COLORADO SPRINGS, COLO. — If one word was needed to sum up the Grocery Manufacturers Association’s Leadership Forum, held Aug. 14-16 in Colorado Springs, it would be uncertainty. Much of the meeting’s agenda focused on e-commerce, e-tailing and digital marketing, and it’s clear many company leaders are frustrated by the lack of clarity in the market. All agree investment in the space needs to be made, but the challenge is identifying the business models that will be successful.
|Shawn O’Grady, president of sales and channel development for General Mills.|
“Our supply chain is not built with e-commerce in mind,” said Shawn O’Grady, president of sales and channel development for General Mills, Inc., Minneapolis, during a presentation at the meeting. “To make that change requires capital. To invest capital you have to scope the outcome you want. The models are changing so quickly it is challenging to scope the capital.”
Jim Dinkins, chief retail customer officer for The Coca-Cola Co., Atlanta, said working with e-tailers is a learning process.
“They are different and they are very supply chain oriented,” he said. “They think about the supply chain before they build a business model.”
Kelly Ungerman, a partner with McKinsey & Co., Inc., said market disruption is often overhyped in the near term, but that a lot of the hype that has been promoted for the past decade is becoming real.
“Food, which has been insulated, has low on-line penetration,” she said. “Our point of view is not to get too complacent. Disruptors are trying to go after the food and beverage categories.”
She added that industry executives should separate their view of on-line research and on-line sales. Research rates are fairly high and consistent for the industry.
“Purchase rates are what you people are watching and we are starting to see some levels of unlock,” she said.
Similar to Mr. O’Grady, Ms. Ungerman questioned if the winning on-line business model exists today, but added, “there is no more disruptive force in on-line retailing than Amazon. They are effectively one of the largest omni-channel retailers. Their on-line component is a hypermarket, and they are working very hard to own that last mile of the basket.”
Ironically, while everyone on the panel agreed the food and beverage category has a ways to go in developing on-line businesses, everyone agreed the consumer is way ahead and ready.
What is holding back food, Mr. O’Grady said, is that a successful full-basket shopping experience has yet to make its way on-line.
“Where it is available, it’s not a particularly enjoyable experience,” he said. “It is improving, but everyone is still working on it.”
Compounding the problem is the transition consumers are making from computers to mobile.
“I think if you look forward it is hard to ignore the (smart)phone,” Mr. O’Grady said. “Whether it is information gathering, personalized offers or navigation, it’s already important. But the big area is the full-basket shopping trip. It is already difficult to do a full-basket trip with a laptop.
“Somehow we are going to have to go from spearfishing for one or two items to a model of big shops. The phone is important to us now from an information and promotion standpoint, but not as important to the full-basket shop.”
Mr. Dinkins said adding to the uncertainty in the market is the emergence of the digital shopping list.
“If selection becomes automatic, what is the dynamic on your brand?” he asked. “Strategies we use in brick and mortar won’t work anymore.”