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Foods 2.0

Retail trade in flux

Purchases on the internet have long since been a normal part of life for consumers. But it is not only the internet which is changing retail and logistics requirements. A multitude of influences in modern society are driving dynamic change forwards.

With just a few mouse clicks, search, order, pay, and have the products delivered to your home in comfort. Whereas twelve years ago only 15% of private consumers ordered online, the figure is now 40%. “E-commerce is a clear growth driver for the retail sector. The distribution channel continues to grow and will affect all players and all product ranges in retail sooner or later", predicts Kai Hudetz, Managing Director of the Centre for Research in Retailing (IFH) in Cologne.

According to calculations of the Centre for Retail Research in Nottingham, online sales in Europe rose from around 110 billion euros to 185 billion euros from 2012 to 2015. According to a survey conducted by SCHUFA Holding AG, 62 percent of German retailers expect on-site retail businesses to further lose their importance.

E-commerce is a growth driver for the retail sector. Photo: © 3Dmask- Fotolia.com

The UK’s leading role

The British top the charts for online shopping: almost three quarters used online shopping last year. In Denmark the figure was 66%, in France 43% and in Romania only 6%. Retailers expect, as the SCHUFA survey found, that in future 79% of consumers will look for product information not just from one retailer, as previously, but via their smartphones before they make a purchasing decision. In international comparisons, the figures may still vary: For example, according to a study carried out by Deloitte for eBay, 56% of Spaniards do research before purchasing online, and 31% use their smartphone for this. In Italy, by contrast, only 18% do so.

In the food industry, the development of an online market has so far been less marked. A survey by Creditreform showed that only 5.4% of German consumers between the ages of 18 and 69 ordered food to be delivered. A pioneer in online food retail is the British supermarket chain Tesco. The company has been selling its products online since the year 2000. With a stream of new ideas, Tesco can adapt to continuous market developments. In Seoul, South Korea, for instance, there is a Tesco Home Plus Virtual Store. Scanning a digital display, for instance in underground stations, customers can order products via an app.

New distribution channels are being tested

In Europe, this type of digital shopping is only being tested in isolated pilot projects. The Düsseldorf start-up company “Emmas Enkel” (Emma’s grandson) has jumped on the bandwagon, however, and developed its own business model for the purpose. In the supermarket, customers can shop on an in-house iPad and then simply have to collect their goods at the checkout later. Or they can order online from the comfort of their own homes for delivery direct to their front door.

Consumers in France can collect their online orders at specially equipped “drive stations” – either on main roads or attached to a hypermarket. 2,000 of these stations offering consumers quick and efficient shopping opportunities are up and running. Last year 2.5 billion euro were spent in this way in France. A winning formula on one side does, however, mean a loss on the other. If this type of retail trade increases, it could represent a threat to supermarkets, hypermarkets and discount chains.

Own brands vs retail brands

Whether the delivery service and collection concepts supplement one another in future, or compete with one another, is an open question, says Stefan Eckert, Client Business Partner at Nielsen Company GmbH.

Eckert has also noted a change in product ranges. Supermarkets’ own brands are increasingly competing with established manufacturer brands. At Tesco, for instance, 50% of sales are generated by own brands. Between 2009 and 2013, the percentage of brand buyers also in Germany has fallen by 10% At the same time, a rise in buyers of retail brands has been recorded, as revealed in a study by the Consumer Research Company (GfK). This trend is not seen across the board. Consumers in certain sectors such as confectionery do, however, favour branded products.

Sustained changes in lifestyles

Other social developments are also forcing us to rethink. Food retailers and the packaging industry are reacting increasingly to demographic change and the related rise in one-person households. These changes influence the demand behaviour of consumers and lead to a reduction in packaging sizes. Production costs increase with smaller pack sizes, a fact which is reflected in the selling price. Nevertheless, demand for the new product sizes is growing, because lifestyles have changed irreversibly.

The range of products offered by the food industry is changing as a result of convenience factors. This includes, amongst other things, having more practical packaging and sealing techniques, and better product marking to meet the needs of the growing 50+ generation.

The trend is towards eating out. Photo: © Monkey Business - Fotolia

New challenges for logistics

The renowned logistics expert Professor Peter Klaus sees yet another development. The trend is towards eating out. This would lead to increasingly large parts of food requirements being delivered to commercial kitchens and the food service industry. “Major consumers will not, however want 150-gram packs, but will require larger packing units,” says Professor Klaus. This is an aspect of the expansion and design of product ranges. It leads to polarisation: on the one hand online shopping and demographic trends mean an increase in smaller packaging and order sizes. This will be a development that significantly alters the product ranges and ordering behaviour in the supply chains."

Logistics does not envisage any losses in the current change in business models, as the goods still have to be moved from manufacturer to consumer. Thanks to international networks, ever larger loads can be brought more quickly to their destination. “Innovative logistics solutions are just as much in demand for online shopping as for retail itself,” says Eckert. “Retailers could simply act as brokers for online shoppers. Again, that would have an effect on warehousing and capacity. The co-packing area could take on board different dimensions and structures. And with delivery right to individual households, another level is created again with individual time windows.”

Tailored selling solutions will therefore define the retail trade in future, whether in stores or for online shopping, in the sales area or at the consumer’s end.

Header: © adisa - Fotolia.com

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