Online foodstuffs retail: Stagnating demand for online supermarkets

A major eCommerce topic of 2017 was the introduction of the Amazon Fresh food delivery service. When the online giant Amazon launched its delivery service in May last year, the industry was then left holding its breath. Many retailers came under increasing pressure and feared drastic changes in the foodstuffs sector. In our article “Online foodstuffs – The new driving force in eCommerce?” we took a close look at the industry and recognised that this market shows further growth potential. Today, we provide an update on the e-food industry and show you that retailer concerns have so far been largely unjustified.

The boom in this sector still appears to be a long time in arriving: According to a recent study of online foodstuffs retailing, only one in five make their purchases at an online supermarket. The scepticism of buying food online still remains great. The reasons for not buying, however, are obvious. Consumers who have not yet used the service express concerns about the quality and freshness of the goods, punctual delivery and also value for money.

Status quo of the online foodstuffs sector

According to the latest figures from the eCommerce industry association, bevh, online food retail sales in the first quarter of 2018 were 16 percent above the previous year’s level. Even if this sounds good at first glance, growth of the industry is quite modest compared to developments in other sectors. In fact, the market share of online food retailing still only lingers at around one percent. Ordering food online is, therefore, still a niche market. As a result, the concerns of retailers that the launch of Amazon Fresh will change food retailing drastically have not yet been justified.

“In the food sector, disillusionment can be observed in regards online sales. Many have dropped down a gear in terms of expanding their Internet activities”, observes eCommerce expert Kai Hudetz from the Cologne Institute for Retail Research (IFH).

In this context, the Consumer Research Association (GfK) also comes to the conclusion that the segment is currently “more or less stalled” in Germany.
Since food delivery services are currently only available in large cities, only consumers from those large cities are among the users of these delivery services. But according to GfK, shopping in an online supermarket is more complicated for city dwellers than simply visiting their nearest supermarket, which is often located in the immediate vicinity. For almost 70 percent of consumers, their nearest supermarket is less than one kilometer distant.

As a result, it makes much more sense to offer food delivery services in rural areas. This, after all, is where the distance to the nearest supermarket is usually greater, thus making food delivery a convenient alternative. From the retailer’s point of view, however, it should be noted that delivery costs in rural areas are more expensive, and the population also tends to be older and less inclined towards eCommerce.

Online foodstuffs retail – the limping sector in eCommerce

Currently, 9 out of 10 consumers believe that the supermarket will never be completely replaced by online food retail. Online supermarkets will continue to have a hard time, especially in the bigger cities. Consumers are currently more likely to react to offers such as cooking boxes and food delivery services, but also to digital technologies in stationary retail. This means that retailers in this segment will now need to rethink their approach.

Cooking boxes more in demand than online supermarkets

So-called cooking boxes (from providers such as hellofresh.de) are a rather new form of offering. Here, consumers browse the shop’s website for recipes – for a particular dish or even an entire menu. By specifying the number of portions, the customer then receives a completely individualised package containing the desired recipes and portioned ingredients directly to their home. On the one hand, this makes it easier for consumers to plan their meals, and, on the other, they do not receive any superfluous food that cannot be processed and, in the worst case, end up in the bin.

Online foodstuffs retail: Stagnating demand for online supermarkets

Cooking boxes in online foodstuffs retail are gaining in speed. The delivery of great recipes and matching ingredients not only relieves the consumer from lining up at the checkout, but also from regular food planning. (Image source: hellofresh.de)

Growth market e-food

Our various industry updates (for furniture, sports and outdoors, and much more) show that eCommerce is booming enormously, as consumers now prefer to shop online across many sectors. And precisely because this boom in the online foodstuffs segment has not yet taken place, you should not be aware of this timely connection.

As an online retailer, you should now be rethinking your strategy and adapting it to the current needs of consumers. With effective action, online retail in foodstuffs still has enormous growth potential. However, there is a great danger that other eCommerce retailers will also sense the potential and catch up using similar measures – competition will increase as a result and the competitive pressures grow. To counteract this, online food retailers must always keep an eye on the market and its competition, as well as their prices and product ranges. Intelligent software solutions like blackbee help you to always maintain a precise and valid overview of your market environment, and to always remain one step ahead of your competitors.

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