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Online grocery retail: A status report

For most of us shopping over the internet is now a part of everyday life. Whether sitting on the sofa in the evenings or while travelling on the train during the day, people in Germany shop online any time, any place, anywhere. And there’s really very little that they can’t buy online.

Let’s look at the figures to back that statement up: in 2016 online distance retail in Germany accrued sales of EUR 52.7 billion1 and rising. But as much as German consumers love shopping online, some products tend not to make it into the virtual shopping cart. These are primarily furniture, large electrical items like fridges and TVs – and food. Only around one percent of all food purchased in Germany is currently bought online.

e-food sector set to grow

Is this likely to change? I believe it will. Germany’s dynamic online food market harbors vast potential with groceries worth around EUR 200 million being bought every year. In 2016, 19 percent of the German population purchased food online. If we compare this with the UK, which has a similar e commerce market to ours, people there go online to buy their groceries some ten times more often2 – and it’s an ever-growing trend.

Plus, the market is in transition. New suppliers big and small are starting to offer groceries online. And with the launch of Amazon Fresh in Germany last May, the world’s biggest online trader has joined the pool. Developments like these are important. New providers stimulate the market, claim consumers’ attention and entice even more shoppers to buy their food online. Most online stores are benefitting from this trend because the growth potential is huge. The e-food market pie is plenty big enough to ensure everyone gets a piece.

e-food specifics and food logistics solutions

Why does the online retail offering for fresh foods currently lag behind compared with other e-commerce sectors? Why are groceries primarily bought in bricks and mortar stores? I think the reasons are three-fold.

First, many consumers in Germany want to be able to pick up and inspect the foods they buy. They can’t do that when shopping online.

Second, many people go shopping for foods and other daily needs more or less out of habit. And in large conurbations, the frequency of supermarkets is particularly high. So why not nip around the corner to buy your bread and gossip with the greengrocer instead of tapping on your tablet to order what you need.

Third, most consumers in Germany are really price conscious. Those who always buy their butter where it’s cheapest or make the price of a liter of milk the reason for frequenting a particular store tend to shy away from the shipping costs and minimum order quantities involved with shopping online.

So is this where the online grocery story ends? I don’t think so. By applying high quality standards when selecting the goods they sell, online food retailers can offer quality produce and save consumers the effort of having to choose. And should a product fail to meet a customer’s expectations, online store-keepers can operate a relaxed policy, allowing reimbursements and returns. Of course, another important aspect is that – as seen in many market segments where online shopping has become routine – shopping habits can change. In the e-commerce sector, convenience counts: I don’t have to leave the house, I don’t have to plan my trip to the store and I don’t have to get in line to pay. Transparent, comparable prices and efficient fulfillment in dark stores which allow (at least in part) both the same margins and shipping costs to be offset – these are the factors that lead to e-food success.

This is why I agree with the experts who say that in the future, more and more people will turn to online shopping to meet their basic needs.3

Both retailers and logistics service providers must continually develop and improve their offerings.

But the market will not self-perpetuate. Both retailers and logistics service providers must continually develop and improve their offerings. Where food is concerned, produce must be fresh when it arrives. That’s not the case with other goods. So for e-food retailers it’s essential that they observe and maintain the cool chain when buying, storing and preparing goods for dispatch – they must ensure that quality is not diminished and that delivery times are aligned.

Another aspect involves getting the packaging right. While the fragile, perishable and sometimes sensitive products must be protected, large amounts of packaging waste must be avoided at all times. Get it wrong and customers will complain, shipping costs will go up and the environment will be harmed. It’s a tall order and especially when a single parcel is likely to contain non-chilled, chilled and possibly even frozen goods. This is where the DHL Multibox comes in – a transport model that DHL has been developing and enhancing for a number of years. It’s used, for example, by DHL’s own online supermarket Allyouneed Fresh to ensure that food with differing temperature requirements reaches customers untainted and safe to eat.

For logistics service providers, the main task is to synchronize the collection process with the shipper and ensure that the order reaches the consumer by quick and reliable means. But in addition to fast delivery and receiving goods intact, customers want time-definite deliveries so they can plan to be at home:

  • 63% want to enter their preferred delivery times when actually placing their order
  • 85% want to decide the delivery day themselves
  • 78% want to choose the actual time window in which their parcel will arrive4

Added to this comes a need for follow-up services, such as a process for returning empties. If logistics service providers fail to offer these, ordering groceries online will not be accepted as a convincing alternative to shopping at regular stores.

Since the launch of the Group’s subsidiary Allyouneed Fresh, which entered in the market in 2011, we have gained valuable and varied experience in food logistics which we use to develop solutions for e-food retail. Of course, we make our e-grocery logistics solutions available to other online food stores (article only available in German).

The e-food future

What else is in store for the online food sector? How is it set to fair? At DHL we firmly believe that Germany’s food market is entering a transformational phase. We expect to see significant growth in online food retail. I think it’s even possible that we see a fivefold increase of revenue generated in the e-food sector in Germany by 2022. That’s quite some growth given that each percentage point represents around EUR2 million or more. This is why we’re constantly developing new and innovative solutions to make life easier for shippers and consumers. We’re seeing a significant rise in demand for solutions of this kind.

Have you ordered groceries online? Post a comment and join in.

For more about DHL Paket solutions, see: www.dhl.de/lebensmittelversand (in Germany only).

1 https://www.bevh.org/presse/pressemitteilungen/details/datum/2017/februar/artikel/stabiles-wachstum-begruendete-prognose-und-aussichtsreiche-perspektive-jahrespressegespraech-2017/
2 AT Kearny: Online Food Retailing, 2016
3 https://www.rewe-group.com/de/newsroom/stories/interview-omnichannel-andreas-conrad/ (available in German only)
4 DHL Paket: Customer Journey Studie, 2016 (available in German only)

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