2014-10-02-奥纬咨询-The_Future_of_Online_Grocery_16页_35mb

THE FUTURE OF ONLINE GROCERY

Threats and Opportunities

• Online grocery growth: The online grocery market is growing rapidly, with 6% market share in the UK and increasing in the US and Germany. Major players like AmazonFresh and Walmart are investing heavily.
• Survival challenge: Established brick-and-mortar retailers face a significant threat due to declining sales and margins. Some stores may become unprofitable, leading to closures.
• "Last store standing" mentality: Brick-and-mortar stores must compete locally to remain profitable, as failure to do so allows online grocers to capture market share.
• Market characteristics: Online grocery is economically viable in many markets with lower market shares than previously believed. Efficiency improvements can expand profitable service areas.
• Segment risk: Traditional supermarkets are most at risk from losing their best (least price-sensitive) customers to online grocers.

Where Online-Only Grocers Can Be Profitable

• Key factors:
  • Population density (affects last-mile delivery costs)
  • Total population (affects fixed asset leverage)
  • Market price levels (impacts margins)
• Examples:
  • Germany: Approximately 60% of the market can be served profitably.
  • US: 70% of the population could be served profitably with a 10% efficiency improvement and less than 7% market share.
• Barriers: High capital requirements, delivery and fulfillment costs, customer purchase patterns.

Operating Strategies

The Threat: Implications for Brick-and-Mortar Grocery

• Financial impact: A 10% loss in market share can be ruinous for retailers with thin margins.
• Store closures: Higher online market share may lead to 30% store closures in certain geographies.
• Location importance: Physical store locations will become even more crucial. Strong locations will capture sales from weaker ones and online channels.
• Multiple threats: The online threat can spin off the collapse of the middle tier (traditional important players) and pressure price and quality leaders.

The Opportunity: Competing in the Online Grocery Business

• New revenues: Brick-and-mortar retailers can reach new customers and grow sales through online channels.
• Optimal timing: Invest and expand online when possible, prioritizing geographically concentrated areas.
• Fulfillment model balance:
  • Choose between "click-and-collect" or "home delivery" based on specific regional market demands and profitability.
  • Evaluate tradeoffs between increased gross margin and fulfillment costs.

When to Launch/Invest/Expand

• Focus on building scale to achieve profitability.
• Plan for full utilization of fixed costs like distribution centers and delivery fleets.
• Consider customer experience investment even if operational kinks exist.

Click-and-Collect vs. Home Delivery

• Choose based on customer demand in the specific regional market.
• Click-and-Collect: Reduces delivery costs but not fulfillment costs.
• Home Delivery: May increase gross margin but requires cost consideration.

How to Fulfill Orders

• Consider "store" fulfillment for capital efficiency, customer insights, and immediate revenue.
• Hybrid fulfillment model: Use stores for fulfillment in regions where growth is not yet established.
• Scaleout: Long-term profitability requires optimizing fulfillment costs through automation and high-volume picking centers.

Concluding Remarks

Online grocery is becoming a viable competitive force in many markets. While disruptive, bricks-and-mortar retailers can survive by focusing local competition, optimizing store locations, and entering the online space strategically to reach new customers and capture assortment innovation advantages.