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Global (e)-Food Retail Barometer Summary

Core Content

This document provides an analysis of the global (e)-food retail sector, with a focus on the disruption caused by i-grocery (immediate grocery) and e-grocery (electronic grocery) models. It highlights the growth of i-grocery services, their impact on traditional food retailers, and the differences between i-grocery and e-grocery in terms of fulfillment, cost, and market dynamics.

Main Points

• I-Grocery is characterized by ultra-fast delivery (typically <15 minutes) and operates from centrally located fulfillment centers (dark stores), offering a convenience store-like experience.
• E-Grocery involves online grocery delivery or collection with various fulfillment models, such as central fulfillment centers (CFCs), multi-fulfillment centers (MFCs), and in-store pick-up.
• Market Trends: i-grocery is gaining traction globally, with early adopters serving as indicators for later markets. It is particularly disrupting the convenience format in the UK and US.
• Consumer Behavior: There is a growing demand for immediate delivery, especially for smaller purchases, with consumers willing to pay a premium for convenience.
• Business Model Differences: I-grocery has lower capital intensity and faster launch times, while e-grocery often involves larger scale operations and higher costs.
• Profitability: The profitability of both models is uncertain, with factors such as automation, inventory management, and delivery logistics playing key roles.

Key Information

UK Market

• I-Grocery Players: Getir, Gorillas, Weezy, Jiffy, Zapp
• E-Grocery Players: Ocado, Tesco, Sainsbury, Morrisons
• Fulfillment Models:
  • I-Grocery: Dark Stores
  • E-Grocery: CFCs, MFCs, In-store pick-up
• Order Fulfillment:
  • I-Grocery: Faster delivery (<15 min), low minimum spend, and lower delivery fees
  • E-Grocery: Slower delivery (next day or same day), higher minimum spend, and variable delivery fees
• Market Penetration:
  • I-grocery is addressing 50% of the market, including convenience, impulse, and urgent purchases
  • UK incumbents (Tesco, Sainsbury) are more exposed due to a higher percentage of stores in densely populated cities
• Ocado Zoom:
  • Offers a smaller range of products with slower delivery times (less than 60 min)
  • Faces competition from I-grocery players with faster delivery and lower costs

US Market

• I-Grocery Players: GoPuff, Gorillas, Getir, Fridge No More
• E-Grocery Players: Instacart, Walmart, Amazon, Kroger, Ocado
• Fulfillment Models:
  • I-Grocery: Dark Stores, with lower capital intensity and faster launch times
  • E-Grocery: Third-party delivery (Instacart, DoorDash, UberEats) and warehouse-based delivery (Kroger-Ocado)
• Market Structure:
  • Highly fragmented, with Instacart leading at 27%
  • Kroger and Ocado are collaborating on a DTC delivery service
  • Ahold Delhaize has limited exposure to the convenience format, which is a direct competitor to I-grocery
• Market Size:
  • Online grocery accounts for 10.2% of the $1 trillion grocery industry in the US in 2020
  • 30-35% of volume is delivered to consumers, 20% is shipped, and 40-45% is picked up at stores

Japan Market

• I-Grocery Players: Oisix, Cookpad Mart, QuickGet
• E-Grocery Players: Amazon Japan, Rakuten, Seiyu, Aeon
• Fulfillment Models:
  • I-grocery is in its early stages, with limited presence
  • E-grocery is more established, with Amazon Japan partnering with local supermarkets
• Market Potential:
  • I-grocery is not expected to have significant growth due to the dominance of convenience stores and the presence of e-grocery initiatives
  • Convenience stores are prevalent, with one per 2,100 people, and operate 24/7

Summary of Implications

• Ocado and UK Incumbents:
  • Ocado Zoom is at risk due to its slower delivery times and limited SKU range
  • UK incumbents (Tesco, Sainsbury) face higher risk from i-grocery due to their presence in densely populated cities
• I-Grocery vs E-Grocery:
  • I-grocery is more efficient in terms of delivery speed and cost
  • E-grocery offers a broader range of products and is more scalable
• Business Model Considerations:
  • I-grocery is more capital-efficient and allows for faster market entry
  • E-grocery requires higher initial investment and longer time to launch
  • Automation is a key differentiator for e-grocery, but I-grocery is more flexible and cost-effective

Key Players and Their Strategies

• Getir: Focused on I-grocery with a flexible manual model, plans to expand to the US
• Delivery Hero: Aggressively expanding Dmarts with both dark stores and partnerships
• Instacart: Testing priority delivery and may build its own warehouses
• Kroger: Partnering with Ocado for a warehouse-driven delivery service
• Amazon Japan: Expanding through partnerships with local supermarkets
• Rakuten: Acquiring a stake in Seiyu to expand e-grocery capabilities

Conclusion

The i-grocery model is rapidly changing the landscape of the global food retail sector, particularly in the UK and US. Its fast delivery and low cost are attracting consumers and creating pressure on traditional retailers. However, the long-term sustainability and profitability of i-grocery remain uncertain, with key factors including automation, economies of scale, and market dynamics. E-grocery, while more established, is also facing disruption from the rise of i-grocery. The future of the sector will depend on how well retailers adapt to these new models and leverage their existing infrastructure.