The Tetra Pak Index 2018 highlights four trends that are driving the growth of online groceries—convenience, sustainability, personalisation, and technology. The report also indicates that smart packaging will offer exciting opportunities to connect with consumers. I speak with Ms Libby Costin, Vice President Marketing, Tetra Pak Asia to find out more about the sort of impact online grocery trends will have on businesses in Asia.
Bertrand Leong (BL): What does the rise of online grocery mean for the Singaporean market, as we gear up to be a Smart Nation?
Libby Costin (LC): While standard supermarket chains and minimarts will always have a place in our hearts, we have come to a point where E-commerce and online grocery shopping cannot be ignored. In Singapore alone, there is plenty of online grocery providers to choose from—allowing us to become one of the markets set to see strong growth in the sector over the next few years. E-commerce is already a multi-billion-dollar business in Singapore, with seven out of 10 consumers shopping online 1.
Smart Packaging (left)
This can be largely attributed to the fact that consumers want a friction-free shopping experience. We have found that convenience is the number one driver of online grocery across all markets, and that the easier brands and retailers can make this shopping experience, the more successful they will be. As Singapore gears up to be a Smart Nation, we will likely see brands innovating more to reach consumers in the moments that matter.
While we already see the delivery of groceries through services such as RedMart and Amazon Prime, we might see more subscription based services that increase the ease of replenishment. For example, having apps connected to smart homes to track when certain products are running out.
The rise of online grocery also has a much wider impact, influencing physical stores, and more. It is part of a transformation that is redefining the way consumers buy, experience, and react to products, driving innovation and disruption throughout the value chain. This is especially the case as brands look to merge offline and online, and provide customers with a better way to experience product discovery and delivery. It is a no-brainer for companies, too, as it proves to be invaluable in driving efficiency across the entire supply chain.
BL: How can brands redefine the online customer experience?
LC: As discussed, the online grocery sector is on an unstoppable march, and brands should use this to their advantage to improve their overall customer experience. With more ways to buy and more places to get information than ever before, consumer engagement throughout the entire customer lifecycle is now essential. In fact, we have found that the more touchpoints a brand makes with its consumers, the better the impact on perception and satisfaction.
Convenience is a main driver of online, and brands must adapt to it. This can be done by providing customers with more information on products, personal offers, and recommendations, simpler checkouts process, and live delivery updates. Additionally, brands with brick-and-mortar storefronts can take the opportunity to merge their offline and online presence into an "omnichannel" age, where consumers can buy whenever, wherever, and however they choose, with the ubiquitous smartphone acting as their compass.
The value of personalisation in redefining the online customer experience is also playing an important role to increase brand loyalty. By using customer data collected across digital touch points—either through online habits or smart packaging features, brands can personalise and customise products to solve complex and personal challenges for consumers. For example, the data can be used to create custom products in smaller batches to meet ever more specialist needs. As such, E-retailers are able to leverage their deep customer data to identify the most desirable, and profitable products.
However, online shopping drastically reduces the visual real estate for products, especially so when users browse on mobile. It is therefore important for brands to ensure that they are instantly recognisable and consistent wherever they appear. The copy on products are also essential, especially in categories in which nutritional information is paramount.
Packaging is key to E-commerce, with an overwhelming majority of consumers saying it can have a positive impact—or ruin an otherwise positive purchase experience. There are several ‘moments of truth’ in a customer’s journey when they shop online that impact on the consumer product experience where package design can play a value-added service. Take the unboxing experience, where there is still significant scope for E-retailers to enhance the consumer experience by improving the way the package looks and performs. For example, our research found that 38 per cent had no brand on the pack, inside or outside, and 30 per cent did not reflect the value of the brand. As more and more customers begin to migrate to online purchases, brands must respond by creating products that are innovative, identifiable, and stand out.
BL: How will the four trends shaping the growth of online grocery affect brands?
LC: In our research, we have found that despite the picture of online grocery differing across markets, we have been able to identify four major trends that are shaping the future of the online grocery marketplace.
Convenience is the main driver for online consumers, as shoppers look for new ways to make their lives easier. Consumers are looking for a shopping journey that is ever faster and easier and they expect a seamless, friction-free experience, not only across devices, but also across online and offline. The easier brands and retailers can make this experience, the more successful they will be. Some key opportunities include easy-to-use products that are convenient to consume, keep, and transport.
Sustainability is an area that greatly influences consumers’ brand choices. Now, more than ever, sustainability is becoming a hot topic around the world, as people show increased interest in the entire process, from how raw materials are selected to how products are recycled. While our survey shows that consumers still consider products being delivered intact and undamaged as the most overwhelmingly important criterion for a delivery service, environmental concerns are growing. This means that brands have to be focussing on reducing their carbon footprint, as they drive down costs and emissions.
Personalisation and Uniqueness
Personalisation and uniqueness is key to customising the shopping experience. Getting consumers to purchase items online, without first seeing and/or trying them in person, creates a challenge that can be addressed through high-quality attractive packaging. Great packaging not only helps to stimulate trial purchases, but also provide a fun unboxing experience that can lead to further purchases. This is accelerating the direct-to-consumer trend, and as many as 80 per cent of consumer-packaged goods companies are predicted to migrate to this model by 2025. Additionally, this means that by using online-only items and personalised products and experiences to attract shoppers online, brands can build loyal relationships.
Technology and Performance
Technology such as packaging tracking systems will become a critical factor in boosting efficiency in online grocery logistics. This is crucial, because logistics become increasingly complex as consumers shift towards buying more frequently but in smaller amounts. The use of robotics, AI, and data processing are all parts of the solution, which is aimed at transforming the supply chain.
For example, superfast delivery in as little as 10 minutes is expected by 2025, changing consumer behaviour to buy more frequently and in smaller amounts, adding more complexity to the logistics. Additionally, carton packaging was also found to have an advantage, as it is already designed to be space-efficient to maximise logistical performance. Looking ahead, space-efficient packaging is expected to be a basic requirement by 2025. Convenience is also key in secondary packaging, with “Frustration-Free” packaging reported as key by E-retailers in their survey.
BL: What shifts can we observe in the marketplace?
LC: Another important shift that we can expect to see in the marketplace is smart packaging, which uses codes to communicate with consumers. Smart packaging features allow brands to connect and provide a positive consumer experience, which is a key factor in online grocery shopping. Sharing important information such as production materials, nutrition facts, current promotions, and environmental initiatives is only one example of how smart packaging can be used. It opens up all kinds of possibilities for strategic communications and creating a sustainable relationship with consumers in the future.
Tetrapak Digital Bits Mockup
Just as smart packaging is able to open up a new world of data to consumers and improve the online experience, brands will find them particularly useful to increase efficiency, as well. Volunteered customer data that has been collected online or through smart packaging will lead to products becoming more personal and niche. Brands will then need to become more nimble by formulating and producing in smaller batches to meet consumers' changing needs. Smart packaging helps drive greater transparency and efficiency in the supply chain, up and down stream, which simplifies the process of developing such batches, and identifying the specific products that suit each customer’s needs. It also enables a direct, interactive relationship with the consumer via the packaging itself.
Additionally, smart packaging enables traceability and transparency, as it allows every product to be tracked, monitored and interacted with throughout the supply chain—creating new opportunities for efficient stock management, distribution, and automation. In fact, Tetra Pak’s 2018 report also found that Radio Frequency Identification (RFID) implementation had helped E-retailers:
• Reduce the risk of out-of-stock items by 20 per cent;
• Reduce inventory costs by 10 per cent;
• Reduce labour costs by 10 per cent to 20 per cent;
• Increase sales by 20 per cent by significantly improving inventory.
BL: What are the five stages of the online F&B customer journey, and how can brands capitalise on these five stages?
LC: For consumers, convenience is at the crux of the any shopping experience—regardless of the market. They expect a frictionless shopping experience across online and offline channels. That said, there are many challenges that can be faced while going online for groceries. We have found that the inability to inspect goods is one of the biggest barriers for online grocery, with quality the leading concern for consumers everywhere. Delivery is then the next biggest barrier, with cost and issues around delivery slots and reliability cited as key concerns by consumers.
Moments of Truth
Given these challenges, along with the increase in the number of ways to buy and places of information, Tetra Pak has identified the five stages of today’s consumer experience. These include:
1. Discovery and Search: Brands need to work harder than ever to capture attention and get their message across; given the amount of information consumers are exposed to while online. What is crucial here is that brand messages are simple, and can stand out among the crowd—particularly as mobile is increasingly the device of choice for consumers.
2. Buy: Online shopping drastically reduces the visual real estate for products, especially on mobile. With many consumers wanting to inspect their goods, it is important that brands ensure their products are instantly recognisable and consistent. This includes the copy, especially in categories such as baby food—where nutrition and ingredient information is paramount.
3. Order Fulfilment and Last Mile Delivery: Technology is transforming both supply chain, as well as the consumer relationship. Hence, a winning logistics and supply chain strategy is key to success in E-commerce. Constant innovation and investment in order fulfilment and the last mile, particularly in technology development, such as highly automated central warehouses, as well as data carrier systems including RFID and Quick Response (QR) codes, will help address consumer concerns on the quality and timing of delivery.
4. Receive: Receiving and unpacking E-commerce goods are often seen as the first “moment of truth”, with packaging making all the difference. Good packaging undoubtedly has a positive impact on customers, and, when done right, can create a memorable brand experience. Think of the contrast when compared to bad packaging that is hard to open (think of electronics or wires encased in plastic that could cut a finger off), unattractive, or damaged—which can all ruin the entire consumer experience towards brands.
5. Share: Connected consumers are increasingly sharing opinions and experiences of food and beverage brands online. These ‘reviews’ not only contain a commentary on the product, but also include photos and commentary about packaging—which makes the experience, whether good or bad, more visible than ever before.
E-commerce is redefining the way consumers receive, experience, and react to products—creating a new circular model with constant opportunities for brands to innovate and disrupt at every stage. Consumers gravitate towards online shopping for its convenience, which then requires an increased reliance on packaging to make their decisions.
Looking forward, the most successful brands will study these opportunities and capitalise on them with the help of leading packaging and expertise providers, thereby increasing their profit margin and market share.
BL: How can customers know if the brands they support are sustainable and ethical? What can brands do to align themselves with these causes?
LC: Demand for more sustainable packaging is on the rise globally. Our Tetra Pak Index 2018 research found that online grocery shoppers are particularly critical of secondary packaging, which they often consider to be both unnecessary and environmentally unfriendly, especially because secondary packaging bags are often made of plastic. It is no secret that consumers are increasingly concerned with plastic waste, but we also predict awareness of personal food waste to continue to grow. Packaging has an important role to play across all these issues.
Ms Libby Costin (pictured left) shares about the impact online grocery trends will have on businesses in Asia.
One of the ways consumer can find out if their brands are sustainable is by simply checking if the packaging materials has been sourced responsibly. For example, FSC™ labelled packages are certified by Forest Stewardship Council™. The FSC certification system, which was introduced in 1994, is today recognised as the highest certification standard for responsible forest management. Tetra Pak introduced the FSC certification system to the liquid food carton industry in 2007. Since then, the number of Tetra Pak cartons bearing the FSC logo has increased steadily each year to reach 54 billion in 2015. In April 2016, Tetra Pak achieved a milestone by delivering 200 billion packages. Up to April 2017, Tetra Pak has delivered more than 280 billion FSC-labelled packages with 3,300 brands in over 93 countries.
Then, there is recycling. Consumers can look at their product’s packaging to ensure that it is recyclable, once it has fulfilled its purpose. Tetra Pak, for instance, keeps in check that around 75 per cent of our packaging material is made from long, strong paper fibres that can be recycled several times. The thin layer of plastics in our beverage cartons can also be blended with other plastics and turned into new products such as roofing tiles, crates, carton boxes, and more. To further our efforts in recycling, Tetra Pak also drives local recycling initiatives in more than 70 countries, which has helped us achieve a global recycling rate of 25 per cent in 2017. Our initiatives extend far beyond Tetra Pak’s own borders, though, as all collection and recycling programmes we develop or support are meant to take back cartons manufactured by any manufacturer—not only Tetra Pak. This has allowed us to recycle the equivalent of about four out of 10 Tetra Pak packages sold.
In addition to the above, it is also important to look at the logistics of how a product is delivered from the manufacturer to consumer. Beverage cartons are one of the easiest packages to transport compared to other packaging types, and the least likely to result in breakages and therefore unnecessary waste. Lightweight, logistically efficient carton packaging has a valuable role to play, both in reducing cost and carbon footprint, and this is being used as a differentiator by some brands and E-retailers. E-retailers report that space-efficient packaging can reduce transport volume by 30 per cent to 50 per cent. It also appeals to urban consumers in small homes with limited storage.
Beyond these factors, brands can also look toward smart packaging to better communicate their sustainable and ethical practices to the consumer. Technological advancements such as smart packaging allows companies to share important information such as the production process, whether the raw materials were sourced from sustainable sources, and many others. Additionally, any recycling programmes or environmental initiatives can also be communicated to the consumer for strategic communications and creating a sustainable relationship with consumers in the future.
Copyright © 2019 Singapore Institute of Management