The increasing importance of the digital shelf for FMCG brands

The hyper-acceleration of ecommerce seen during the height of the Covid-19 pandemic has in large part been reversed in grocery, but online sales remain up on 2019 levels. In the UK, ONS figures show online taking an 8.9% share of food retail sales in August 2022, up from 8.0% in the same month in 2019 (though admittedly far below the 12% share of August 2020).

For FMCG or CPG brands, ecommerce still offers a huge opportunity, however, as consumers use a diverse number of digital touchpoints to find and research products, whatever the sales channel turns out to be. This circuitous consumer behaviour presents a challenge, too.

Unlike in physical stores, where packaging, promotions and brand/product recall are all important, consumers shopping online may be using generic terms to search a digital shelf made up of endless aisles. This makes it harder for FMCG brands to stand out, when unknown competitors can steal a march through promoted listings and product content and reviews can come to the fore.

In this article, we will discuss what the digital shelf means for FMCG, how brands can optimise their online presence for maximum impact, and how the digital shelf is evolving with the rise of retail media.

What is the digital shelf and why is it important for FMCG?

The digital shelf refers to how and where a brand’s products are displayed online. This can include search results, owned websites, product and category pages on third-party grocery retail websites, as well as marketplaces and delivery apps.

Research shows that prominence on the digital shelf can have a huge impact on consumer purchasing decisions, enabling brands to be found at the right moment in the consumer journey. Due to the vast amount of FMCG brands (and products) competing for success, however, visibility in search is one key factor. A 2020 study by Sistrix (involving the analysis of 80 million keywords and billions of search results), found that the first organic result in Google has an average click-through rate of 28.5%. But beyond this, CTR falls dramatically, with the average rate for the second result dropping to 15.7% and 11% for third position, highlighting the importance of search result ranking.

Other factors such as reviews and product descriptions are also impactful for driving online conversions. Additionally, monitoring the content and volume of reviews can also play a key role in inspiring shopper confidence and preserving brand reputation. According to Bazaarvoice, when a CPG brand interacts with user-generated content, brands and retailers see a 127% lift in conversion and a 120% increase in revenue per visitor. “Reviews are playing a great part in helping fill out a whole product picture if you’re a CPG product on a retailer’s website,” Kate Musgrove, MD APAC at Bazaarvoice, tells Inside FMCG.

It’s also important to note that the digital shelf doesn’t only impact ecommerce sales, but in-store, as consumers increasingly use their smartphones to research products online before they buy from brick-and-mortar grocery retail stores. According to Deloitte, 59% of total US retail sales were digitally-influenced in 2021, which it defines as “consumers who research products online but then buy them physically,” with predictions that this will rise further to 70% in 2027.

How to stand out on the digital shelf, and the role of measurement

Insights firm Dunnhumby writes about the importance for retailers of identifying “emerging need states or category trends” in order to optimise grocery taxonomy. One example given is understanding that some shoppers browsing beer, wines and spirits may be looking for gift ideas or for on-the-go cans, and that retailers can support these two missions.

The same goes for FMCG brands, which need to understand how product portfolios and product content can appeal to different shopper needs; needs which may also be present in-store but are stated more explicitly through search and menu usage online. Beyond the fundamentals of product positioning, something which for many brands had to flex during the pandemic as people stayed at home, FMCG brands need to know where and how their products appear to customers online.

With algorithms continuously changing, understanding how to maximise visibility on online channels (as well as identifying any issues) can be a big challenge. This is particularly the case for FMCG brands, which tend to sell products via retailers or marketplaces, each of which is likely to have its own ranking and visibility criteria or advertising platform.

Measurement is key to this, and FMCG brands should focus on KPIs to determine success in various areas of the digital shelf. This is where digital shelf analytics software can be useful, enabling brands to keep track of how products are performing through automated insights, such as the following:

Pricing and product information

PIM (product information management) software can be integrated into DSA (digital shelf analytics), offering FMCG brands a way to ensure that all product content is correct and up to date. This includes pricing across channels, helping brands to benchmark pricing against competitors, as well as react to any irregular or unusual pricing on third-party retail sites. Alongside this, also ensures that products are listed with all the correct information, as well as analyse the performance of any variations.

This is particularly important considering that most consumer journeys increasingly start with a product search rather than a brand or retailer, Erika Goldwater, Director of Global Communications for PIM system inriver, explained to Econsultancy in 2021 that “If consumers can’t easily find what they want, they simply move to the next site” she said, reinforcing the fact that “retailers and brands must accurately present and optimise their products online.”

As well as accurate product information, such as descriptions or ingredients, FMCG brands should also consider rich media content on product pages, too (which is content such as dynamic imagery and video). Amazon says that its A+ Content can help to increase product sales by three to 10%. To maximise visibility, product content should be updated regularly to align with trending search terms or consumer behaviour. One example could be a health-focused food or beverage brand aligning with key words related to fitness and wellness.

Ratings and reviews

As previously mentioned, ratings and reviews can improve conversions, but keeping on top of them can be a huge task. DSA can automate this process, also helping brands to monitor and review competitor products, as well as act on underperforming products or lack of reviews on a particular marketplace.

Out of stock information

Stock-outs can be hugely detrimental, not only resulting in missed sales (that could go to a competitor instead), but also having a negative impact on reputation and even long-term relationships with customers. This is particularly the case for FMCG, where consumers can easily swap out one product for another on grocery shopping lists. Insider Intelligence states that recent Amazon out-of-stock rates for CPG categories are over 10% for both grocery and personal care products.

DSA can enable brands to continuously monitor stock levels on the digital shelf, highlighting out of stock items or promoting alternative options for customers such as in-store pick-up.

Search performance

Search rankings remain a key part of purchase and discovery for online consumers. DSA can provide a comprehensive review of how products rank and appear in search results (across key terms), as well as a comparison against competitors.

Monitoring and optimising search activity enable brands to understand the consumer journey as well as product performance.

Promotions and ad optimisation

DSA applications can track and monitor promotional campaign activity to gain an understanding of the impact on sales or search behaviour. Determining which products are converting the best can also help to define and better target future campaigns. Retail media is a burgeoning and now key part of FMCG advertising.

Retail media networks are offering FMCG brands more precise targeting

FMCG brands rely heavily on TV, spending 39% of their ad budgets here in 2020, compared to 24% for the average brand, according to Zenith. However, spend has increasingly shifted towards digital channels in recent years. The latest IPA Bellwether report reveals that main media marketing budgets – which include above-the-line campaigns – fell for the first time since Q1 2021, whilst ‘other online advertising’ and video saw growth.

Retail media has become a key part of the advertising mix, for FMCG brands to target consumers close to the point of sale, by placing ads on partnering retail websites and apps. This is made possible by the first-party data that grocery retailers hold on customers – ranging from digital interactions to in-store purchases and loyalty data – which FMCG brands can then use to form or complement their advertising strategies. The end result is the ability for brands to boost visibility on the digital shelf, with these ads typically placed across the entirety of consumer journey, including online, meaning category and product listings pages and search results, as well as in promotion feeds and in store, such as via digital signage or programmatic OOH ads. Many retailers also offer the activation of their first-party data across social media performance campaigns.

One of the key benefits of retail media for FMCG brands is so-called closed-loop attribution, i.e., the ability to tie ad spend to sales, and to calculate and improve return on investment.

According a Criteo study of 251 UK CMOs, where retailers are already offering advertising space across their online properties, the revenue from retail media ads had risen 24% over the past 12 months alone. In light of this, 70% of respondents identified retail media as a ‘strategic priority.’

Which retail media networks should FMCG brands consider?

Amazon was one of the first players to launch a retail media network, and the company continues to take the majority share of the market. In Q2 2022, revenue from Amazon’s ad service grew 18% year-on-year to reach $8.76 billion. Walmart stated that its ads business grew 30% year-over-year in this period, off the back of $2.1 billion revenue from advertising across 2021.

Sponsored product ads on Walmart.com delivered higher ROAS than Amazon in Q2, according to Insider Intelligence, with this being partly down to its accurate targeting. To ensure both reach and relevancy, Walmart considers factors such as customer intent, contextual relevancy, and historical performance when determining where to place sponsored product ads.

Several UK grocery retailers have also created or expanded their retail media networks in the past few years. Most recently is Morrisons, which joined the top three supermarkets – Tesco, Sainsbury’s, and Asda – in launching its own offering. The biggest UK network is Tesco, which is seeing growing momentum, recently announcing that the Tesco Media and Insights platform powered by Dunnhumby is now working with over 450 brands. This has also been bolstered by the addition of 100 out-of-home advertising screens to its existing collection of 400, making it the UK’s largest digital advertising network. Tesco says that this gives advertisers access to 63% of its stores.

The platform relies on the first-party data it collects through its Clubcard members, enabling brands to target online and in-store customers. CEO Ken Murphy recently said that making “best use of that data” continues to be a key strategic priority for the supermarket, which includes activity such as “testing and trialling over two million personalised promotions through the app.”

Econsultancy deputy editor Rebecca Sentance explains that retail media is particularly appealing for grocery retailers amid shrinking profit margins. Sentance writes, “Amid this environment, retail media networks offer grocery retailers a potentially lucrative additional revenue stream, as well as the opportunity to monetise the additional traffic and data they are accruing online. At the same time, for the FMCG (fast-moving consumer goods) brands that sell with grocery retailers, retail media networks represent an opportunity to reach consumers at the point of purchase with advertising that has a direct response element.”

New players move into retail media

While big grocery players including Target and Walmart have their own retail media networks, competition is appearing from elsewhere, including delivery companies Instacart and DoorDash.

After slashing its valuation after dwindling grocery delivery sales, Instacart is now aiming to reinvent itself as a player in retail media, launching Instacart Platform, which it describes as “a new suite of enterprise-grade tools built to power the future of grocery.” A key pillar of this is advertising, or Carrot Ads, which integrates Instacart advertising into retailers’ ecommerce sites. However, as Sentance explains, Instacart’s ad network could create direct competition for companies that it already partners with, including Walmart and Kroger.

Meanwhile, DoorDash has added several new tools to help CPG brands advertise on its platform, including a self-service ads manager, the option for third-party platform management, and API integrations that let brands bring ad management in-house. DoorDash is keen differentiating itself with a ‘pay for sale’ model, whereby merchants only pay only for orders placed via their ad instead of ad clicks or impressions. With 25 million monthly active users as of earlier this year, DoorDash could have an advantage in the retail space, considering that users of the app tend to already be in the mindset to purchase.

Could smaller FMCG brands be priced out of retail media?

With retail media enabling brands to target consumers with relevant and personalised ads, one of the biggest challenges ahead is likely to be the ability for small or new FMCG brands (without the same budget) to gain visibility on the digital shelf. Head of media and performance at Accenture Interactive, Shane O Leary, told Marketing Week that “There will increasingly be a power law effect,” he said. “Once the big CPG [consumer packaged goods] brands get their functions in gear and really understand what they are doing, and it becomes much more of a pay-to-play space – which most digital areas tend to – it becomes much harder for small brands to break through.”

This, combined with ingrained consumer behaviour in grocery – in so far as it’s difficult to persuade consumers to try new products or switch to a lesser-known brand – is likely to exacerbate difficulty. One way around this is to focus on branding and product visibility offline first, to establish a level of awareness before competing on the digital shelf.

Head of marketing for beverage brand CleanCo, Dean Lavender, told Marketing Week that focusing on on-trade (outlets where goods are bought and consumed, such as bars or food markets) has helped the company to grow in its early stages, giving it a leg up to compete with more established FMCG brands on the digital shelf. “Then the volume comes through from the major multiples and supermarkets. People try it in their local pub, bar or restaurant then they can go and buy it from their local Tesco, Sainsbury’s or Waitrose,” he explained.