E-commerce continues to grow rapidly, with sales soaring 14% in 2021 to $869 billion, according to Mintel’s executive summary of US retail and e-commerce for 2022. And while e-commerce sales have traditionally been just a small portion of business for baking and snack companies, the coronavirus (COVID-19) pandemic may have changed this for good.

“COVID really sped up the growth and adoption of e-commerce in the realm of groceries,” explained Erin Heikkinen, vice president of e-commerce strategy and consulting, Advantage Digital Commerce. “Prior to COVID, there was a question in a lot of consumers’ eyes of buying groceries online and will it meet my needs and will it be satisfactory in the process. Being strong-armed into it during the pandemic due to their fear for safety and health risks really helped people get over that hurdle of trying it for the first time.”

Many consumers realized they can have the same grocery shopping experience online as they do in store, with a large selection of items and the ability to customize their orders. As a result, online sales of bakery and snack foods will grow, even though many consumers have returned to in-person grocery shopping.

“The trend is going to continue, both from those who have started to adopt it in the current generations — the millennials, the boomers, Generation X — but the continued fuel power is coming behind it with the younger generations that aren’t going to think twice about shopping online, because they do everything online,” Ms. Heikkinen said. 

IRI data shows that 21% of all multichannel sales are now happening online, according to the 52 weeks ending Feb. 20, 2022. Online sales of general food, which includes bakery and snack items, stand at 13.4% of the food and drink category at $31.9 billion. While this lags behind categories like beauty and health, it’s the fastest growing online food segment at 10% growth.

“E-commerce is here to stay,” said Sam Gagliardi, senior vice president of e-commerce, consumer and shopper marketing, IRI. “We predict it will be at least a third of the total grocery industry sales by the end of next year at the latest.”

Pure-play vs. omnichannel 

Food companies moving into e-commerce must be aware of its two main channels. The pure-play channel includes online-only sellers like Amazon, while the omnichannel is represented by in-store retailers such as Walmart and Target that also sell products online.

Each channel is growing in different ways and serves a unique purpose. E-commerce pioneer Amazon has the largest share of the online grocery space and accounts for half of all online sales, IRI reports. But omnichannel grocery sales are also growing quickly, largely thanks to strong customer loyalty, Mr. Gagliardi said.

“When you look at the US grocery industry, these retailers specifically have the most loyal consumers of any industry,” he explained. “More and more shoppers generationally shop at the same grocery store over and over again.”

When consumers migrate their shopping experience from in-store to online, they want to shop at the store they’ve gone to their entire life. 

“Those new omnichannel retailers that are able to exist in-store and online, they’re actually growing the fastest and taking share away from Amazon, and especially for bakery we would expect that to continue,” Mr. Gagliardi said.

Food brands should capitalize on this consumer loyalty and get their products on omnichannel sites. But establishing a presence on pure players like Amazon is equally important.

“Because of the size and scale of Amazon here in the US, it still is a must-win for all brands and all categories, although it might not be their No. 1 revenue driver,” Ms. Heikkinen noted. “I think pure-play has a place and needs to be managed more so as a marketing tool for perishables.”

If brands aren’t putting their products in front of consumers in the pure-play space, others will.

“If you’re not choosing to engage with Amazon, there will be someone else out there, a third-party seller, who will take your brand and sell it online,” Mr. Gagliardi warned. “And if they’re doing it, then you lose control of your brand messaging, you lose control of what that product detail page can look like. Some third-party individuals will set it up with what they believe the brand stands for, opposed to what you and your brand managers believe it should stand for.”

Muffin Town, Chelsea, Mass., sells its products on Amazon as well as numerous other online platforms. In addition to the Muffin Town website and Madeline’s Pantry, its own online bakery, Muffin Town’s baked goods are available on Walmart, ePallet and Instacart, as well as Google Shopping, Facebook and Instagram.

“The goal is to get us into as many omnichannels as possible,” said Roger Piffer, director of marketing, Muffin Town. “Orders come from all these channels, and more visibility means recognition.”

Knowing where to start

With so many sellers to choose from across pure-play and omnichannel, some companies may be unsure where to start putting their products online. Mr. Gagliardi said it’s critical brands first get their distribution set up properly on whatever channel they choose.

“If it’s a pure-play like Amazon, you have to make sure you get listed. If it’s with these omnichannel retailers, you have to make sure that they’re bringing their in-store assortment to online,” Mr. Gagliardi explained. “Once you gain your distribution, that’s when you need to go back and cultivate your product detail page.”

This detail page includes a product’s description, title, packaging, ingredients, benefits, company story and more, and if done right, will help a brand stand out from its online competitors.

“Brands need to own that process,” Mr. Gagliardi emphasized. “Once you own that presence and own what your packaging is now in the online space, then what you finally need to do is drive awareness and drive consumers to that product page so they can actually buy you.”

Consumers’ online loyalty makes driving this brand awareness especially important. When it comes to groceries, shoppers aren’t re-shopping, they’re rebuying off their previous grocery list, Mr. Gagliardi said. Once customers start buying a certain product, they’re going to keep buying it unless they have a bad experience or the product is out of stock.

“That online presence is really the tip of your marketing spear, and if it’s not done right, or if it’s done by someone else, then you’re really losing a significant part of marketing to specific consumers,” he said. “If you’re not utilizing e-commerce as not just another sales channel but also a media channel, then you really are opening yourself up to a lot of competitors winning that purchase. And once they win that purchase, they’re more likely to win the next purchase.”

B.T.R. Bar, San Francisco, for example, prioritizes building a personal relationship with customers so that they keep coming back.

“As soon as we get reviews through our Shopify stores, I reach out to each of our customers. I’m able to set up calls with them and crowdsource more data about what they’re looking for within the snacking industry,” said B.T.R. founder Ashley Nickelsen. “We get this one-on-one time, and we know who they are.”

Having an online rating and review system is great for gathering valuable consumer feedback, but it’s also a necessary tool for driving customer conversion to a brand’s product.

“The number of reviews shoppers want to see in order to feel comfortable making a purchase is important and becoming larger,” said Stephen Chriss, vice president of digital commerce and omni shopper marketing, Campbell Snacks, Camden, NJ. “One to 10 ratings/reviews has a 40-plus % conversion rate, whereas 100-plus ratings/reviews has over a 200% conversion rate.”

Regardless of a brand’s online strategy, it’s important they start small and realistically assess what the size of the prize is. With so many additional touchpoints and labor behind the scenes, profitability is one of the biggest challenges for online food sellers, so companies have to make sure they don’t stretch themselves too thin.

“I’ve seen a lot of small brands get really enthusiastic about getting out and getting everywhere, but there’s just not enough time in the day to do that, so let’s prioritize and start with one or two,” Ms. Heikkinen said. “Then when we get that right and start to grow, then let’s focus on three, four and five.”

This article is an excerpt from the May 2022 issue of Baking & Snack. To read the entire feature on E-Commerce, click here.