Convenience is still king

Sales of groceries to Danes have marked record high growth over the first 5 months of 2021. The otherwise apparently unstoppable discount sector is losing actual market share for the first time in years. There is still significant growth in discount, as the market in general has grown significantly. Based on market shares, however, we have seen a clear trend this year, where all supermarkets, from the smallest grocery store to the largest department stores, are gaining ground in relation to discounters.

The 2 largest Danish retail groups believe that this trend is temporary and that consumers will revert to normal routines. When everything reopens and stabilizes, they expect a normalization of the market, and that consumers will also prefer shopping at discounters again as they will have less time.

Another interesting question is whether online retailers can retain the many new customers they have attracted in the past year. According to the leading online retailers across the Nordic region, once customers shop for groceries online, they appreciate the convenience and are likely to continue using the service.

What could drive consumers to go back to classic retail from online and go back to discounters from supermarket? Probably price and convenience. But which one will be decisive in the end? Time is money considerations may win out.

We do not have any past experience – at least not in the Nordics for this.

Using South Korea as an example, in 2014-15, it was hit by the MERS pandemic, which was more severe locally at that time compared with COVID-19 in the Nordics now. Then online sales of groceries had an extreme upswing in 2015 and continued to increase in the following years. It became a snowball effect and not just a temporary increase that later declined. Instead, it continued to grow.

It is critical for retailers understand the nature of the online shop and how shopper needs change over time.  And It is critical for online grocery to adjust their structures and develop their buying power to meet changing consumer demands.

For the classic retailers their existing structure is under threat. Online retailers need to develop a new structure with robotics and efficiency that can meet changing consumer demands.

Several other factors will also be important for the development. Sustainability and Climate. Is it more efficient to deliver from one place to 100 households or is more sustainable to have 100 households to go to a shop? Is it better for the climate to have 1000 shops filled with products or is it more efficient to have one fully automated warehouse and deliver to 500,000 households? All these questions will become relevant. At the end of the day consumers will no doubt change behaviour, they have done so through history and “self-collection shopping” started in the 1960’s and is now being challenged for real.

I believe the online retailers who are not bound into existing structures have an advantage.

I believe we will see a similar development in grocery retail as we have seen in clothing and non-food and the future winners are not necessarily today’s leaders. Consumers’ perception of convenience will decide the winner.