With food e-commerce sales up more than 30% in the Netherlands last year, it seems that the much anticipated acceleration of the food e-commerce market is finally here. With EUR1.4 billion in the till last year, we project that the e-commerce grocery market will reach EUR1.8 billion this year. For retailers and manufacturers that have a strong e-commerce strategy in place, this development brings a huge opportunity.
Almost one in five Dutch shoppers (18%) report that they’ve bought groceries online in the past month, which means that e-commerce adoption in the Netherlands is now outpacing its neighbors in both France (16%) and Belgium (14%). So what’s behind this acceleration?
Picnic, the rising star e-commerce retailer, is definitely one accelerating factor. The online retailer, which was founded in 2015 but really took off in 2017, is shaking up the Dutch retail market—and kick-starting the e-commerce market in a manner we haven’t seen before.
The e-commerce grocery market began accelerating in the year that Picnic began to take off. Last year, Picnic, using data published by Picnic as well as our own data, we estimate that Picnic became the third largest retailer in food e-commerce in the Netherlands, behind Albert Heijn and Jumbo. And this year, we expect e-commerce grocery to attain a 4.4% share of the total grocery market.
Dutch shoppers have consistently reported two primary reasons for not buying grocery items online: delivery cost and the lack of in-store experience. With no delivery cost and a relatively low minimum order amount, Picnic has broken through one of the main barriers, and that’s having a big impact.
In fact, Nielsen research shows a systematic trend that occurs when Picnic enters a geographic area: within the first ±40 weeks, each brick-and-mortar store in that area loses an average of approximately EUR40,000 in value sales. This decline is twice as high (EUR80,000) among retailers that also have e-commerce service.
What’s causing this impact? The fresh section is one of the biggest drivers, as it’s become one of the most popular categories for online food purchase, and that’s causing an average loss of EUR70,000 for each brick-and-mortar store with an e-commerce service.
So how can manufacturers and retailers best prepare for the future—and for future competition—as the e-commerce market in the Netherlands matures and expands?
- Improve the in-store experience, making shoppers’ store experience both pleasant and convenient. Many people still love the in-store experience and many others can be won over with the right concept. Use tools like virtual reality technology to help measure, evaluate and optimize a range of retail concepts and therefore influence shoppers at the moment of truth.
- Communicate the availability of your wide assortment. The range of products you carry, from basic to premium, can be a big driver for shoppers to buy with you.
- Offer locally tailored assortment in regions. Shoppers are interested in local and fresh from farmer products, which not all retailers are able to provide. Differentiating assortment per region—and marketing that effort—could bring consumers back to brick-and-mortar stores.
- Differentiate your promotions and prices. Adjust your price and promotions according to the disposable income and profile of shoppers in the geographic area. Understand what people can and are prepared to spend, and for what.