Topics Covered: November 7, 2022

  1. The omni-enabler calculus (part 1)
  2. The expanding role for CDOs
  3. Amazon as a service provider
  4. Company commentary from last week
  5. Amazon freezes ads segment
  6. Amazon v. Walmart study

Like Amazon in 2015, omni-enablers don't offer a choice to consumer brands

There’s a great deal of pessimism in the eGrocery industry.

 

Investors went from risk-on to risk-off, challenging not just the growth potential but the survival of many firms that just a year or two earlier were darlings of the industry.

 

Quick commerce firms shut down, IPOs were delayed, international markets were closed.

 

But just as the pendulum swung too far on the optimism side at peak pandemic (e.g., “Everyone’s going to buy all their groceries online”), so too has the industry gone too far with its pessimistic outlook (e.g., “Digital has fallen off a cliff”).

 

The three-part series this week will explore omni-enablers – companies like Instacart, DoorDash, Uber Eats, Shipt, and Grubhub – and why brands should make them a key part of their digital growth plan even if they’re currently out of favor. 

 

This is a great series for CPG leaders that might have their toe in the water on omni-enablers but want to hear the case for going bigger.

  • Part 1: The Analogy to Amazon’s Marketplace
  • Part 2: Assessing 3 Common Critiques
  • Part 3: Urgency and Risk-Reward Considerations

The Analogy to Amazon’s Marketplace

 

In 2015, consumer brands were hesitant to sell on Amazon.

 

Amazon was…

  • Small
  • Competitive
  • Disrupted pricing
  • Difficult to work with
  • Different to work with
  • Didn't highlight the brand
  • Didn't care about the brand

 

Brands felt they had a choice of whether to sell on Amazon.

I told all of them, "You have no choice, you're already selling there. You just let others do it for you."

 

How was this possible they responded, tilting their heads?

 

The marketplace, of course. 3P sellers sourced product from wherever, oftentimes directly from the brand, and listed on the marketplace for a wide range of prices. Content was often poor, these sellers may or may not have had sophisticated strategies to win search (leading to the brand losing share), and management had little to no visibility on the trajectory of the account.

 

This meant that while a brand might not want to be on Amazon for fears, perceived or real, it wasn’t lucky enough to have that choice.

 

Once a company accepted that reality, the conversation shifted to, "okay, if we're selling on Amazon, we want to control it and we want to maximize the opportunity".

Omni-enablers are similar.

  • Hesitant to over-invest: CPG brands were quick to prioritize Instacart at the start of the pandemic. But as financial markets have turned risk off, many brands are increasingly doubting Instacart’s long-term viability and have been slow to prioritize Uber Eats and DoorDash, both of which have added grocery and convenience channels to their offerings.
  • Feeling like it’s a choice: Instead of a marketplace enabling sales of a product without an active strategy, physical stores enable this. Since omni-enablers pull from stores, a brand's product found on an Albertsons' shelf will also show up on Uber Eats app

 

Skeptics might say things like, "But we don't sell on Uber Eats app" or "We don't focus on Uber Eats" or “Omni-enabler models aren’t viable long-term.”

 

Okay, but your products are showing up there and volume is flowing through that channel even if you are not conscious of it or you can't measure it closely.

That means the decision, like on Amazon, becomes one about control and maximization and risk/reward trade-offs rather than to sell or not to sell.

  • Do we want to ensure our content looks good on Uber Eats (or Instacart or Shipt or Grubhub or DoorDash)?
  • Do we want to ensure a shopper sees our products when they search for our brand or are we okay letting our fiercest rival own that top slot and enter the "previously bought" category forever?

 

Typically, the answer is a brand wants great content and to win share.

 

Fortunately, the investment to "expand" to omni-enablers is smaller than expanding to Amazon. It's a function of paying more attention to content (with a brand’s existing syndication platform able to distribute to omni-enablers) and investing in performance marketing (mean paying for search terms you care about in a flexible, auction driven manner) that is often enabled by existing partners and/or tech stacks.

For the Nerds

Expanding role for CDOs: "Today, the role of the chief digital officer (CDO) is as vital a role as the CMO, if not even more so, thanks to the fact that digital transformation became necessary for survival, generating credibility across the C-suite…Responsibilities for CDOs have also spread horizontally across most businesses, charged with improving business performance as much as transforming business practices."

 

The article (study not released yet) highlights the growing overlap between CDOs and CMOs as measurement and marketing become more technical, an outcome of technology blurring lines up and down organizations. While there might be competition between these two roles inside an organization, the obvious better outcome is to work tightly together on customer experience, leveraging the talents and capabilities of both executives. (Digiday)

Image Source: https://www.amazon.com/alm/storefront?almBrandId=U2F2ZSBNYXJ0

 

Amazon as a service provider: Save Mart (~$4B in sales; 3.5% 5-year CAGR outlook) announced it will now offer two-hour delivery via Amazon. 

 

Why would another grocer work with Amazon? Logistics and customer acquisition!

 

This announcement follows Cardenas doing a similar partnership and builds on other non-grocers partnering with Amazon (PacSun, GNC, SuperDry and Diesel) to enable BOPIS.

 

It's all part of Amazon's focus turning outward, and the recent partnerships are both good (grocers are looking for partners) and bad (Amazon's competing) for omni-enablers like Instacart. (Winsight)

Company commentary: Supply chain, inflation, pricing, and inventory remain top of mind for many companies amidst volatile macro backdrop.

  • Mondelez - Revenue +12& on pricing with operating income up 20%+; Planning more price increased in December '22 and likely in '23 as well.
  • Clorox - Cleaning and disinfecting surprised to the upside in the quarter; supply chain disruptions persist; rational inventory levels are in place across channels; continuing to see cost inflation and more ad/promo spend
  • Molson Coors - Worse than expected results as inflationary pressure across materials, transportation and energy contributed two-thirds of the 12% increase it saw in COGS.
  • Hub Group (logistics) - “The fourth quarter is generally the peak of the holiday shipping season…however, judging by the feedback from our clients, this peak will be muted versus historic norms. Beyond 2022, we do acknowledge the potential for a continued softening economy.”
  • Criteo: Third-party cookie deprecation is translating to the company planning to compound its retail-media solutions 45% each year between now and 2025 while its retargeting business steadily declines.

Amazon freezing new position openings in ad unit: Amazon is reportedly freezing new position openings within its advertising business.

 

While Amazon's ad business escaped the muted results from Google, Meta, and Snap by growing 25% Y/Y last quarter, it's new position freeze suggests growing concern on growth prospects headed into '23.

 

This comes at a time when many advertisers it does business with are entering annual vendor negotiations and setting '23 ad budgets in addition to the "retailer" courting non-endemic advertisers and moving up-funnel.

 

Current forecasts predict Amazon's ad business to grow 18% in '23 compared to 1P sales growth of 5.5% and 3P up 10%. (Bloomberg)

Image Source: Jungle Scout

Amazon vs. Walmart study: Jungle Scout released an updated study analyzing consumer behavior and seller dynamics across the two marketplaces. Walmart data points that stood out:

  • ~40% of shoppers start their search for products at Walmart (Amazon ~65%)
  • 31% of consumers are Walmart+ members (Amazon 57%)
  • Product prices are the #1 reason shoppers choose Walmart (Shipping prices are #1 on Amazon) (Jungle Scout)