent of grocery transactions occurred online before the pandemic, this is no longer the case.
“Online grocery sales increased as much as fivefold to between 10 percent to 15 percent of total grocery sales,” said Steve Caine, a retail expert and partner for Bain & Company in an interview with CNBC.
Caine continued by saying that he expects this trend to continue even as the pandemic wanes.
Logistics has never been more important for consumer product manufacturers. In an increasingly competitive environment, successful transportation is a clear advantage and differentiator.
Respondents in the same Zipline survey of retail buyers stated that logistics is essential, as 73.33% reported that they work directly with their logistics colleagues at least once per week, and 40% of them doing so every day.
Don’t Be Subject to Involuntary Sampling
If a brand underperforms when it comes to logistics, they can easily be replaced in both individual transactions through involuntary sampling and in long term retail relationships.
It is as critical as ever to be on the store shelf when shoppers browse digital or in-store aisles. Brands that cannot meet the growing supply chain expectations stand to lose out to competitors.
With all that has changed in how consumers purchase which products, it is as vital as ever to optimize your logistics function to ensure that your product remains in stock.
Whether consumers are finding your product in-store or online, you must maintain an efficient supply chain to keep up with customer demands.
The best way to remain a fixture in a changing retail grocery industry is to work with a true logistics partner specializing in the space.
Zipline works exclusively with CPG brands on a consultative level to ensure they stay up to date with the latest happenings in retail.
We understand the importance of keeping your product on the shelf and can work with you to ensure that it does.
Want to make retail chargebacks and out-of-stocks a thing of the past?
The post Involuntary Sampling: An Emerging Threat to CPG Brands’ Revenues at Retailers appeared first on Zipline Logistics.