Report tips click & collect to account for half of online grocery orders in EU by 2017

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Drive-throughs: altering profitability dynamics of delivery

Drive-throughs: altering profitability dynamics of delivery

Click & collect will account for every second online grocery order in the EU by 2017, according to a new report from ResearchFarm.

Its Online Grocery Retailing in the EU 2014 study finds the European online grocery market grew by 129% over the last five-year period to €19.0bn. This means online grocery still accounts for below 2.0% of the total grocery sector.

Turning this growth into profitability still eludes many businesses, however current moves towards lockers, click & collect and drive thrus have altered the profitability dynamics considerably, researchers claim.

However, at the same time, much potential exists to make home delivery more cost effective and efficient and the report highlights four different strategic options available to retailers.

In France the click & collect and drive share of online grocery is above 80% already, however this is now set to change with the impact of the Loi Duflot, which has curtailed the building of new stand-alone drives considerably. The Belgian online grocery market has developed in a similar fashion with Colruyt and Delhaize investing into click & collect early on, with Ahold to follow the model in the Netherlands. Meanwhile in Germany DHL has provided the infrastructure in the form of its Packstation lockers for players such as Buenting, allyouneed and Amazon to exploit, whereas Rewe and Real are still struggling to make the drive concept work. In Spain and Italy the drive option is mainly developed by Auchan and still in its infancy.

The report finds click & collect will act as a growth driver of the total online grocery sector, as the absence of significant commission and delivery charges and fixed time slots for home delivery will boost the convenience draw of online grocery and attract more grocery shoppers online. That said, it’s not all about click & collect. Online grocery home delivery has always been about route optimisation, better load factors and utilisation, high average order values and managing time slots, so costs do not explode and the service becomes profitable. There are a number of alternative solutions to click & collect available to make home delivery more efficient. With moves towards same day delivery, home delivery will regain an impetus going forward. The research has identified four key strategic recommendations for retailers to explore:

1) Collaboration around distribution centres. At the moment the retail sector is evolving towards providing click & collect centres in out of town locations, with hypermarkets and shopping centres providing lockers as a first step. Looking ahead, some of these locations could develop towards becoming warehouse hubs to bundle orders from various retailers to deliver in a single trip into major conurbations. Especially the multi-channel players (Ahold, Casino or Tesco) with an out of town store estate and their own marketplace operations could start offering such services to their third party sellers, before offering this to (non) competing retailers for a fee. 

2) Logistics interleaving. Most online grocery delivery vans are returning to their warehouses empty, shipping air. On their return trip trucks could pick up non-food returns, goods from suppliers bound for the DC or use the spare capacity through collaboration with other sectors. 

3) Third party logistics providers could group single trips into closed loops. On a smaller scale there is currently much activity in Italy, Spain and Scandinavia, where organic farmers markets move online with box schemes. In the UK hubbub offers a similar online service for high street specialists. The challenge would be to transfer this collaborative effort to a bigger stage.

4) ResearchFarm believes there is an opportunity to bring food service deliveries and online grocery together. The various take away delivery services demonstrate how home delivery of relatively low priced, low margin, perishable product can be made profitable. A retailer could partner up with Domino’s Pizza for example and bundle trips to the same street and take a delivery van off the road, naturally such a set up would ask for a lot of flexibility.

Daniel Lucht of ResearchFarm said: “In the UK Tesco and Giraffe could form an ideal partnership, Tesco could start a trial to deliver Giraffe takeaway meals with the online grocery delivery fleet. There should be a significant shopper segment for which such a service, to receive all food needs from a single touch point in a single transaction, would be an enticing option.”