Market research
Last week, research group IGD held a digital retail conference in London, with some of the biggest etailer and online companies presenting on the channel's top trends. just-drinks brings you the low-down on the six biggest talking points from the event and what you need to know to be ready for the digital future. For more on future trends, download just-drinks' new FREE Futures report here.
Drone delivery - How's that coming along?
Autonomous delivery is nothing new, but the technology is moving from small-scale trials to much larger roll-outs. In the UK, the Co-op supermarket chain has been testing self driving carts - which look like coolboxes on wheels - for the past six months in the town of Milton Keynes. The project is with a company called Starship Technologies, which is also working with local businesses like fish and chip shops to get hot food to consumers' doors. For alcohol delivery, the issue of age-gating is being tackled with a code that is sent to the recipient's mobile phone. The consumer, who has been pre-vetted, uses the code to unlock the cart.
In China, online retailers have taken to the skies. JD.com, the third largest internet company in the world by sales, says it has been testing flying delivery drones in Qinghua university in Beijing.
One obstacle to the successful roll out of this technology, however, is insufficient wireless infrastructure in the world's cities. Alistair Balderson, head of supply chain insight at IGD, warned that governments will need to upgrade their municipal wireless systems to cope with the influx of machines relying on an internet connection to navigate and deliver.
The robot revolution is already here
Delivery drones are not yet a common sight in our cities, but look inside packing plants and you'll find the robots have already taken over. Ocado showed a video of their Andover distribution centre, featuring packing robots whizzing around on rails with balletic grace. Management says the fully-automated system can pick and pack an order in under five minutes and gives the company capacity for GBP8m (US$10.4m) more in sales this year.
Yet again, China is ahead of the curve. JD.com opened the world's first fully-unmanned storage facility in Shanghai in October last year.
Checkout-free shopping has arrived
UK supermarket chain Sainsbury's has launched its Smart Shop platform in one of its London stores. Consumers scan products with an app and then checkout their purchases by scanning a QR code as they head out the door. The retailer said that it is part of its goal to provide a "simple, frictionless experience for shoppers" by taking as many checkout elements as possible out of a person's shopping trip.
But what about the problem of age-gating for alcohol? Speaking to just-drinks, Sainsbury's senior product owner for instore digital, Beth Marchant, said the company is still working on it. In the current London trial, a staff member is on hand to check for proof-of-age, a human touchpoint that Marchant said may have to be incorporated into any future system. At what stage in the system this touchpoint will have to be at depends on future legalisation, Marchant added. These challenges, however, won't stop the expansion of Smart Shop - there are plans to expand the trial in London. It is also what younger shoppers are demanding. According to Marchant, 75% of 16-24-year-olds look for self-service tills because they don't want to speak to anyone while shopping.
Packaging needs to shape up
just-drinks new Futures reports (free to download here) highlights how product packaging will have to change to accommodate the growth of online retailers. That point was underlined at the IGD conference by Amazon, which said it is working with brands to create "frustration-free packaging". Part of that work is to make it easier for consumers to tear through the delivery packaging and in to whatever it is they have bought. However, is also about making the package easier to post in the first place. This, of course, is an issue for beverages, many of which come in letterbox-unfriendly shapes. Will spirits companies be willing to overhaul their famous bottles (and boxes) to encourage online shopping? You can bet smaller producers will soon start tailoring bottles sizes, likely dragging the rest of the industry with them.
Red Bull and the B2B online opportunity
Online wholesale ordering for convenience stores and other small outlets - known as B2B online commerce - often slips under the radar despite its importance, especially in soft drinks. When Lotte Tregear took over as ecommerce head for Red Bull UK she was shocked to learn that B2B sales were 15 times greater than those through regular online grocery channels. This took Tregear on a mission to overhaul often tired and difficult-to-navigate wholesaler online shopping portals, believing that the refresh would help Red Bull sell more units. She had her work cut out for her - often the wholesaler sites would simply list products in alphabetical order, making it difficult for B2B customers to find what they needed. In one case, the search pages were listed by product number, meaning the only way a brand could move up the rankings was to go back in time and launch earlier.
Luckily, Tregear found that the people shopping on wholesale websites are the same people using regular online stores, so by getting the sites to use better, clearer product images and make sure the energy drinks category is simple to find, she was able to boost Red Bull sales in the channel. She warns brand owners that only focusing on Amazon sales can eat up all your time. There are other opportunities out there.
The bad news
One of the final speakers at the conference was Shore Capital's head of research, Clive Black. A long-term critic of online retailers in the UK, Black was introduced as an anti-venom to all the positivity surrounding the channel. He certainly came through on that, delivering a downbeat assessment of the entire industry. Choice quotes in a 30 minute presentation included the claim that Ocado is not a true retailer but a technology company with a "fanciful" business model. He also called out Amazon for being "really, really stupid" in its tax affairs.
Behind the attacks was Black's opinion that standalone etailers - in the UK specifically, but also globally - are not making enough money to be sustainable over the long-term. Eventually, he says, market economics - and the tax man - will catch up with them. He also made the point that in the UK, 93% of grocery shopping is still done offline and that online supermarkets cater solely to the "cash rich and time poor". Mainstream acceptance has yet to arrive. He estimates growth for the channel but warns that the "online sector has lived off other people for too long" by having a poor health and safety records at their distribution hubs and avoiding paying into the government coffers of the countries they are operating in.
"The world will catch up on Amazon," Black said.
Sectors: Beer & cider, Marketing – advertising & promotions, Soft drinks, Spirits, Water, Wine
Companies: Red Bull
