eCommerce marginality – Focus Food&Grocery

eCommerce food&grocery

Over the past decade, in Italy, we’ve seen a slow migration of food spending to online. Covid-19 radically accelerated this transition, and in a few months what would have happened in five years happened. Those who were already accustomed to shopping online were ready to expand the horizons of their digital purchases, even considering unusual transactions such as car selection, directly on the web. The vast majority of consumers, on the other hand, have finally broken the buck and taken advantage of the restrictions at Covid to familiarize themselves with e-commerce.

eCommerce marginality, the challenge for retailers

But what happened on the retailer side? Were they all ready to embrace this surge in demand? While sectors such as food and hospitality, through marketplaces and third-party partners, were already adept at online sales, for the vast majority of grocery stores, except for the big names, the adaptation came running.

The data shared by the Polimi observatory on B2C Food & Grocery e-commerce tell of 2020 in which online spending by Italians in Food & Grocery reached 2.9 billion euros with a growth of +84% and estimate a further important leap forward for the sector. In 2021 online purchases in Food&Grocery will, in fact, exceed 4 billion euros (+38% compared to 2020), driven mainly by the Food component (+40%).

ecommerce food&grocery

eCommerce marginality, the research

Food Grocery (i.e. supermarket products) will grow by +39% in 2021 to reach almost 1.4 billion euros, while Food Delivery, having overcome the difficulties of early 2020 due to the closure of restaurants in the first lockdown, will continue to grow at a sustained pace (+56%) in 2021 and will exceed 1.4 billion euros. Explaining the development of the sector is mainly the offer grows, both in terms of new restaurants that activate eCommerce directly or intermediated, and in terms of greater territorial coverage of the service towards smaller municipalities.

eCommerce marginality, the key is in the business model

But the need to quickly launch the online sales service in order to respond to consumer’s needs┬áhas not, in many cases, allowed retailers to define a winning business model and to carry out precise analyses on margins. In fact, many of these entrepreneurs, at the end of the first lockdown, realized that home delivery or in-store pickup purchases proved less profitable than in-store transactions. In transitioning sales from the physical store to the online store, most of these traditional sellers adopted the same business proposition and price list as the store, forgetting about the costs they had to add to their existing operational infrastructure.

eCommerce marginality, the offer differentiation

While a brick&mortar grocery store typically provides an operating margin of 2%-4%, taking their proposal to the web adds the costs of technology infrastructure and its management, of providing home delivery services or pickup points, without eliminating significant store costs. If this online migration has represented a real lifeline at the time of lock-down and if guaranteeing a digital offer has brought several players up to date, today is the time to reflect on one’s own business model and analyze historical data in order to apply corrective measures, now that the data show, in any case, that the consumer has become accustomed to buying online even in these product categories and will continue to do so even after the health emergency is over.

eCommerce marginality, the areas of intervention

The areas of intervention will therefore necessarily have to be

  • cost analysis
  • pricing
  • diversification of the product portfolio
  • evaluation of online and offline margins

For all these aspects, in Premoneo we have a technological solution based on sophisticated mathematical-statistical models and artificial intelligence algorithms to support the market in this moment of adjustment.

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