e-grocery: 2016 growth justifies new investments

03/01/2017
In brief
Investing in e-grocery is not just an adaptation to market changes and customer expectations, but a strategic choice that points to loyalty.

Discussing e-grocery as part of the blizzard of forecasts that are made around this time of year may seem predictable, but that is not the case here. When we talked about it in the past, we undeniably clarified its contribution to the overall volume of digital commerce (still rather limited), but also its prospects and the particularities that come with managing it. Factors such as packaging, transport and delivery are much more critical for e-grocery than other types of goods, because they must take into account the products’ rapid deterioration. But 2017 looks set to be the year in which online grocery shopping shakes off its experimental tag and becomes a stable, albeit smaller, part of the market. There were clear signs of the phenomenon in 2016 – just think of Amazon’s strategic partnership with Unes and NaturaSì – and the data collected in the latter stages of the year by observers such as Mintel and Nielsen confirms as much. In Europe, the group with the most positive attitude towards online grocery shopping is Millennials. In Germany, around half of them have purchased fresh products online at least once in the last six months, compared with 31% of people from other age groups (over 25). The results are similar for France, Poland and Spain. Great Britain’s results can be discounted in this case: its spending indicators are higher, but this is less significant since the country is way ahead of the rest of Europe when it comes to digital commerce. 2017 will be the year in which e-grocery products exceed 1% of all fast-moving consumer goods purchased in Italy. In September, it was worth 544 million euro, a 30% increase with respect to the same month in 2015. To give a more telling idea of its importance, it was responsible for 25% of the grocery sector’s total growth, which this year stood at 0.9%. Online consumers are not just spending more on e-grocery products; they are also buying more groceries in general: 6.8%, between 7 and 8 times the overall market growth rate. Turning our attention to Italian consumers, there are now more than 5 million Italian families who make purchases via this channel, almost a 5% increase, with an average spend of 108 euro and a frequency of 3.2 purchases a year.  Many people (42.4%) are occasional buyers who have purchased groceries online only once. However, these 3 million Italian e-shoppers are a valuable group of buyers, with an annual spend of 254 euro and a high average purchase value (around 53 euro). Lastly, the north of Italy was responsible for the lion’s share in 2016: more than 70% of e-grocery sales. Observing the retailers operating in the e-grocery market provides even more interesting information. The number of mass market retailers selling online has increased, but their market share has fallen in favour of specialised retailers and pure players: from 50% in 2015 to 45% in 2016. The range on offer to consumers has also widened: Amazon has increased the number of FMCGs it stocks from 7,000 in 2015 to nearly 50,000 in 2016, with a selection that covers every area of FMCGs including fresh produce. The e-grocery sector’s potential for growth involves new needs and demands a renewed focus, above all on logistics and information technology. The current business models are especially expensive because they are still temporary (the all-out battle over customer deliveries is the most obvious aspect), and for the time being they do not involve large volumes. Furthermore, many retailers are still failing to optimise their sites based on conversion rates, although there are some fine examples of this. Carrefour and Esselunga, for example, have made significant improvements to their online presence, and U2’s focus on securing its own store on Prime Now is also worthy of note. The bottom line is that investing in e-grocery is not only a necessary adaptation to the developing expectations of customers, but also a strategic decision. There is a far greater possibility of ensuring customer loyalty online than via traditional sales channels, despite the fierce competition and fragmented market.

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