online-large-scale-distribution-swallow-spring - Retex | Retail Excellence

Online large-scale distribution, the swallow, and the spring

MICHELE CAPRINI

08/06/2020

In brief

In these months marked by the pandemic, the online large-scale distribution has been chalking up record figures. In the general uncertainty of the health emergency, the predictions on the ability to confirm this trend for the future are difficult. Often, in a market that is lagging behind the European frontrunners in smart technologies, the inadequacies of infrastructure become all too apparent. The game is therefore played on the awareness of retailers to be able to stand the competition only with a decisive digital restructuring of the operating flows and points of sale.

One swallow does not make a Spring (Aristotele, The Nicomachean Ethics, IV Century B.C.)

For the online large-scale distribution, the fortunes linked to the health emergency are under everyone’s eyes, accompanied by the excellent results achieved in the same period by the physical distribution.

RECORD NUMBERS

According to estimates by the B2c eCommerce Observatory and by Netcomm, in 2020 the Italian consumers’ purchases of goods sold in supermarkets will grow by 85% compared to 2019, for an amount of 854 million Euros.

In the recent study by Casaleggio Associati, in the first quarter of this year the sales of the major players in the online large-scale distribution (Carrefour.it, Esselunga.it, e-Coop) recorded increases of between 250% and 400%, for an overall value above 350%. According to IRI estimates for Osserva Italia (la Repubblica.it), April sales exceeded 122 million Euros, a threefold increase over the same last year period.

HOW TO ADAPT TO THE NEW DEMAND

In some cases, the phenomenon has led to original solutions. After a month of quarantine, with delivery slots snapped up rapidly, Carrefour decided to create a section, ‘the essentials’, where consumers can buy what is normally their weekly shopping, with free home delivery throughout the national within 4 working days.

Even at a lower level of distribution, there has been no lack of initiatives, such as taking orders via WhatsApp. There is no shortage of examples of neighbourhood shops, which afford their advantage in sale of basic necessities, and which have started their own digitalisation process, making use of the collaboration of third parties already supporting the online distribution, such as food delivery platforms.

ONE SWALLOW DOES NOT MAKE A SPRING

So all is well, then? One swallow does not make a spring and prudence is a must. In the latest Coop Report relating to 2019, thus before the pandemic, food expenditure and personal care accounted for 5% of total digital commerce sales. In short, high growth and low market share for the online large-scale distribution, with a much lower impact compared to other European countries. In France and the United Kingdom, for example, already in 2018 it reached 12% and 15% respectively. The impact for the two countries expected for 2023, is of 17% and 22%. And what about Italy? The likelihood of placing itself on the same level as the major online markets is still far away.

Forecasts cannot take as reliable base the record increases achieved by the large-scale distribution during the lockdown, in some cases even tenfold. Several elements are at stake: the duration and extent of safety measures, the greater or lesser imposition of restrictions, the consequences on purchasing behaviour, the ability of the Italian large distribution to absorb the growth in online demand.

WHAT IS TO BE DONE?

To do what needs to be done requires a strong determination and the decisive will to accelerate the digitalisation of processes. It is an ‘open secret’ that the peaks induced by the lockdown have not always received an adequate response. Several operators have failed to maintain, or create, a good competitiveness for the lack of adequate digital infrastructures.These will have to reconfigure their offer on the basis of new demand trends, by focussing on efficient picking and distribution processes, which are instrumental in the operational flow of digital commerce.

As pointed out by Valentina Pontiggia, Director of the B2c eCommerce Observatory, practising e-commerce in the grocery sector (where the average order includes up to 50 products, with a low unit value and specific needs such as temperature-controlled storage and transport) “requires a fully functional and efficient operating machine, and the priority will be to work on the company organisation and on the roles and responsibilities necessary to achieve a new idea of business, certainly more digital and omnichannel”.

The game is therefore played on the awareness to be able to stand the confrontation in the marketplace with a decisive digital restructuring of the operating flows and points of sale. It is an unmissable opportunity and, above all, a necessity. Any delay is likely to be very costly and a sure debt to payoff already in the immediate future