Cannibalisation increases due to online stores and new stores.
Many consumers are experiencing “sticker shock”, says Rabobank analyst Schreijen. This term refers to the feeling of surprise or shock caused by the high prices of certain products compared to a few years ago. For example, consumers are still astonished by a jar of peanut butter costing more than €5, chocolate sprinkles costing over €3.50, and ready-made meals priced at €7.50, up from €5 in the past.
Price awareness influences purchasing behaviour, mainly because consumers are aware of price developments and this may make them think twice before spending. In addition to price-conscious consumers, competition from other providers also poses a significant challenge for supermarkets. This includes meal delivery services, meal kit providers, online platforms, specialty stores and foodservice.
As consumers once again have money to spend, especially now that their purchasing capacity has returned to 2019 levels, they find it easier to switch to more expensive channels such as foodservice and specialty shops. This poses a considerable risk to supermarkets. However, there are also opportunities. There are particularly good prospects for supermarkets among generations that value convenience, such as baby boomers, who have relatively higher discretionary income.
Additionally, supermarkets can strengthen their position by utilising unmanned vending points and vending walls, which cater to the demand for convenience. Rabobank expects increased competition among supermarkets in the coming years. More new supermarkets will open and more store space will be created, which will lead to greater rivalry.
This results in a ‘survival of the fittest’ situation, where only the strongest will endure. This could be more challenging for so-called service supermarkets, as growth is primarily occurring in higher segments and revenue from these segments may decline more rapidly in favour of discounters, who mainly compete on price. Furthermore, the bank predicts that the online share of the grocery market will grow to between 15 and 20 per cent. The market will be dominated by large players such as Albert Heijn, Picnic and Jumbo.
Newcomers will find it hard to break into this market, since major players have logistics, fulfilment and technology advantages. The analyst advises supermarkets to view online shopping as an additional service rather than the main focus, because the required investments are very high and the market is rapidly becoming saturated, with the largest players ultimately benefiting the most.
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