As previously reported by the IWSR, ecommerce presents a major growth opportunity for beverage alcohol; in 2019, ecommerce sales in the ten core markets studied by the IWSR are estimated to be worth almost US$21bn. By 2024, IWSR forecasts that the channel will reach a value of US$45.5bn just in those ten core countries, significantly outpacing the growth rate of total trade over the next five years.
However, “as consumer patterns shift over the course of the coronavirus outbreak, we are likely to see this growth proliferate even further,” remarks Mark Meek, IWSR CEO.
Ecommerce platforms have already reported increased sales: Drizly, the largest alcohol ecommerce marketplace in the US, said that its growth rate of sales increased by 50 percent since news of the virus began to spread in the country. JD.com, one of China’s largest ecommerce sites, saw sales of common household staples quadruple over the same time period last year.
IWSR data shows that historically, products that do particularly well on ecommerce are ones that are positioned at the medium or higher-end, such as premium wines and Scotch. Now, as consumers increasingly turn to online grocery shopping for household items, mainstream beverage alcohol products will likely be added to shopping baskets on a more regular basis as well. The consumer base is likely to expand too, with older consumers becoming more comfortable on ecommerce platforms, in response to social distancing and self-isolation.
“As the current situation abates, this increased use of ecommerce has the potential to remain for the longer-term. While we may start to see some changes in purchasing frequency and the end consumer now, the underlying drivers of what makes for a successful ecommerce strategy still remain the same,” remarks Meek.
The unique potential of ecommerce is that it allows brands to tap into a wider consumer base. For smaller, craft or independent brands, it also offers the opportunity to launch into new markets more rapidly and effectively, posing increased competition for incumbent brands. For larger companies, ecommerce also offers a platform for nimble product innovation and product development. For example, limited editions and special collaborations, such as Johnnie Walker’s Blue Label Year of the Rat launched for Chinese New Year, keep brands fresh and exciting for consumers, and can hone in on a very targeted consumer segment.
The foundational building blocks for success lie in brand owners treating ecommerce as a market, not just as a distribution channel. Ecommerce requires a centralised team to negotiate the digital world; one that spans business functions – sales, marketing, technology and logistics teams – as well as being fully aligned with country teams.
Each country will have a different view of what works best for the local market, and will need to adhere to the guiding directives set by the centralised head team while still assessing the needs of their specific country, such as:
- Which platforms offer the best partnerships
- Whether a carefully curated combination of individual brands and individual platforms is needed
- Which categories outperform the rest
- How to satisfy consumer drivers for shopping online
- How to adapt product marketing for consumers who are platform-agnostic vs those who are brand-agnostic
- How to marry pricing strategies of ecommerce and brick and mortar trade, alongside the on-premise
- What type of storytelling and online positioning cut through the competition
Choosing the right partners and route to market is a nuanced decision, and as brand owners work with supermarkets, specialist stores and general ecommerce sites such as Amazon, they need to also consider how to retain access to their customer data. “Brand owners need to find their own ways of reaching their consumers so that they are not solely dependent on Amazon and other online retailers as a distribution platform or as a source of customer data. Direct to Consumer channels provide opportunity here,” advises Emily Neill, COO of IWSR.
Brands with a strong heritage and story resonate well with consumers, and it’s no different in the online space. Merchandising in the on- and off- premise offers brand owners the opportunity to leverage assets such as shelf placements, special displays, brand activations and bartender ambassadorships. This, however, does not translate online. Brand owners that have seen success in ecommerce are ones that invest in product descriptions, graphics, and crucially, online storytelling, to stand above the competition, especially on specialist retailer websites. Some examples include Diageo’s virtual voice distillery tour, the ‘Talisker Tasting Experience’; Jiangxiaobai in China; and Johnnie Walker Game of Thrones.
Understanding consumer purchasing drivers will be key as well. IWSR research shows that in China, for example, consumers are extremely retailer/platform-loyal rather than being brand loyal. In other markets, consumers will specifically seek out their favourite brands online, regardless of platform. Brand owners need to understand how to adapt their marketing strategy based on whether they are targeting the purchase drivers for a specific ecommerce platform or for the product itself.
As we see more innovation, investment and consumers moving into this space, brand owners need to view ecommerce as a market in its own right. There needs to be a clear ecommerce strategy – one that takes into account pricing strategy, delivery formats, storytelling, brand marketing, and how to deliver on the expectations of the online consumer.
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