This article was originally published by FMCG.
Generally, the alcohol category has successfully ridden the wave of Covid-19, despite the closure of hospitality venues which normally account for a high percentage of sales.
This closure and societal shift has resulted in a substantial increase in online shopping as consumers have been flocking to Omnichannel and Pure Players to purchase alcoholic beverages whether that be as part of their grocery shop or as an independent trip mission.
Consumers are also looking to explore new brands and products that they may have never tried before and are now discovering experiential sampling choices or home tasting kits.
It is therefore more important than ever to focus on building relationships with the consumer as a method to drive customer lifetime value (CLTV) whilst also fostering close relationships with supply intermediaries. And as the increase in demand has spiked considerably, many collaborations are occurring between these delivery partners and brands directly in order to fulfil consumer demand.
Looking ahead, at Transact we think there are four key areas that alcohol brands should be mindful of to ensure success in 2021 and beyond:
- The ‘Future Store’ as a concept: The store is changing and the concept of the ‘infinite aisle’ is becoming increasingly apparent. The focus should now be to ensure products are not only listed online but are optimized and discoverable for shoppers. As many countries across Europe move in and out of national lockdown, the shopping experience as we know it, is going through a period of dynamism and flux. Brands and retailers must now understand the best way to communicate with the customer and drive incremental sales through the digital store. However, this current state will not continue indefinitely, so it is crucial to use this time to plan how the shopping experience will evolve over the next 18 months both in-store and online. In particular, brands will need to innovate in order to drive sales especially as more retailers will be switching focus to developing private label products which often yield a higher margin and are not as subject to supply chain constraints and availability challenges.
- Delivery fulfilment & supply chain optimization: The supply chain of the big grocery giants has been tested under the weight of such an increase in 2020. As such, this has encouraged collaborations between brands and intermediary delivery providers such as Deliveroo who have the infrastructure and scale to fulfil additional orders. Partnering has allowed brands and retailers to stay ahead of the curve and unlock incremental sales in the short term; in the long term this will ensure retail readiness when the robust and sophisticated self-serve intermediary platforms emerge next year. It is anticipated that these platforms will be monetized, therefore, allowing brands to maximize exposure through various media mechanisms such as Sponsored Search and Static Merchandise. 2021 will no doubt see the emergence of revolutionary delivery methods as many businesses and retailers conduct analysis from the pandemic and initiate changes to their existing supply chain model in order to become more agile and responsive to spikes in demand. Brands therefore must consider their supply chain and delivery models to ensure they are using the most effective and reliable options whilst also being mindful of the importance sustainability has on consumer satisfaction and trust.
- Consumer engagement and loyalty building: As the shopping environment pivots away from the level of flux seen throughout 2020, promotional activity will return to pre-lockdown levels. Brands will need to decide the appropriate approach considering the economic outlook of a recession and choose between activating normal promotional activity in key moments such as Prime Day and Black Friday or providing a long-term cost price reduction. It will be particularly important next year to not alienate consumers, therefore taking note of the price elasticity of each brand/product within a portfolio to ensure relevance and growth of CLTV. Consumers will be particularly price aware in 2021 and will be looking to scale back on non-essential purchases. We will also see retailers introduce private label alcohol products in order to gain incremental margin that will mean brands will have to be increasingly inventive and focus on building brand loyalty in order to maintain or grow market share. One consideration to foster loyalty would be loyalty cards or surprise gifts for loyal consumers, alternatively, collaborating with shoppable media partners to make a loyalty programme possible would be another way to incentivize purchasing behavior and encourage re-purchase.
- Supercharging the digital and eCommerce experience: Seasonal event driven peaks are becoming particularly relevant, however as above, the focus should be on staying relevant and appealing to a price sensitive shopper. It is more crucial than ever to ensure all digital content is appealing, relevant and search engine optimized as consumers interact with the product using various touchpoints throughout next year. Engaging with the major retail platforms as they focus on territory expansion in 2021 will ensure that brands stay at the forefront of consumers’ mind. Although many customers will be shopping online, lots will also be venturing back into the physical retail environment meaning a seamless brand experience is necessary to build relevance and increase brand knowledge and exposure. Having clear processes in place to develop, upload and optimize products will be crucial whilst implementing sustainable and streamlined operational solutions will ensure a robust position when moving through 2021 and beyond both online and offline.