In an industry that has historically been slow to change, the pandemic has caused a seemingly irreversible shift, with traditional grocery retailers having no choice but to adapt accordingly to protect their market share. Yet, developing a comprehensive online offer is no easy task; many retailers have struggled to build a smooth customer experience, particularly when it comes to last mile delivery.
Digital platforms are supporting traditional retailers
Ordering Food online has never been so easy for consumers, a variety of solutions have emerged from meal kits (like Hello Fresh or Julienne), to takeaways (led by Deliveroo, Just Eat and Uber Eats) or ultra-fast convenience groceries (such as Gorillas, Cajoo, Kol or Dija). But the biggest winners have been grocery platforms, enabling large retailers to digitize their existing offline offering in a matter of days. Instacart in the US, Everli in Italy and Poland, Rappi in Latin America or HappyFresh in South East Asia, have all build their business model partnering with traditional retailers instead of competing against them.
To date, this has proven a remarkably successful model, leading to rapid market dominance. In the US, 57% of online shopping is done via Instacart after mass adoption by leading retailers like Walmart, Kroger, Costco and Aldi, as well as regional grocery players. In total, more than 40,000 stores from 500 retailers are now selling digitally via Instacart.
Having established itself in Italy and Poland, Everli has set its sights on the rest of Europe and is now expanding its proven model to France and the Czech Republic. The company has quadrupled its revenue during the pandemic, now operating across 70 cities and offering access to 300,000 products via major retailers like Lidl, Carrefour and Kaufland.
In Latin America, Rappi has been steadily building momentum since 2015. “Rappi managed to acquire customers incredibly fast, while broadening the scope of services they offer and expanding to all key markets in the region, putting pressure on international retailers to also invest in their own e-commerce operations”, says Alberto Moriana, Head of Sales LATAM at P&G. “Rappi has thus contributed significantly to a lasting change in the shopping habits of Latin America consumers by providing them with a one-stop shop to solve their small daily needs.”
Platforms are part of retailers’ digital ecosystem
The key of success for the on-demand grocery delivery platforms lies in the value they bring to both sides of the marketplace.
- Consumers: marketplaces are highly customer centric, allowing the customer to cherry-pick the best offers from different retailers in one place. Parting from the ‘everything under one roof’ approach created by supermarkets, they expand it for the digital age, so it becomes ‘everything from everyone under one app’.
- Retailers: platforms solve many challenges for retailers, including:
a) addressing the last mile issue of delivering same-day medium-large basket orders, which are the most costly and complicated to handle for e-merchants. The sheer volume of orders on the platforms means they can optimize routes and deliver superior customer service.
b) providing plug & play technologies to implement efficient online services, solving the long and complex process of developing new digital infrastructure and IT solutions.
c) working with external employees to bolster staff as needed, they deploy a versatile model, depending on the volume of orders and time of day.
d) ensuring high quality Customer Experience – not being a partner does not prevent platforms to send shoppers to retailers’ stores, with poor customer experience associated with a retailer’s brand. Being a partner allows to reduce significantly pricing errors and substitutions due to out of stock, as the platforms have a better monitoring of the store inventory.
By solving these core challenges, grocery marketplaces have become part of a comprehensive ecosystem for traditional retailers, rendering the full integration model obsolete. Even for retailers with an established e-commerce offering, these new platforms provide an attractive complementary solution by allowing retailers to offer customers a same-day delivering service at a competitive cost, without disturbing the internal organization of the store.
Sustaining growth in a highly competitive market
As the market continues to mature, eGrocery marketplaces will need to sustain their growth by strengthening existing partnerships with retailers, reinforcing the entire ecosystem against emerging pure players like Amazon and Ocado and alternative solutions like Gorillas or Glovo which bypass traditional retail altogether. Enrico Fantini, Director of e-commerce & digital transformation at Carrefour Italia, mentions « To keep up with online market growth, retailers will have to strengthen partnerships with Platforms. Not only for their traffic building capabilities but also for the convenient delivery services they bring. Retailers should consider schemes where partners like Glovo or Deliveroo cater to the convenience need via ultra-fast delivery of small baskets while marketplaces like Everli cover same day delivery without disturbing store organization. Bulk orders from the client with scheduled slots can still be handled directly by the retailer.”
Ownership of customer data will be a key differentiator and strategic asset; by sharing and enriching this data, retailers and digital platforms could gain major grounds over new players in the market. Another potential differentiator for platform/retailer partnerships is the use of store private label brands; marketed correctly, these exclusive options could be used to increase brand loyalty.
In short, with e-commerce expected to account for up to 25% of spend in mature markets, omnichannel is no longer an option for retailers wanting to retain market share. Partnerships with online platforms provide an attractive alternative to developing stand-alone solutions, allowing them to offer a greater breadth of service at a competitive pace and price. By combining decades of retail experience and heavy customer footfall with a user-centric digital approach, we believe that robust platform/retailer partnerships will be strong contenders against innovative and well-funded digital grocery models emerging in the market.
Cowritten with Anaïs Jollivet