While food e-commerce is not yet profitable for distributors, it could overtake the market share of hypermarkets and convenience stores in Belgium. Distributors are multiplying investments and developing home delivery.
Watchword? Ease, flexibility and growth. Here is the main motivation of distributors who invest in e-commerce. Delhaize, Carrefour, and now Colruyt… It’s simple: (almost) everyone gets involved. The share of food e-commerce is relatively limited, even if “everyone expects growth to reach 15% but we don’t know when exactly”, explains Gino Van Ossel, professor at Vlerick Business. School. If this growth is confirmed, the market share of e-commerce would exceed that of hypermarkets and convenience stores in Belgium. “Which explains the efforts of distributors to be present in this sector,” he says.
Watchword? Ease, flexibility and growth. Here is the main motivation of distributors who invest in e-commerce. Delhaize, Carrefour, and now Colruyt… It’s simple: (almost) everyone gets involved. The share of food e-commerce is relatively limited, even if “everyone expects growth to reach 15% but we don’t know when exactly”, explains Gino Van Ossel, professor at Vlerick Business. School. If this growth is confirmed, the market share of e-commerce would exceed that of hypermarkets and convenience stores in Belgium. “Which explains the efforts of distributors to be present in this sector,” he says. Belgium experienced unprecedented growth in online food trade during the health crisis. If our country is still lagging behind, compared to its French, German or Dutch neighbors (only 8% of Belgians make food purchases online, compared to 30% of French and 25% of Germans), this segment has practically doubled over a two-year period. This growth has reshuffled the cards for large retailers, who have therefore had to adapt their strategy. The Colruyt Group brand has just announced the deployment of a new home delivery service in the Brussels and Antwerp regions. “It was necessary not to lose market share to Carrefour and Delhaize, which were already active in home delivery,” says Gino Van Ossel. In this area, Delhaize is a forerunner since the brand has been delivering to homes since 1989 with Caddy Home, which made it possible to place orders by telephone (the prices were however higher than in stores). The reconciliation of family life and professional life, the use of teleworking and the evolution of technology are shaking up consumer habits a little more every day. “The health crisis also played an important role,” adds Wim van Edom, chief economist at Comeos. Customers are looking for convenience. “They expect their store to save them time,” said Roel Dekelver, spokesman for Delhaize Belgium. As a result, the online shopping service continues to grow in popularity. And all of the distributors questioned assure us that online commerce makes it possible to win customers. “Today we are seeing a slowdown in the dramatic growth that occurred at the start of the pandemic, but the number of new customers continues to increase. Which means that consumers have well and truly taken a liking to online shopping services” , analyzes Leen De Dobbeleer, innovation manager of Collect&Go, Colruyt’s online platform. At Delhaize, home delivery now represents 50% of e-commerce volume, proving the interest in this type of service, the rest being click & collect. Food e-commerce has developed thanks to click & collect, a formula that allows customers to select the products they want online before picking them up at a pick-up point, without queuing at the checkout. A privileged entry service because it is less expensive than home delivery. “But today it is in delivery that the biggest growth is located”, analyzes Gino Van Ossel. In France, it now weighs more than drive, as our neighbors call click & collect. It represents 10.7 billion euros when the drive, also in growth, weighs 9. All the players in the large distribution have a similar speech, insisting on the complementarity between physical stores and e-commerce and the need not to oppose them. “There is no reason to think that e-commerce will cannibalize the sale of physical stores”, adds Arnaud Lesne, innovation director of Carrefour Belgium. Today, the customer is omnichannel. Delhaize’s available data does not say otherwise. “Customers are not 100% digital and continue to visit physical stores,” says Roel Dekelver. And it is no coincidence that the distribution centers where most of the orders for Delhaize, Colruyt and Carrefour are prepared are currently located on the Brussels-Antwerp axis, respectively in Puurs, Londerzeel and Willebroek. This area is strategic for distributors. “Not only is the population density very high there, but the purchasing power is very high, specifies Professor de la Vlerick. These are two essential elements for accelerating growth.” The population density makes it possible to distribute large volumes and therefore to reduce costs. That being said, e-commerce is far from being profitable for food distributors because the logistics costs are not yet fully invoiced to customers. But if supermarkets have waited a long time before embarking on food e-commerce and home delivery because of the lack of profitability, everyone is convinced of the long-term investment. “You don’t launch a service to lose money,” says Leen De Dobbeleer. “It’s a structural battle where, for the moment, everyone is losing money but where it is possible to win customers, continues Gino Van Ossel. Delhaize has gained market share thanks to this system.” Will it ever become profitable? The answer is yes. The two main costs are in order preparation and delivery. “The technology will make it possible to optimize and improve the efficiency of management and order preparation”, adds the specialist. Then the volumes will only increase, which will reduce delivery costs. But not all distributors are in the same boat. Although Aldi and Lidl are among the European leaders in food retail, they are lagging behind in food e-commerce. Hard discounters have been able to grow because they have been able to perfect the concept of profitable self-service to the extreme. But they lose that cost leadership when it comes to online, according to a report by LZ Retailytics. The reason is simple: Lidl and Aldi are secondary stores for the majority of consumers. This means that they are not the preferred place for all shopping but only for certain products. “The offer of these stores is different from that of traditional distributors, recalls Gino Van Ossel. The consumer goes there because it is cheap.” Throughout Europe, e-commerce is a major challenge for hard discounters since delivery costs are proving too high in relation to the value of the items. “For these stores, it is even more difficult to be profitable”, underlines the expert. Certainly Lidl is still present in this segment, but only for non-food. However, not all distributors have chosen the same formulas. For example, while order management and preparation is a service that remains internalized, delivery from the store to the customer is not necessarily. Carrefour has, for example, developed ShipTo, a personal shopper platform that delivers using cargo bikes in 90 minutes. The distributor has also set up partnerships with delivery platforms such as Deliveroo, Uber Eats and Just Eats. “These partnerships provide an e-commerce solution for stores that have never developed drive-thru, such as Carrefour Express”, specifies Arnaud Lesne. Especially since these stores are generally open later than the hypermarkets and therefore make it possible to cover a wider time slot. “Our job is not logistics, so we call on professionals,” he adds. Colruyt also combines different formulas. In addition to 500 drivers, formerly known as “neighbor delivery people”, a service that uses private delivery people, the brand completes its home delivery offer with 20 in-house delivery people. “We are aiming for 50 for next year”, specifies Leen De Dobbeleer. Colruyt delivers on board vehicles running on CNG (natural gas) “which emit far fewer harmful substances than vehicles running on diesel or gasoline, adds the manager. A CNG engine emits around 75% of fine particles and nitrogen oxides less than a diesel or gasoline engine”. For Delhaize, “being the first to embark on home delivery has made it possible to have a certain lead over competitors and to develop logistics”, continues Roel Dekelver. The company also uses Urbike, a Belgian start-up that offers companies bicycle delivery services for all types of goods. This option is preferred for stores located in places that are difficult to access by car (especially in the metro) or prohibited to transit traffic, such as certain areas of Brussels. The advantage of the cargo bike is that it avoids having to adapt the supply chain in depth. “This avoids traffic jams but also traffic constraints”, explains Renaud Sarrazin, the co-founder of Urbike. The proposed solution also makes it possible to decarbonize the environment. “Not only do we improve air quality but we avoid noise pollution.” Proof that home delivery is on the rise and concerns everyone, The Barn BioMarket store, the brand which has set itself the task of democratizing organic food in Brussels, has also launched a delivery service to residence. It also calls on a Belgian start-up, Proxideal, which has become its exclusive partner. “We are the first to offer large shopping within two hours, at the same price as in the store”, adds Andréa Englebert, co-founder. The partnership started with the store in Ixelles and will soon be extended to the other stores. “We receive dozens of orders a day.” Will food e-commerce then save supermarkets? What is certain is that if the growth in delivery is confirmed, those who have not seized the opportunity may well lose their feathers… or market share.