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The following is part one of a two-part feature by Keith Anderson, VP of Strategy & Insights, Profitero. Part two is available here.
It’s no secret that impulse purchases are a CPG mainstay under siege. Pressure to offer better-for-you indulgences, the rise of self-checkout, and shoppers too distracted by phones to notice product displays in the checkout line—these are just a few of the reasons industry insiders are exploring the future of impulse purchasing.
In this article, we’ll explore seven ways brands and retailers can prompt unplanned purchases, with a focus on the online channel.
First, a little background…
Impulse purchasing is huge. By some estimates, it accounts for between 30 and 50 percent of offline purchases. And while typical “on the fly” items such as candy bars and batteries are physically small, the profits are big. The checkout area typically comprises 1 percent of the supermarket’s merchandising space, but accounts for 4 percent of the profits.
Brick-and-mortar stores continue to try to drive impulse purchases with primary aisle placement, and with secondary placement on clip strips, end caps and point of sale displays. But how do they face the challenge of enticing a consumer base that increasingly interacts with brands and retailers online, and one that is undergoing a fundamental change in how it shops for and purchases merchandise?
The rise of Amazon spear fishers.
One reason the online channel is so difficult for impulse purchases is because of the “spear fishing” dynamic that dominates the way people buy from Amazon. Think of them as hunters standing in shallow waters, each with a spear, knowing exactly what they’re looking for.
Bezos himself has said that Amazon is not in the business of selling stuff, but rather, of helping people buy. The implication is that people know what they want—Amazon just helps them find it and makes it easy for them to purchase. However, in an impulse-oriented category in which prompting is key, it’s not so easy in Amazon’s platform to provide prompts for items not directly related to what the buyer is looking for.
In other words, when a shopper on Amazon searches for candy, Amazon can readily display related items. But if the shopper didn’t search for candy, Amazon may not be able to easily display the other products the shopper is looking for.
Add to that the underlying psychology of impulse purchasing—the desire for instant gratification, which isn’t available when you have to wait for delivery of an online purchase—and you begin to see why many industry experts have a mixed outlook.
There’s also another online retail difficulty…
Full basket grocery, but limited opportunities.
Let’s look for a minute at online grocers that have a local presence, whether it’s delivery or click and collect. This category includes AmazonFresh, which offers not only shelf-stable products, but chilled and frozen products as well.
At Amazon.com, where the spear fishers are shopping, the average order size has fewer than two items. But average orders for the full basket grocery players tend to be in the 20- to 30-item range, sometimes larger. However, even though shoppers are building a full basket, the flow of their online shopping experience has fewer secondary and impulse merchandising display opportunities than a traditional brick-and-mortar store. There simply isn’t the opportunity for the retailer to hang a clip strip in the aisle or through a merchandise rack up at checkout. For the full basket online grocery players, the challenge is simple: They may have only two or three secondary placement opportunities, whereas in a brick and mortar store, they might have 15.
What to do?
For brands and retailers, it’s a multi-billion-dollar challenge.