How online grocery and quick commerce in Europe are changing the grocery retail landscape
Lian Enters, Market specialist Netherlands
Picture source: Pixaby Skitterphoto
In recent years the potential of the online grocery market has become evident. Covid accelerated the growth of online retail and a series of large investments and take overs will speed up these developments even more. The battle for the consumer has started. This article will give you an overview of the landscape to date, the outlook and the possible implications this can have on retailers and suppliers.
Size of the opportunity
The European market for groceries is worth €1.644 Bn, for online groceries 52.1 Bn. The average market share of online grocery is 3.2% but the percentage and the potential differs a lot per country. In the Netherlands for example, the market share of online groceries is expected to grow from 5.1% in 2021 to 9.6% in 2026, in the U.K from 10.5% in 20221 to 11.8% in 2026 and in France from 5.2 % in 2021 to 7.9% in 2026. Germany, Italy and Spain are less online oriented. (IGD March 22).
At the moment the market is very fragmented with many online players who join the game to gain market shares with various business models and strategies.
Groceries delivered in 10 minutes
On the quick commerce front there are now 10+ companies across Europe with more-or-less the same business model. Pure Quick commerce players such as Getir, Gorillas, Flink and Zapp, who have received large investments to expand their presence, seem to have a chance of winning the fight. Aggregators as Just Eat or Uber Eats can easily add dark stores to their current operation enabling them to compete in this arena. Retailers are less prominent here but could potentially team up with an aggregator as seen with Carrefour teaming up with Deliveroo, Casino with Uber Eats and Jumbo with Gorillas.
Profitability is extremely hard to achieve with this business model. Investments need to be made to win the consumer and profit can only be made with repeat purchases of larger baskets. Consolidations in this highly competitive space are very probable with only a few dominant players likely to be left in the future, in comparison to the many players that are active today.
Deliver all
Amazon's delivery service for fresh groceries is also on the rise in Europe. The e-commerce giant delivers in a number of cities in the UK, France and Germany while in Spain and Italy they have started delivering to homes in Madrid and Milan. In January 2022 JD.com, the world's third-largest e-tailer opened its first doors in Europe with physical stores in The Netherlands to support their online delivery service.
Local market to your home
The French La Belle Vie or the Dutch Crisp are examples of online service who bring anything you would find in a local outdoor food market to your home. These services are also expanding their offering and find partnerships to grow.
Memberships of specific delivery service such as bread, flowers and toilet paper doubled in the last year and is again expected to double in 2022.
The German food box giant Hello Fresh, who tripled their customer base over the past two years, opened a grocery store in their app and delivers extra groceries additional with their meal boxes.
With so many new players in the field it is hard to say how the landscape will evolve but it is clear that supermarkets will lose some of the share to online.
The retail experience
When online grocery shopping becomes more common, the traditional retailers will need to win the customers with all the advantages a physical shop has. Retailers need to offer an experience to a customer to retain them. The stores can serve as a meeting point where food and drink can be bought and consumed. A place where you can get advice from experts and where you can be inspired by products.
For retailers a major focus is the Omni channel strategy. In their loyalty services they include delivery in the subscription fee. If they manage to also make their delivery faster they will be able to retain the shopper for every shopping mission, from the main shopping to the top up and to go needs.
What does this mean for Irish suppliers?
The retail landscape is becoming more diverse. The consumer needs of each of the shopping platforms varies. Suppliers who can work with the retailers to address these needs and partner up to do this can take the advantage. For a chocolate producer for example, this could mean focusing on sharable bags at the quick commerce retailer between 7 and 8 pm, while having the premium gift range displayed in a physical shop. Storytelling on the source of the chocolate needs to be highlighted selling through the artisan food deliverer.
It is important to understand the platform and consumer well in order to succeed. This has always been the case, but the landscape is clearly diversifying. Is your product range evolving accordingly?
References:
Europe channel forecasts 2021 – 2026. https://retailanalysis.igd.com/data/presentation-viewer/t/europe-channel-forecasts-2021-2026/i/11334
FoodHolland. https://www.foodholland.nl/nieuws/bericht.php?id=235840&b=211203
Distrifood. https://www.distrifood.nl/websupers/nieuws/2021/12/klantenkring-hellofresh-ruimschoots-verdrievoudigd-101153047
amazon now delivers fresh products to Spain and Italy too https://www.retaildetail.eu/en/news/food/amazon-now-delivers-fresh-products-spain-and-italy-too
Quick Commerce is not a Panacea for European Online Grocery – Learnings from China, https://www.linkedin.com/pulse/quick-commerce-panacea-european-online-grocery-learnings-kremer/
Chinese e-commerce giant JD.com embarks on physical conquest of Europe in Leiden, https://www.retaildetail.eu/en/news/general/chinese-e-commerce-giant-jdcom-embarks-physical-conquest-europe-leidenhttps://www.mckinsey.com/industries/retail/our-insights/a-year-like-no-other-for-european-grocery-retailers-the-state-of-the-industry-post-2020
On-demand grocery delivery: A regularly updated list of market expansions
https://sifted.eu/articles/on-demand-grocery-delivery-markets/