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This year has shifted the online marketplace. Here's what natural products industry brands need to do to keep up.
4 Min Read
For the last 14 years, Netrush has been helping natural products brands maximize their potential on Amazon and other e-commerce channels. Our monthly E-commerce Radar is intended to provide actionable insights surrounding the most current news, trends and shifts in the e-commerce space.
E-commerce now accounts for 16% of retail sales
COVID-19 has accelerated e-commerce two-to-four years into the future in just two quarters. According to data from Marketplace Pulse, e-commerce in the U.S. grew by 44.5% in Q2 2020, raising e-commerce’s total share of retail to 16.1%.
Not all sectors of retail were affected equally by COVID-19. Vitamins, minerals and supplements (VMS) experienced a surge in online sales. As online interest and e-commerce sales volume increases, there are a few ways brands should be shifting their strategies:
Become more consumer-centric. COVID-19 has put all the power in the hands of the consumer, and in turn, brands need to be putting consumers at the center of their retail strategy. Fast shipping options, extensive product details, customer service, frustration-free packaging—all of these things are designed to deliver the best possible experience for shoppers at every touchpoint, and they work.
Identify economies of scale. Many brands are still working with multichannel supply chains, and that can create lots of inefficiency over e-commerce. When volume surges, those small inefficiencies become costly problems. This is where identifying “economies of scale” becomes important.
Internally align traditional and digital retail strategies. To effectively reach shoppers, brands need to achieve alignment between their brick-and-mortar and e-commerce strategies. Being able to provide a similar experience on the digital shelf — one that your brick-and-mortar customers are used to, including product information, pricing, packaging and customer experience—is critical to developing a successful e-commerce strategy.
COVID-19 is shaking up customer loyalty
According to a recent report by McKinsey & Company, 76% of consumers have tried a new shopping behavior as a result of the pandemic. Thirty-seven percent of those consumers have tried new brands.
Most of those brand changes took place in “basic” shopping categories, such as groceries, snacks and other household staples. Out of all consumers surveyed, including those who don’t regularly buy vitamins, 5% tried a new vitamin brand between the start of the pandemic and the end of July. Fifty-eight percent of total surveyed consumers cited “value” as the main driver for making a brand change.
Consumers are up for grabs right now. To win these consumers, brands need to focus on two things: increasing their visibility and proving value. In the e-commerce space, this is a great time to double down on marketing and content budgets, focusing on how products are being presented on the digital shelf.
Amazon has its biggest-ever quarter in terms of retail sales
Amazon characterized its Q2 2020 performance as “highly unusual” in its last earnings call to investors. What is typically the retailer’s lightest quarter turned out to be one of its biggest ever in terms of retail sales.
Demand on the Amazon Marketplace started to surge in early March, just shortly after the pandemic hit the United States. Overwhelming pressure on its supply chain forced Amazon to limit inventory injections to high-demand, essential items.
Demand continued to be high in the second quarter, but Amazon was able to meet that demand by flexing into areas reserved for Q3 and Q4, which are typically the company’s busiest quarters. Q3 is now here, Q4 is right around the corner, and Amazon is doing everything it can to increase capacity fast.
In the meantime, the company has placed new limitations on FBA in the form of quantity limits and an increased Inventory Performance Index requirement. Limitations can be worrying for brands, especially those that rely specifically on FBA. Moving into peak season, it’s critical for brands to focus on flexibility. Supply chains should be able to rapidly shift to meet demand, something that will become even more important during the holiday season.
Austin Wright is a content strategist at Netrush, a leading e-commerce solutions provider for premium natural products brands.
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