Dropshipping, Kroger Online, YouTube

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Dropshipping Capability Growth
In our 2019 supply chain benchmark, 56% of manufacturers we polled indicated they currently have dropship capability, an increase from 40% from last year’s benchmark. Hardline manufacturers tend to outpace CPG companies with this capability as CPG products tend to be very difficult to economically ship directly to the home. There did not, however, appear to be much of a difference in terms of size of company and the likelihood of doing dropship. For companies without dropship capability, 30% of them indicated they are working to enable it over the next 12 months. We expect part of the urgency for these companies is that we see more retailers, including outside of Amazon, requiring at least portions of product assortment to be dropshipped to the home by the manufacturer. For instance, 16% of manufacturers are seeing this with Walmart and 21% with Home Depot. Keep in mind, these are manufacturers with mature businesses at these retailers and a long history of only doing wholesale business. In other words, as eCommerce grows for these retailers, they are pushing more of the shipping challenge onto manufacturers regardless of the goodwill established over decades of business relationships. 

Source: kroger.com

Kroger Highlights Digital Growth and Offers Free Online Pickup Until 2020
At an investor event this week, Kroger highlighted its digital growth, noting that online sales were expected to grow 30% Y/Y in 2019 and an additional 20% in 2020. Kroger also highlighted that its data indicates 50% of online purchases are incremental to brick and mortar sales. For comparison, this is slower than Walmart’s growth which has been fueled by free Online Grocery Pickup. Notably, Kroger also announced that it would offer free Grocery Pickup through January 1, 2020 in an effort to drive adoption of the service and highlight the company’s rebrand, including a new logo and slogan. Kroger also highlighted continued growth in its advertising offerings, including online, expecting $125-150mm of growth in 2020. For vendors, while Kroger is seeing solid online growth, the majority of its focus appears focused on its partnership with Ocado for grocery delivery, which our work has indicated is likely to launch in 2021. 

YouTube Cited as Most Influential Social Media Platform
75% of consumers indicated that at least one of the platforms in the chart above influences their purchasing behavior. YouTube (a new addition to this year’s survey) stood out this year as the most influential platform for consumers as they consider products to purchase. For instance, we see this often in the home improvement category for DIY-related products and in the beauty category around makeup tutorials. Other key platforms include Facebook, Instagram, and Pinterest. 

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