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Online grocery – a market with a huge potential. Part III

With regard to the company’s earning power, the choice of the business model is crucial.

Center of distribution with delivery

When reaching a four-digit number of orders per week, a center of distribution pays off due to low labor costs. From here on, goods are delivered to the customer’s home. In Germany, online retailers like lebensmittel.de have been present with such an offer for several years.

Driver Delivering Online Grocery OrderEven though several online merchants operate with this model successfully, it doesn’t guarantee automatical success – as the case of Amazon proves: In Juli 2010 the famous online merchant startet to sell eFood in Germany. But due to several external Amazon-suppliers, which priced own forwarding expenses and delivered products in separate packets, Amazon’s service was not attractive enough to become established.

 

 

Center of distribution with pickup by the customer („Click-and-Collect“)

This time saving concept is based on the „Drive-in“ idea. The consumers order online and pick up their merchandise at a center of distribution, not having to get off their car in most cases. This model is very well known e.g. in the UK and France. In Germany real,- and Globus started the “Click-and-Collect” models. The pickup process takes only some minutes according to their own account.

Addressing customers everywhere: Multichannel distribution.

Combining the advantages of both worlds – online and offline – with a multichannel strategy.
Giving customers buying incentives wherever they are – with a multichannel strategy.

The future will show to what extent online pure players will be able to gain market shares in the food trade. Yet, it is unlikely that brick and mortars will suffer in the medium term, as the satisfaction with existent shopping possibilities is too high, at least in most countries. With a multichannel orientation retailers are combining the advantages of both worlds – online and offline. Providing that, like at REWE, real,- or Carrefour, a multichannel solution is applied that proves its ability to provide local availabilities and other buying relevant information at every touchpoint. Then, also the most current trade trends can be implemented. Location based Service guarantees that daily updated, local offers of brick and mortars are integrated online and are made available via Smartphone, PC or Tablet. Read more here: http://www.fact-finder.com/Solutions-for-retailers.html

Another advantage of multichannel companies is that they can implement an additional business model:

In-store Pickup

A few European retailers, especially in the French market, have recently launched a service that just might mark the tipping point for online grocery: “buy online, pick up in store,” or click and collect. In this case, customers make an online order and pick up their merchandise in the corresponding store or place. Advantage: The customer saves time at the store, as he/ she has already chosen and paid the articles before. Here it is important to offer a service, which is attractive with regard to price but which also pays off for the retailer.

This model is related with much less economic effort than home-delivery service. Thereby, it gives retailers from brick and mortars an easier entry into the online-grocery market. An analysis of Mc Kinsey shows: Operating with a Click-and-Collect-Service means as much as a 30 percent difference in margin in comparison to a delivery service – making it easier for a retailer to justify the investment. Since 2006, retailers have established approximately 1,000 pickup points in France.

Tesco goes even further offering click and collect service away from its stores, e.g. on the parking lots, schools etc.  Thereby, the British retail-chain brings the Click-and-Collect Service directly by car towards its customers – a completely new offer, in which Simon Belsham, managing director of Tesco.com, firmly believes: “Customers up and down the country already love using Click & Collect because they can do their shopping trip in a matter of minutes, even with the whole family in tow.” [1]

Conclusion:

Online grocery is attracting the attention of customers, retailers and investors across Europe. In both, countries with a low population density and those with a high one, this online market segment is growing steadily. However, online food retailers have to face two major challenges in order to become a realistic alternative to brick and mortar stores: gaining customers and maintaining loyality. In order to achieve this, online merchants have to provide a unique customer experience and high usability – e.g. through investments in the product data, an advanced search and navigation functionality and an individualized offer.

With a cross channel strategy, retailers are combining the advantages of online and offline distribution. Providing all relevant product information at every customer touchpoint means convincing shoppers – resulting in higher revenue.

One Comment

  1. Thanks for the useful information of online shopping, give more innovative updates.

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