Economy

Overcrowded on the market for online supers; can they make a profit?

“No, you can’t make money with delivering groceries,” says retail expert Paul Moers straight to the point. The only way that can be done is by robotizing the entire order picking process and thus reducing costs, he thinks.

But these investments involve significant amounts, tens of millions of euros, says Moers. “The only ones who can afford that are Albert Heijn and Jumbo.”

Scale size

These two can also buy cheaper thanks to their market share in the Netherlands of 35 percent and 21.5 percent respectively, according to Moers. After all, the more you purchase as a supermarket group, the lower prices you can usually negotiate.

Perhaps Plus, if it can take over a party, will have a market share of about 10 percent. It could save it then, Moers thinks.

Moers is much more gloomy about online supermarket Picnic. He points to the losses that Picnic is suffering. In 2019, this amounted to 44 million euros, an increase of 20 percent compared to the previous year. Figures for 2020 have not yet been published.

Increase prices

However, not everyone is as gloomy as Moers. All online supermarkets can make a profit, thinks supermarket expert Erik Hemmes. According to him, a condition is that they ask a higher fee from the customer.

After all, if you do your shopping yourself, it means a lot less work for a supermarket. “Once consumers are customers and are willing to pay for delivery, you can increase the fee.”

The prices in stone shops will eventually be lower than if you order online, Hemmes thinks.

‘Competition, however, pushes prices down’

But Moers does not expect higher prices at all for the time being. “When there are so many players, they compete completely.”

Online supers should wait until one or more players can no longer survive, Moers thinks. For the time being, however, investors are still putting money into online supermarkets.

Jitse Groen invests

For example, supermarket app Crisp can continue to grow in the near future thanks to a capital injection of 30 million euros.

Investors also include top Dutch names, such as the founders of JustEat Takeaway (Jitse Groen) and Adyen. In 2019, Picnic raised another 250 million euros from existing investors and from house bank ABN Amro.

Crisp: niche

A solution for new web supermarkets could also be that they look for a niche, Hemmes thinks. According to him, Crisp is in an interesting niche, because they supply local products. Those products are a bit more expensive, which means that the margin is higher.

Gorillas, which claims to deliver within ten minutes to a number of large cities in the Netherlands (and beyond), is also located in such a small, but interesting part of the market. That’s what Eelco Hos, an independent retail consultant, thinks.

Moers sees dangers for a player like Crisp, however. Albert Heijn, for example, also started with regional products. And how important is it that you have your groceries within ten minutes, he wonders. “Most people plan.”

Why online?

If delivery is now loss-making, why do you start? “Online is potentially a large market, many companies want to have a position in it. But not everything works, there is also a lot of opportunism. It’s like salmon swimming against the tide, most of them don’t make it, but those those who do make it have a good chance of success “, says Laurens Sloot, professor of Entrepreneurship in the Retail Trade at the University of Groningen.

“What you see is that investors value growth and growth potential highly, higher than how profitable something is at the moment. Ultimately, companies have to go black below the line. The question is: how long will it take? Jitse Groen is also natural. no Sinterklaas. “

“If you cannot make a profit, you can also earn money in another way, by selling”, says Hemmes. Picnic’s CEO Michiel Muller previously sold Tango and he founded Route Mobiel, a competitor of the ANWB, which he later sold.

‘Better: web and physical store’

You would think that supermarkets that are only active online have future prospects, because they do not have physical stores. That’s a misconception, Hos explains. Supermarkets that are either only active online or have no website at all will have a difficult time, he thinks.

“Online customers are very loyal and they also come to your brick store. They are also less likely to switch to another supermarket.” He noticed that many supermarkets that lost market share last year, such as Vomar, Aldi and Lidl, do not have a web shop and delivery service.

However, not all consumers will want their groceries delivered at home, Hemmes thinks.

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