E-Commerce continues to cement its importance for fast-moving consumer goods (FMCG) brands as online shopping becomes increasingly interwoven into consumer purchasing behaviour. However, riding the e-commerce wave means more than distribution of products. Building an effective e-commerce strategy requires FMCG companies to devise and execute digital strategies effective in shepherding consumers on their paths to purchase.
As companies continue to integrate digital commerce into their strategic growth plans, success stories from the world’s leading FMCG players offer valuable insights into the “how” of executing e-commerce strategies. Here are four key learnings.
Reach consumers when and where they shop
As e-commerce evolves, the channel envelopes diverse digital platforms and business models shaping discerned shopper journeys and experiences.
Building an e-commerce strategy in a wide playing field requires FMCG players to focus on the channel, category, and consumer fit
Building an e-commerce strategy in a wide playing field requires FMCG players to focus on the channel, category, and consumer fit. In other words, companies must understand when and where the consumer shops for their product category (or categories) of focus.
FMCG giant Unilever has been successful in executing a category-driven e-commerce strategy. The company’s leading product category, beauty and personal care, accounts for nearly 42% of its online sales across the markets covered by Euromonitor International’s E-Commerce system. One retailer, Amazon, accounts for 40% of Unilever’s e-commerce sales in the category. This makes sense as Amazon is the leading online retailer for beauty and personal care products globally, due to its vast product assortment and its unmatched logistics capabilities. Thus, Amazon has become a key retail partner for Unilever, where its hair care, skin care, and bath and shower products are top sellers across beauty and personal care categories.
Lead with a champion category
While FMCG companies have wider product portfolios, most players that find online sales success do so on the back of a particular category or brand. Nestlé has been successful with this approach, leveraging the high online penetration and premium positioning for its pet care products, with pet care accounting for 39% of its overall e-commerce sales in 2022.
By focusing on a champion category or brand, companies can leverage their competitive advantage.
Understand seasonal behaviour and leverage pricing
Although most FMCG products are used on a regular basis, seasonality can significantly influence sales performance, with a notable impact on the overall product portfolio of FMCG companies.
Nestlé’s online sales demonstrate the impact of seasonality on its hot drinks and consumer health categories, which collectively accounted for 34% of its e-commerce sales during 2022. Both categories see particularly heightened sales in Q1 and Q4 as demand for coffee, wellbeing products and supplements increases.
Seasonal trends not only shape consumption patterns, but also affect shopping behaviours. Amazon, Nestle’s most important online retail partner, sees this trend during the traditional holiday shopping season. During the fourth quarter of 2022, its share of Nestlé’s overall online sales increased to 26%, up from 24% in the first quarter of the year. This growth is supported by an increase in the value share of Nestlé’s products sold via Amazon across categories, with hot drinks being a notable exception.
The hot drinks category sees its highest volume of sales in Q1 and Q4, but a greater share of sales is conducted via Nespresso, Nestlé’s direct to consumer (DTC) e-commerce platform. Nespresso channelled over 68% of Nestlé’s hot drinks e-commerce sales during 2022, while Amazon accounted for only 19% of Nestlé’s hot drink sales during the year.
Nespresso demonstrates that companies can leverage seasonal shifts to their advantage. The DTC platform allows Nestlé to keep ownership of its online user experience and first party data.
Such strategies also bring in opportunities to develop subscription schemes and exclusive benefits for members, creating avenues for improved customer relationships
Consider premiumisation and innovation to drive value
With smaller unit prices and dependency on third party online players, e-commerce is a business of thin margins for most FMCG companies. Differentiation through premiumisation and innovation is thus on the agenda for many to move upmarket.
To drive its e-commerce sales, Nestlé notably focuses on premium brands such as Nespresso, and Purina with popular pet care lines - Pro Plan, Fancy Feast, ONE and Friskies - which collectively constituted over 47% of Nestlé’s online sales in 2022.
Investing in digitally native and prestige brands has also become an active strategy as FMCG players stretch beyond legacy brands
Unilever has recently pivoted its portfolio from mass to more premium brands, which are often digital natives and are sold through specialist online channels. For example, Paula’s Choice accounted for over 7% of Unilever’s beauty and personal care e-commerce sales within one year of its acquisition in 2021.
While these four strategies are key to developing a value-driven e-commerce strategy, companies and brands also need to integrate their own unique insights into online consumer behaviour, lifestyles, and consumption patterns to inform product design for e-commerce. Adapting a fit for market strategy is also necessary, which entails identifying the right retail partners and business models to win in a competitive online environment.
To obtain further insights from Euromonitor International’s new E-Commerce system on how FMCG companies are unlocking e-commerce potential, read our new report, Unpacking the E-Commerce Strategies of Kenvue, Nestlé and Unilever, or check out our on-demand webinar, Mastering E-Commerce Growth: How to Win Online Amid Uncertainty.