Grocery retail is worth 5.9 trillion USD globally according to Euromonitor – however in 2017, online sales only accounted for around 1.5% of that total. In the UK, where retailers have more quickly embraced eCommerce, online grocery shopping accounted for 5.5% of the total spend.
Online grocery shopping in France accounts for around 4.5% of the total, and the online grocery market in China is predicted to triple by 2022, taking it to 11% of the grocery spend. In the US, online sales only account for 1% of the total – with predictions suggesting that it will rise to around 2% by 2022.
Tech giants such as Google, Alibaba, Amazon and China’s JD.com are partnering with grocery retailers in order to share their knowledge and technology within this field. Daniel Ekstein, a UBS analyst noted that,
“This is bringing together previously unlikely bedfellows […] Google has positioned itself an ally in the tech arms-race and so partnership seems a pragmatic, capital light solution to build skill and scale.”
Grocery retailers hold a huge amount of data on their consumers and their habits, and tech giants can help them to up their game when it comes to making personalised offers. Planet Retail Director, Boris Planer explained that,
“The online and offline worlds are coming together. This ability to connect with the customer and mine data is going to be one of the main capabilities for the future … Retailers are beginning to understand that it would be a big mistake to think they can do it on their own.”
Groceries are an attractive area of retail because consumers shop for food on a more regular basis than almost any other item, and it accounts for between a third and half of all spending in developed countries.
Grocery retailers that have had brick-and-mortar shops have built strong relationships with their customers and their suppliers, and they have logistics expertise and shops that can be used as a distribution network; which contrasts with Amazon’s Fresh grocery service that launched in 2007, that has had many challenges and has made very slow progress with consumers.
Analysts from Bernstein noted that,
“Once a retailer cracks the logistics path for grocery e-commerce, it provides a high frequency platform from which other categories can be approached. Grocery retail can therefore not be ignored.”
Online grocery shopping is not all good news – the cost of implementing new technology and systems will be expensive, and the added cost to the retailer of delivery is estimated to be between 4-7 Euros per transaction. This will mean that retailers will see an impact on their margins – which are, notoriously, already rather slim.
The delivery of online shopping becomes much more efficient in urban areas as the densely-packed nature of cities means that each driver, van and trip can be maximised. In rural areas, retailers would do well to encourage shoppers to shop in-store, collect the order from the store or to do a curbside pick-up point – something that has been trialed in France, that is now gaining popularity in the US.
As online grocery shopping become more and more popular there are predictions that physical shops will be affected; Oliver Wyman predicts that up to 30% of shops could close should 8% of the market share move to online.
A representative of Reuters explained that,
“Retailers and suppliers cannot wait for it to become mature and figure it out then. As with all paradigm shifts, true leaders will have established their presence and expertise for years before the trend hits the masses.”