E-commerce E-food: 4 propositions concerning the market in the DACH region
No other market segment has grown as strongly in recent years as e-food. Whereas before the coronavirus pandemic there was no shortage of both supporters and critics voicing their opinions, it is now clear that e-food has arrived in the here and now. E-food expert Dr. Matthias Schu from the Lucerne University of Applied Sciences and Arts outlines the key points.
01 It’s still “Day 1”
You probably know the phrase – it’s from Jeff Bezos, has gained cult status and it’s included in every annual Amazon shareholder letter. And it also applies to e-food: despite the growth seen in recent years, the Swiss market is still in its infancy, with a market share of around 3.5%. And there’s still a great deal of potential to be tapped into in the DACH region in the future!
02 E-food developing in urban areas
Distance, logistical costs, speed. E-food is not a phenomenon for the countryside. And it’s the last mile – which is complex and expensive – that most players struggle with. Freshness and a full product range necessitate swift delivery, meaning regional warehouses and, ideally, your own delivery fleet. Given these extreme fixed cost drivers, there is generally no nationwide coverage, with providers concentrating on the conurbations.
03 Need for speed – quick commerce on the rise
At least since Berlin startup Gorillas achieved unicorn status, everyone’s been talking about quick commerce – the delivery of food within 60 minutes. And from an investor’s point of view, it’s become the “hottest shit on earth” as a niche within the online food retail business. It’s about cut-off times, fulfilment speed and the time between receipt of the order and delivery to the customer. While the occasional long-established e-food veteran still raves on about drive-ins, delivery windows of several hours and next-day delivery, both the market situation and consumer expectations have changed radically in the past 24 months: the standard and expectation has become same-day delivery, and within a maximum delivery window of one hour, shortened where possible to 20 minutes before delivery, as is the case with Picnic or myMigros. The speed concept has also been adapted by Zurich startup Stash, and others will follow. The idea behind the speed concepts: appeal to and acquire new, online-savvy customer groups with smaller shopping baskets and speed, moving beyond the traditional weekly shop.
04 Process costs – scaling without automation and efficient delivery will not work in the long term
The challenge with e-food: high structural fixed costs for picking, packing and delivery. So if there’s not a lot you can do about margins and the delivery fees only cover a fraction of the costs incurred, you have to tackle the challenge in a different way by focusing on the process costs. And in terms of scaling, the new saviour here is automation, as implemented for example by Picnic in the Netherlands with TGW Logistics, or Frisco in Poland in 2019. In 2020, KPMG published a study on this with guide values that should make profitability in e-food feasible: in the long term, a target cost corridor of 3 euros per order must be achieved for picking, and 5 euros for delivery. However, without automation and your own delivery fleet, this is almost impossible for e-food.
Due to the current situation, Connecta Bern will again be held as a digital event in 2021. Connecta is renowned for shining a light on the diverse nature of digitization and this year will be no different with content presented across the three formats of Connecta Blog, Connecta TV and Connecta Talk. Find out more here: www.swisspost.ch/connecta.
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