Online foodstuffs – The new driving force in eCommerce?

Ever more suppliers of foodstuffs are finding their way onto the internet. Besides pure players such as myTime.de and AllyouneedFresh, ever more stationary grocery retailers have recently been expanding on the internet – the market leaders Edeka24 and Rewe.de setting a good example here. Many traders are starting up in online foodstuffs retail not least because of a fear of being ousted by their competitor Amazon. When they also begin their own delivery service, Amazon Fresh, in Germany, this will drag some retailers into difficulty. But whilst one foodstuffs supplier after another stands waiting in the wings, the market share of online foodstuffs retail, at 2.4 percent (€ 971mil) of total eCommerce turnover in Germany (€ 39.8bil), still finds itself at a very low level. To establish a lucrative e-food business, some problem areas still need to be overcome.

Challenges to online foodstuffs retail

The delivery of fresh or frozen goods, above all, presents online foodstuffs retailers with special logistical challenges. Delivery has to take place very promptly and the cooling chain remain unbroken. This is why delivery to homes is often burdened with delivery costs. Additionally, a minimum order value is frequently imposed (for example 40 Euro at Rewe-Shop). A closer look at customer habits will quickly reveal the first hurdle here: In Germany, ca. 37,000 foodstuffs businesses (>100m²) meet with every one million inhabitants. Because of the high density of shop branches, which compete for every customer in an aggressive quality and price competition, no willingness exists among customers to pay a minimum order amount and the delivery costs.

Top 5 reasons from consumer viewpoint against purchase in online foodstuffs retail

Illustration: Top 5 reasons from consumer viewpoint against purchase in online foodstuffs retail (Source: Self presentation in the style of KPMG AG Wirtschaftsprüfungsgesellschaft / IFH Institut für Handelsforschung GmbH, 2014)

The absent shopping experience locally represents a further major barrier. Especially in the purchase of fruit and vegetables, the opportunity of examining the product freshness before buying plays a big role. Trust in product quality is a decisive purchase criterion. This trust, above all for online pure players, must firstly be earned. Additionally, purchase in a local supermarket is for many people an essential everyday routine. With respect to the quality and freshness concerns of consumers, retailers can differentiate themselves from competitors by offering added-value services. They can offer their customers, for example, to examine the ordered goods upon receipt of delivery or to make a selection from several examples.

Online foodstuffs retail: A market with potential

The foodstuffs market is one of the last markets to be conquered by online retail. Around 28 percent of all online shoppers have already purchased foodstuffs or beverages on the internet. As one of the largest and most important markets of all, the foodstuffs market on the internet offers enormous potential still to be awoken. With growth of 27.6 percent in 2015 compared to the previous year, e-food has become the most exciting and strongest driver in eCommerce. At present, the nutrient for growth stems from young people with a low time-budget for whom online foodstuffs retail is becoming ever more attractive. Convenience and flexibility in the increasingly fragmented everyday life of customers are the central driving forces of online foodstuffs retail.

We believe that the online purchase of foodstuffs will soon belong naturally to the everyday purchasing channels”. – Béatrice Guillaume-Grabisch, Chairman of Nestlé Deutschland AG

Particularly for stationary market leaders, expansion on the internet represents a real opportunity. Through a positive retail environment locally, combined and tightly interconnected with a further differentiation of customer approach on the internet, as well as the actual online offering, customer loyalty can be further strengthened.

The intense competition

Although online channels in most sectors have long become everyday life for the customer, consumers for a long while have not been inspired by digital foodstuffs retail. The reasons for this, above all, are the factors of trust and logistics, which raise special challenges for online retailers. In the future, convenience and flexibility will gain in significance, also in the purchase of foodstuffs. With the appropriate retail concepts and the optimal target group approach, online foodstuffs retail holds an enormous growth potential over the coming years.

A particular phenomenon in German foodstuffs retail is a highly intense, price-driven competition which will also continue online. But with increasing competition, pressure on margins is also on the rise. This will make it all the more relevant for online foodstuffs retailers to keep an overview of the market and their competitors and prices. The wide variety of own brands and similar products presents price and competitor observation with unforeseen difficulties. Intelligent software solutions like blackbee help you in always having a precise and valid insight into market conditions and always remaining one step ahead of your competitors.

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