“We're engaged in a company-wide digital transformation,” says Michele Buck, CEO of The Hershey Company. She’s speaking to a roomful of financial analysts who were invited to Hershey’s Pennsylvania headquarters to learn about how the company is working to understand and drive growth in digital commerce, while helping retail partners do the same. During the visit in late August, the group also had the opportunity to tour the Global Customer Innovation Center and one of the Hershey manufacturing facilities, to gain a deeper understanding of how Hershey is winning at digital commerce.
The grocery segment has, after all, been the slowest retail sector to join the e-commerce rush. That, says Buck, isn’t necessarily a bad thing. “We've been able to learn, frankly, from how some players went into that space and perhaps got into some issues where they weren't maximizing margins.”
Today, the shopper has many choices: home delivery, click and collect, a visit to the physical store and more. It’s important, says Buck, for retailers to not focus on one of those, but all of them. “The consumer's shopper journey is not one of offline or online, it is interwoven, and so that's a place that we're very much focused,” she says.
That interwoven journey is the specialty of Doug Straton, chief digital commerce officer with Hershey. In addressing the analysts, Straton briefly outlines the history of e-commerce in grocery, which dates back about 18 years, to Tesco, which is the UK’s largest grocery chain. Today, online penetration in Europe is at about 5.6 percent, says Straton. While it’s had time to mature in Europe, online grocery shopping is much newer in the U.S., where click-and-collect services at Kroger and Walmart started taking off around 2015. In the last three years, it’s sped up significantly. In that time, says Straton, online retailers have figured out ways to control for external factors such as temperature when shipping. For a chocolate company like Hershey, that’s been a game changer. “There really wasn't the ability to speed up the growth in digital commerce for The Hershey Company until about this period,” says Straton.
As the online retail landscape has shifted, the team at Hershey has been studying shopping behavior to try and help retail partners connect shoppers with what they want. Here are some of the key points that Straton shared during the analyst event:
Shoppers are still shopping, but their options have expanded. The basic equation has remained unchanged, says Straton. “The consumer wants, the consumer shops and the consumer buys. One constant is, there is a shelf, there is a basket and there's a checkout.” It’s the behaviors, the number of trips and the number of pay points that have started to evolve. And that, says Straton, opens up a world of potential. “There are billions of pay points that are literally in your pocket,” he says. Shoppers no longer need to have transportation or take time to visit a store. They simply need a phone, computer or tablet, and they have insta-access.
Online trips are driving bigger baskets. At one time, there was a general concern in the industry that impulse buys would be limited by online shopping. Today, the opposite is proving true. Straton shared numbers provided by retailers showing that they’re selling 1.2 to 3.5 times the number of snack items as physical stores, and baskets are 1 to 3.5 times bigger than in brick-and-mortar transactions. The reason, he says, is simple. While a shopper may not be interested in purchasing a single candy bar in a large online order, he or she is interested in buying a pack of those candy bars. “When you have a pack in your house, in your pantry, you're going to gobble it up,” he says. Hershey is accommodating that by offering larger pack sizes with more diverse offerings in a single pack.
Content is key. By content, Straton means the design of the pack. In the digital world, the shelf is now the screen. Rather than presenting a package that’s “foot-stopping,” it must be “thumb-stopping,” says Straton. When producing new package designs, Hershey aims to have something that pops on a 5-inch screen and can grab attention from 30 feet away. With each pack, the aim is to have a product and product count that can be identified in a glance.
Search is the new strike zone. The team at Hershey refers to eye-level shelf space as the “strike zone.” In e-commerce, that strike zone applies to online search. Getting items listed on the first page is essential to getting them in front of consumers’ eyes, into baskets and onto a regular shopping list. Straton points out that Hershey has deep experience in this area, both in the physical world and in terms of search engine optimization. “We have the digital prowess to start to connect the environment of that retail ecosystem between the digital and the physical. That is a new capability,” he says. “We've actually set up a team that's going to be driving this for us over the next couple of years.”
Conversion is golden. When you shop online, retailers that have created a smart system will store the list and allow shoppers to use it to populate future lists. “You just take a look at what you purchased before and you basically click 'yes' and it goes into your basket,” says Straton. It’s key to get a product on that list, whether it’s through search, paid ads or other techniques, he says. Once a product makes it in, it continues to market itself.
Opportunities still abound. Online grocery shopping is still in its infancy, and it’s an exciting time. Retailers continue to test ways to capture a checkout-style experience in the digital world. One example: at click and collect, a push message appears asking if you’d like to add a Reese’s to your order. Another example: in online shopping, a retailer lets a shopper know that by adding a pack of Hershey's bars to their purchase, they will reach the minimum for free shipping and can cut costs. Straton adds that the convenience store industry still hasn’t jumped on the online bandwagon, aside from limited attempts, such as an app called goPuff, which quickly delivers drinks and snacks on demand. When that sector starts to shift, he says, “that will be another growth driver for us, and particularly at instant consumables.”
Straton and Buck are both eager to see what the future holds, and they left the analysts with a positive outlook. As Hershey continues to share insights and help retail partners build their digital commerce business, the possibilities are endless. “Everything is connected all the time,” says Straton. “You're really not ever not shopping.”
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