Online is easy, but building a scalable, profitable e-commerce business takes graft
For years, new product launches followed a similar pathway with a brand initially seeded in the on-premise before being introduced into the off-trade. The conventional wisdom about brands being built in the on-trade was mostly unshakable. Travel retail was the other great new product launchpad, with the introductions typically made at trade shows such as TFWA — often as travel-retail exclusives. The Covid-19 pandemic, now in its second year, has dramatically changed
how companies conduct their business. With trade shows cancelled, travel retail in the doldrums and much of the on-premise in lockdown, companies have been forced to think outside the box.
Many suppliers have simply delayed their new product introductions. Others have forged ahead and utilised the existing at-home and emerging e-commerce channels. Elwyn Gladstone, founder of Biggar & Leith, recently told Intel: “Many of our brands work well in the off-premise straight from the get-go. This law that you have to build a brand in the on-premise may be true for certain brands, but I don’t think it’s true for everything. You can build brands online and in retail. In many ways, with online brand building you actually have much more opportunity than you do with building it in the on-premise. You have more opportunity to tell your story, to give the consumer lots of information about the brand, details of the packaging, etc., that you can’t get necessarily from relying on a bartender telling you about the brand. I’m not anti-onpremise, it’s great, but you need to be pragmatic.”
Distill Ventures CEO Frank Lampen makes a similar point: “A lot of people went to the on-premise initially because they felt retailers would track on-trade trends. Retailers would be going to influential bars and thinking ‘What new stuff have they got?’. There was this sense that the on-premise was almost a box you had to tick. The reality is that the on-premise is an expensive channel to access relative to the scale it can give you. The opportunity presented by the closing of the on-trade is to say: ‘Well actually, it isn’t true that the only way you can build brands is through the on-trade. There are other ways you can build brands, particularly with e-commerce.”
As the market evolves and e-commerce grows, it presents the opportunity for a different way of expansion. It may no longer be necessary to lead with a very expensive, time-consuming and unwieldy on-trade brand-building model. Now, there is the possibility of expanding into multiple geographies through e-commerce operators. Whitley Neill is a good example of a brand that has successfully followed this path — it is pretty much driven by e-commerce and the off-trade.
Smaller craft brands stand to really benefit from the development of e-commerce. Access to distribution has always been their biggest hurdle. Major wholesalers are particular about how many brands they want to represent and this tends to create a funnel for craft producers. E-commerce promises better market access and is a great leveller in a business dominated by big brands.
The gradual development of credible and popular e-commerce channels is facilitating this route-to-market. If you are selling a whisky brand, for instance, there are a number of strong whisky e-tailers such as Master of Malt and The Whisky Exchange in the UK or Whisky.fr in France. The better retailers in this space have a whisky club feel and have built great relationships with a core customer base interested in experimentation. Some bricks-and-mortar retailers, like Astor Wines in the US, have successfully carried over what they were doing in-store into the e-commerce space in an interesting way.
E-commerce offers incredible opportunities for introducing new products to trade and consumers. The consumer online shopping experience can be much better than in a store. The brand owner is in control of who to target and what to say. Data and analytics are freely available, so you can really see what is working.
There are also huge opportunities for innovation, with traceable bottles, subscription services, packages designed to be shipped easily and online-only exclusive editions. With less to offer in terms of impulse or price versus major multiples, online retailers and suppliers have an opportunity with ‘hard to find’ online exclusives. A good example is Diageo’s Johnnie Walker Game of Thrones online exclusives.
Many suppliers assume that e-commerce offers an easy win, but it is not a silver bullet. Offering basic online retail is relatively straightforward, but putting the pieces together in a way that results in growth and profitability is very difficult. There is a big difference between getting an e-commerce presence and building an e-commerce business, with success relying on achieving operational
excellence across a range of areas. You may be listed all over the world, but do you have a scalable, profitable opportunity? Not necessarily. Not unless you put that e-commerce route-to-market together in the right way.
