Report • 30.01.2018

Unrealized potential in online food retailing

Fresh delivery service coverage primarily in metropolitan areas

Prior to the launch of Amazon Fresh in Germany, many e-commerce observers expected brick-and-mortar grocery retailers to do everything in their power to fight back with their own offers and services. This prediction has not come true. Several of the big retail chains developed digital strategies and experimented with online delivery services. However, some (Lidl, Kaufland, Real) very quickly abandoned these efforts again, when they didn’t instantly turn a profit, while others (e.g. Aldi) didn’t even try to compete.

Slow start in Germany despite high growth potential

While online retail in Germany has reached a large percentage, especially in the fashion, electronics, and IT sectors, online food retailing gets off to a very slow start. Although the market indicated above-average growth according to the HDE Online-Monitor from 2017, this took place at a very low level.

Infographic: Bar chart shows proportion of online revenue from groceries in...
Analysis from Kantar Worldpanel show that in most countries the majority of groceries are still bought in traditional brick and mortar stores.
Source: Kantar Worldpanel / statista.com

Meanwhile, a comparison with other countries indicates that there is fundamental potential for online food retailing. According to the Kantar Worldpanel, the online percentage of FMCG sales (fast-moving consumer goods) amounts to 20 percent in South Korea, while it accounts for at least 7.5 percent in Great Britain (compared to 1.7 percent in Germany). The difference is especially apparent when it comes to per capita spending in Great Britain; at an annual 154 Euros compared to 18 Euros, it is at a much higher level according to an online food retailing study by the A.T. Kearney consulting firm.

Even though 16 percent of Germans occasionally purchase groceries online, only 1.4 percent use this option to buy at least half of their overall grocery products according to a study by Ernst & Young from the spring of 2017. ”The fundamental willingness of Germans to order groceries online today is already strong. […] However, we are still waiting for the breakthrough of online grocery shopping,“ says Joachim Spill, Technology, Media and Telecommunications Leader at EY in a press release. “So far, the grocery segment has lacked truly strong and comprehensive available online options that also include fresh foods.“

Creating a hassle-free ordering process

According to a Bitkom Research survey in December 2016, German consumers are still skeptical and question whether fresh foods ordered online have the same quality as store-bought items. Waiting for deliveries and shipping costs are also mentioned as the main reasons why customers continue to shop at brick-and-mortar stores. The minimum order quantities and free shipping order minimums of some retailers are set quite high. For example, the minimum order value for Edeka’s online supermarket Bringmeister in Berlin is 40 Euros, though beverages are not included in this amount. Delivery fees are waived for orders over 100 Euros.

If a customer has completed his/her shopping order, but a higher priced item is suddenly not available and causes him/her to drop below the minimum order amount, it is understandable why some shoppers choose to cancel the entire order instead of searching for an alternative item. Confusing shipping rates can also result in a disappointing shopping experience.

Photo: Person surfing on a laptop at the online supermarket myTime.de;...
The online supermarket myTime.de charges 4.99 Euros for shipping and an additional fee of 2.99 Euros for express delivery, but only if the order doesn’t contain any fresh foods. To guarantee fresh, quality refrigerated or frozen food items, the site charges an extra €4.90.
Source: Harry Köster Fotografie / myTime.de

To drive conversion rates, a simple ordering and checkout process and a clear design of websites and apps are crucial. What’s more, consumers appreciate tight delivery windows and a speedy delivery. During the week, Edeka‘s Bringmeister offers same-day delivery for orders made before 2 pm and provides one-hour delivery windows.

However, there is a caveat. So far, Bringmeister is only available in Berlin and Munich. And generally speaking, fresh delivery service coverage is currently primarily available in metropolitan areas, which already enjoy a high density in terms of supermarkets. Meanwhile, rural areas have to resort to online supermarkets in the parcel delivery market. And sometimes consumers might actually be lucky enough to be close to a local service provider.

Challenging: Shipping perishable foods

The big challenge in shipping a mixed item shopping cart is the delivery of frozen and refrigerated products. Service providers have come up with different solutions for this. Online supermarkets that ship orders via parcel services usually rely on passive cooling techniques with special cold boxes featuring dry ice or cooling elements. Meanwhile, Food.de and Rewe rely on their own respective delivery services with refrigerated trucks and vehicles.

In these cases, the purchase is simply packed and delivered in paper bags and customers have to be home to receive the items. Deliveries in insulated shipping boxes using solutions such as parcel stations near the house or in-house parcel delivery boxes and shipment release authorizations are also viable options. In contrast, consumers don’t utilize click and collect alternatives as much, and retailers now tend to reduce them in volume versus expanding them.

Growth opportunities thanks to convenience aspects

Needless to say, it is definitely more complicated to send fresh groceries to customers than it is to ship clothing or decorating items. Having said that, grocery retailers are also passing up some great opportunities. Obviously, if you need to buy a carton of milk or two tomatoes on your way home from work, you are most likely to go to the supermarket in town versus ordering these items for delivery with your smartphone. You don’t pay shipping costs, get the milk right from the shelf and pick the tomatoes that look freshest to you.

Amazon Fresh severely reduced its food delivery service in the United States at the end of 2017. The company stated that the shipping of groceries by post did not work reliably.

Infographic: Infographics of a survey about quality demands of consumers for...
Source: McKinsey / statista.com

However, there are great opportunities for online retailers when it comes to the weekly shopping segment and items that customers purchase time and again. Opportunities that are so far passed up by most retailers. “The German online food retailing market is an attractive segment that is likely to cause fierce competition and ultimately forces brick-and-mortar retailers to join in,“ warns Dr. Mirko Warschun, Head of the Consumer Industries and Retail Practice in Europe, the Middle East and Africa at A.T. Kearney. A great offer that complements the benefits of grocery delivery for consumers with added features such as shopping lists, nutrition consulting services, product and recipe suggestions or price comparisons, wins over many customers and can shape their buying behavior.

Author: Julia Pott, iXtenso

related articles:

popular articles:

Thumbnail-Photo: Outdated last-mile delivery technology
07.07.2020   #logistic solutions #mobile computing

Outdated last-mile delivery technology

Transportation and logistics companies losing customers

Transportation and logistics (T&L) companies are losing customers and missing opportunities to expand their business due to outdated last-mile delivery technology, according to a new global research report by SOTI, which looks at the ...

Thumbnail-Photo: Last mile: What do you have to do?
14.08.2020   #supply chain management #logistics

Last mile: What do you have to do?

How to win the battle for customer experience excellence in both the first and last mile of delivery

As recent events have caused major supply chain disruption with many physical stores abandoned, e-commerce has never been more under the spotlight. The double-digit growth the industry has seen over the last few years looks set to continue, ...

Thumbnail-Photo: Supply chain: Know what’s on your retail shelves...
15.07.2020   #brick and mortar retail #personnel management

Supply chain: Know what’s on your retail shelves

What should bricks-and-mortar retailers pay attention to in their supply chain management?

The Cha-Ching sound of the cash register rings up sales – that’s music to a retailer’s ears. Satisfied customers and happy employees are the key to increasing sales. What role does effective supply chain management play in this ...

Thumbnail-Photo: Millennials averaged 50% more online deliveries than baby boomers …...
22.07.2020   #online trading #e-commerce

Millennials averaged 50% more online deliveries than baby boomers …

… even though millennials favor eco-friendly choices

Millennials have become online “super buyers” during the COVID-19 lockdown and are receiving an average of 50 per cent more deliveries every week than the over-55 “baby boomer” generation, a new survey of 2,000 consumers has ...

Thumbnail-Photo: Door-to-door delivery and returns service
13.08.2020   #online trading #fashion

Door-to-door delivery and returns service

Asda trials George parcel returns via home shopping deliveries

Starting last week, Asda has launched a two-store trial allowing customers to conveniently return George parcels at the same time as they receive their weekly shop.Customers in York and Milton Keynes can now return George online purchases for free ...

Thumbnail-Photo: Uber & Cornershop: introducing grocery delivery...
14.07.2020   #delivery #food delivery service

Uber & Cornershop: introducing grocery delivery

New grocery delivery features planned for customers and merchants alike

In collaboration with our partner Cornershop, customers in select cities in Latin America and Canada can order groceries through both the Uber and Uber Eats apps. And starting later this month, grocery delivery will be available in Miami, FL and ...

Thumbnail-Photo: Smart packaging: “Hi! I am your package“...
20.07.2020   #online trading #packaging

Smart packaging: “Hi! I am your package“

Interview with Alexander Cotte, Co-Founder and CEO of LivingPackets

The delivery service rings the doorbell but nobody is home. Recipients receive damaged products and cardboard boxes end up in the trash after just one use – these are just some e-commerce weak points and challenges that the German-French ...

Thumbnail-Photo: Key elements of successful supply chain management...
15.07.2020   #personnel management #logistic systems

Key elements of successful supply chain management

5 tips to optimize your supply chain and mitigate risk

A chain consists of many small individual links and only works as a whole when these links connect effectively. After all, a chain is only as strong as its weakest link. The same principle applies to supply chains. What are the best practices for ...

Thumbnail-Photo: How retail drone delivery may change logistics networks...
08.09.2020   #logistics #delivery

How retail drone delivery may change logistics networks

Chance for retailers: best-possible delivery-time guarantee zones

Researchers at The University of Texas at Dallas say drone technology has the potential to be a genuine game changer in the retail industry, with its promise to enable retailers to offer unheard-of delivery lead times and near-perfect delivery-time ...

Thumbnail-Photo: Online retailers need to better inform customers about the status of...
21.07.2020   #online trading #e-commerce

Online retailers need to better inform customers about the status of their orders

E-Commerce Shipping Study 2020 by parcelLab

parcelLab has analysed for the second time the shipping services of 100 of the largest German online shops (according to EHI). The results show that 1 in 4 retailers in Germany only send a single email to their customers after their checkout. This ...

Supplier

Axis Communications GmbH
Axis Communications GmbH
Adalperostraße 86
85737 Ismaning