E-commerce Food Industry – Could the Long-Term Impact of COVID-19 be Positive?
Pre COVID-19 the global growth of e-commerce in grocery was something we all took for granted, but market shares were still often quite small and cost factors for both providers and shoppers a nagging concern.
The Coronavirus crisis has turned all of that on its head.
For consumers, brands and retailers (large and small), and even for food service operators and wholesalers, the landscape has and will change.
Which Food Services Have Benefited?
In markets where online food sales are more established – France and the UK for example – sales have rocketed.
Ocado, the UK’s pureplay online supermarket, saw demand increase ten times as shoppers turned to the home delivery specialist.
Its share price has risen over 50% since February, reflecting not just its sales hike but – more so – its world leading online technology solutions now seen as likely to be increasingly sought after by other global retailers (Kroger – USA, Casino – France, and Aeon – Japan, are among its existing clients).
While Tesco developed its online capacity so quickly that it has managed to double deliveries from 690,000 per week pre crisis to 1.2 million, as anxious shoppers sought to limit in store shopping as much as they could.
Independent retailers, delis and farm shops have followed suit, with promises of short notice delivery slots which their much larger competitors have struggled to keep.
Premium foods, such as “organic” or “environmentally friendly” labelled goods are still even experiencing growth in places like Italy – countries that have been hit hardest by COVID-19
How Were Smaller or Start up Food Businesses Affected?
SMEs and challenger brands have been ahead of the curve in selling direct to consumer – via their own websites and online marketplaces.
This is all the more crucial now to replace sales lost from foodservice and (possibly) temporary de-listings as supermarkets seek efficiencies in their supply chain. But legacy brands can be agile too.
How Some Brands Overcame This Challenge to Sell Their Food Products
Giants like Heinz and Pepsico are offering product bundles shipped direct to consumers’ homes.
So to what extent do these changes mark a permanent shift in food selling and buying behaviour?
This will depend on how each group responds to opportunities and challenges:
Food Consumer Habits as a Result of Coronavirus
Opportunities as a result of COVID-19’s effect on food consumer purchasing include:
- increasing order frequency from existing shoppers shop more (appeal of convenience, safer shopping)
- increased penetration through new converts to online food shopping
- especially the 65+ generation, many of whom have recently engaged for the first time
Food Retailers Response to COVID-19
The changes and challenges they will face include:
- managing expansion of capacity
- investment in logistics and staff (vs pressure to invest in price)
- finding an elusive profitable model for home delivery.
Brands
Food brands opportunities and challenges will include
- increasing direct consumer engagement
- building omnichannel breadth to their marketing
Food services During and After Covid
Takeaway and delivery could significantly increase the share of restaurant revenues as social distancing and possible lower frequency of visits limit on-site sales.
And not least, for all of the above, how consumers and businesses alike will respond to the pressures of unemployment and recession before any steep (or gradual?) upturn in the years to come.
Simon Waring
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