The Australian food industry is now facing a new type of consumer—one who is increasingly technology-literate with a wealth of information to support purchasing decisions.
According to areportprepared by consulting firm KPMG and commissioned by the Australian Food and Grocery Council (AFGC), the rise of online and related technologies has democratised the flow of information, shifting power from retailers and brand-owners into the hands of consumers.
State of the Industry 2012 is the latest is a series of annual assessments of the country’s food and grocery industry. This year’s edition highlights the fundamental shift in power towards the consumer, and the dramatic changes in the way they think, buy and interact to force traditional retailers and brand-owners to dramatically re-think their business models in order to remain relevant.
Online sales small but growing
The growth of Australian online retail in food and grocery products has been rapid compared to traditional retail sales over the last year.
While traditional retail sales grew almost 5%, online sales grew by a quarter to A$11.7bn over the last financial year. This figure represented 5.3% of total Australian retail sales, which together are worth A$220bn.
“Frost & Sullivan estimates that online shopping represented A$16bn in 2012, and will grow rapidly at a CAGR of 14.1% to A$26.9bn in 2016. The most important consumer reasons for shopping online are lower prices, convenience and the availability of a greater product range than in store,” the report said.
According to the report, further growth will be fuelled by more online retailers entering the market due to potentially lower costs, continued growth in technology and consumers’ ability to use it, and the increasing desire by consumers to purchase anything any time and place.
“Online grocery sales are forecast to double in five years to A$2.9bn. Moreover, if Australian online grocery sales accelerate to reach UK penetration levels we could potentially this see value increase to $4.4 billion in Australia,” said Valentine Tripp, director of strategy at KPMG.
The report outlined how, despite the unique challenges associated with online grocery retailing, super-retailers like Coles and Woolworths are still preparing their businesses to ride the online boom.
Rise of social media is good for business
The monster growth of social media it presents a sizeable opportunity for brands to connect with consumers, the report suggested.
It remarked that the main factors for consumer brand engagement are trust, honesty and transparency, and that open communication through social media can provide opportunity for the kind of direct engagement with consumers that conveys this kind of transparency.
Samantha Burke, director of industry affairs at the AFGC, said that consumers are taking the lead in the conversation and demanding greater value from companies.
“They—not companies—are shaping brands, and business leaders must engage with consumers through these social media channels to build and maintain trust among their ever-evolving consumer base,” she said.
Traditional sales methods can no longer guarantee results as marketing spend shifts from above-the-line concentration to below-the-line, and a one-size-fits-all approach clearly no longer applies.
Burke remarked that consumers no longer shop online or offline—they just shop. And social media offers a platform for instant feedback when consumers are dissatisfied with a product or brand.
“Companies can embrace this change as an opportunity to communicate directly to their consumers and grow their brand equity through their consumer’s conversations,” she added.