FACT-Finder

Online grocery – a market with a huge potential. Part I

Blog post   •   Dec 19, 2013 15:13 GMT

A new ecommerce trend is attracting Europe’s wide attention of customers, retailers and investors: Purchasing food with one click, picking it up in the store next corner or getting it delivered home – more and more consumers are using online-food-retailing.

Especially in regions with a low population density, as in Scandinavia for example, online retailers face extremely favorable terms, generating extraordinary turnovers in the online grocery segment. People living in those areas have to cover far distances to get to the nearest store. Online-retailing of groceries can fill this supply gap – a market potential, investors have already identified by now. At present, they invest high funds in the Swedish online grocery store MatHem (engl.: ‘food to home’).

For international operating retail chains, online-food-retailing becomes increasingly important. Philip Clarke, CEO of Tesco, even declares that this is his company’s future: “Food shopping online is all the growth we have in our core food business in the UK.”

Also the food and consumer goods research group IGD forecasts a huge impact of online grocery: Thus, eFood sales will approximately double on average by 2016 – in five key northern European markets: Britain, France, Germany, Switzerland and the Netherlands.

Even though there is an encompassing market offer in Germany, the online-food retail registers a significant growth. A trend that is supposed to continue, especially when succeeding in broadly communicating low prices, time savings and detailed product information and turning occasional buyers into loyal customers.

A growing trend: Online pure players like Lebensmittel.de are winning more and more market shares in the grocery.

A growing trend: Online pure players like Lebensmittel.de are winning more and more market shares in the grocery.

A new study proves: Entering the German eFood-market is profitable.

The percentage of German customers purchasing groceries via the Internet accounts for just 18% in 2011, but already hits 27% in 2013. For the year 2012, the market value of online food trade is estimated at 370 million Euros. These results were revealed in a current study by the consultancy A.T. Kinley, interviewing 700 consumers about their buying behavior in the eFood field. According to this study, the most important buying motives are the home-delivery (38%), curiosity (33%), attractive prices (27%) and time savings (25%). “Therewith also figures finally prove that eFood and foodstuff distribution are no longer in a shadowy existence”, states Christoph Wenk-Fischer, chief executive officer of the German E-Commerce and Distance Selling Trade Association.

2 big challenges: gaining customers and their loyalty.

The survey revealed important details: First of all, the majority of interviewees have never bought food on the internet – for reasons such as existing shopping possibilities (66%), lacking visibility and tangibleness of online products (60%) and unsafe product quality (55%). Furthermore, the growth results mainly from occasional buyers while loyal customers remain scarce in this segment. The majority of German online customers leave it at one to three test orders.

An Europe-wide study of the Mc Kinsey consultancy, which included 4500 consumers in France, Spain and the United Kingdom, revealed similar results: In France for example, only about a quarter of consumers who have shopped online for groceries once continue to do so regularly. Here, unsafe product quality is the main concern – followed by further reasons such as reduced assortments and additional fees.