E-groceries are booming – how Covid-19 is changing shopping behaviour

Covid 19 hat dem Marktsegment einen gewaltigen Schub beschert: E-Food boomt. Doch nicht alle Länder Europas profitieren gleich stark. Wie deutlich die Unterschiede sind, zeigt eine Studie des EHI Retail Instituts.

 

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Demand higher than capacity

Doing the weekly shop with one click from your sofa? Even before the pandemic, online grocery shopping was a clearly recognisable trend. Restrictions in the retail sector due to Covid-19, customer concerns about contamination, but also the desire for optimal time management continue to drive up demand for ordering food online.

Online grocery suppliers have long been unable to exploit the demand fully. Logistics and capacity constraints mean that delivery slots are sometimes in short supply.

However, the picture in Europe is mixed. While online grocery shopping is a serious factor in some countries, other places are experiencing high growth rates, but from a very low level.

Market share in Britain at 8.8 per cent

The front-runner among the countries studied by the EHI Retail Institute is Great Britain. According to projections by the British market research company IGD, the online grocery market reached a total volume of 18 billion pounds sterling (about 20.8 billion euros) last year. With total food retail sales of £205 billion, this represents a market share of 8.8 per cent. "The online grocery market was very highly mature here even before the crisis," says the EHI Retail Institute.

 

Click & Collect popular in France

In France, too, the online grocery trade was able to make profits last year. For 2020, the Nielsen market researchers recorded an increase in the online share of grocery sales to 8 percent. A year earlier, the online grocery’s market share was just under 6 per cent. "The grocery e-commerce boom in France is mainly based on the click & collect model of large-scale full-range retailers," says the EHI Retail Institute. "This concept allows customers to order the goods online and then pick them up themselves, either by walking into one of the market’s set-up distribution points or taking the car to a drive-in pick-up station."

 

Germany’s small market share

Compared to the rest of Europe, Germany has a very dense network of food retail outlets. In contrast, the online grocery sector's share of 1.0 to 1.4 per cent of total grocery retailing in Germany is low. However, the market is growing strongly and got another boost in the pandemic. According to the German E-Commerce and Distance Selling Trade Association (bevh), the German online grocery market reached a total turnover of 2.67 billion euros in 2020, with a strong growth of more than 67 percent compared to 2019.

"Centrally controlled online offers from Rewe, Picnic and dm experienced an upswing, as did the delivery services of many independent food retailers, so that they sometimes reached their capacity limits," explains the EHI Retail Institute.

The ‘fresh solutions’ trend

The latest study by the market research company GfK indicates that this trend will continue, too. According to the GfK study, many of the effects in shopping behaviour triggered by the pandemic are due to changes in consumer needs. This includes conscious consumption and deceleration in everyday life. The special attention that the issue of food received in the crisis is emphasised by the Zukunftsinstitut in its Retail Report 2021: "With the growing preference for buying groceries online as well, the increasing desire to cook for oneself and the expansion of infrastructure, new ‘fresh solutions’ are emerging that focus on enjoyment in addition to supply."

 

Startups create competition

Lured by significantly increased sales and potential in the online grocery sector, more and more startups in Germany now want to compete with the big food retailers.  Each equipped with hundreds of millions of euros in venture capital, the delivery services Gorillas, Flink and Getir want to expand into more cities. While they promise to deliver the ordered goods in ten minutes, other providers like the Dutch company Picnic rely on fixed routes at fixed times. This saves money – yet does not harm their success.

According to a survey by the Cologne Centre for Research in Retailing (IFH), more than half of 18 to 29 year-olds would like to have smaller purchases of everyday products or beverages delivered within four hours. However, a large proportion of the total population (36%) is satisfied with same-day delivery; for drinks, the next day is usually enough. 

New collaborations are also on the cards

The number of small suppliers in a rapidly growing market is also making Germany’s big players like Rewe and Edeka rethink. For example, Rewe, the market leader in the delivery and pick-up service business, took a minority stake in the startup Flink in the summer. Lionel Souque, CEO of REWE Group, explained that it is noticeable "that the food delivery business in Germany is currently becoming very differentiated. Besides the comprehensive full range of up to 20,000 items that can be ordered from Rewe.de, fast delivery services are entering the market whose USP is delivery to customers in 10 minutes." REWE Group wants to profit from the development of the market segment and, among other things, take over the exclusive supply of goods at Flink.

Germany's largest food retailer Edeka, so far rather cautious in the online grocery sector, is betting on a stake in the Dutch company Picnic. Edeka is convinced that Picnic's concept of delivering at set times in set neighbourhoods is the most likely to make money in online retail in the future.

And in Britain – currently burdened by supply bottlenecks and a shortage of truck drivers – new collaborations are also on the cards. Deliveroo has now teamed up with the Morrisons supermarket chain. The new delivery service, ‘Hop’, brings food from the Morrisons range to homes in two London boroughs within 30 minutes.

Conclusion

Online grocery shopping is a trend that received a huge boost during the coronavirus pandemic. The trend does not look set to reverse any time soon. Companies are now faced with the challenge of failing to reach delivery and capacity limits in the face of growing demand. While in European countries with low food retail density, such as Great Britain and France, the online grocery share is at least 8%, it is still low in Germany. Startups with delivery times of up to 10 minutes as their USP are entering the market with a vengeance, but the big players like Edeka and Rewe also want to profit from the development. They are using different approaches in their attempts to make money in the online grocery trade.

 

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