The Dutch grocery sector in 2030 - RETAILes - TALE 4: E-COMMERCE MODELS - Roland Berger
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RETAILes: The Dutch grocery sector in 2030 1
RETAILes
The Dutch
grocery sector
in 2030
TALE 4: E-COMMERCE MODELS
2 RETAILes: The Dutch grocery sector in 2030
RETAILes: The Dutch grocery sector in 2030 3
BACKGROUND
Roland Berger and EFMI Business School have re- executives from retailers, fresh food companies, brand-
cently conducted a joint study to gain insight into the and private-label manufacturers gave their views on the
future of the Dutch grocery sector and to understand future of the grocery sector.
how the industry could transform itself over the next
10 to 15 years within the context of a rapidly-chang- In a series of Retail Tales we aim to give an impression
ing world. In order to capture accurate insights from on what the industry could look like in 2030. Selected
within the sector, we organized roundtable discussions focus areas include the future of the brick-and-mortar
with CEOs and senior management of a wide variety store, the impact of digitalization and the social impact
of players active in the food and retail industry – both of these developments. In this fourth tale we discuss
incumbent companies and innovative newcomers. In the future of different e-commerce models and what
addition to the insights gained from these roundtable grocery retailers can do to become successful “click-
discussions, EFMI and Roland Berger conducted an and-mortar stores” (Figure 1).
in-depth food industry survey in which 150 Dutch
In the study we propose to focus on 3 selected areas:
In this fourthintale
developments we discuss the
brick-and-mortar, future ofand
digitalization different e-commerce models and what
social impact
grocery retailers can to do to become successful “click-and-mortar stores”
…
Figure 1: RETAILes: The Dutch grocery sector in 2030 …
INTRO BRICK-AND-MORTAR DIGITALIZATION SOCIAL IMPACT
0
Introduction to
1 The grocery store of
the future
3 Online grocery
shopping
5 Sustainable
supply chains
RETAILes: The
Dutch grocery
sector in 2030
2 Innovative in-store
technology
4 E-commerce
models
6 The pursuit
of health
4 RETAILes: The Dutch grocery sector in 2030
KEY TAKEAWAYS OF TALE 4: E-COMMERCE MODELS
• New and incumbent grocery retailers are
experimenting with different e-commerce models
in search of a slice of the online pie
• Incumbent retailers need to rethink their supply
chain in the e-commerce model
• Rise of direct-to-consumer model (DTC) and
platforms have the potential to change the
grocery retail sector
RETAILes: The Dutch grocery sector in 2030 5
Figure 3: Amazon consequently focusses on cust
In the study we propose to focus on 3 selected areas:
developments in brick-and-mortar, digitalization and social impact
End-to-end digital information flow
…
New and incumbent grocery retailers are … In the Netherlands, we see that both incumbent
Figure 1: RETAILes: The Dutch grocery sector in 2030 Inbound flow
and
experimenting with different e-commerce
INTRO BRICK-AND-MORTAR DIGITALIZATION SOCIAL IMPACT
new pure players are active within the online market,
0 in search
models
Introduction to
1 of a slice
the future
3 of the online
The grocery store of
5 pie providing both home delivery and click-and-collect
Online grocery
shopping
Sustainable
supply chains
Dutch customers are slowly starting to embrace the
RETAILes: The solutions. Home delivery is the dominant model in the
Dutch grocery
concept
sector in 2030 of buying their groceries online. As we illus- Netherlands, accounting for roughly 75% of the online
2 Innovative in-store
trated earlier in technology
our third deep-dive 4
E-commerce
models
The pursuit
about online gro-
of health
6 market. In this model the grocery items
Fully digital are brought to
Anticipatory Re
su
cery shopping, the Dutch online grocery market is the customer’s home rather thansupplythechain customer collect-shipping
m
expected to increase in value to EUR ~8 bn by 2030, ing them from the store. In the click-and-collect model,
> End-to-end digitalization > Predicative analytics allow
according to the Dutch food industry. Various retailers customers can order online and ofpick-up their groceries
administrative processes Amazon to send products to
the warehouse closest to the
> Ordering processes have
are currently experimenting with different e-commerce either at a local store or at a designated
a zero touch policylocal distribu-
anticipated customers –
either directly from suppliers
models in search of a slice of the online pie (Figure 2). tion point. Examples of local distribution points
> Integration of suppliers
into data collection and include
or from within their logistics
> Returns are likewise
data management
processes automatically send to the
likely area of the next order
Figure
Figure 2:2:
An An overview
overview of e-commerce
of distribution models2018
models in the Netherlands, in the Netherlands, 2018 Source: Roland Berger analysis
Consumer goes to
traditional grocery store
A Traditional
shopping
96.8%
Distribution center
Traditional store
Click and collect:
B1 In store
Pick-up Click and collect:
point B2 Pick-up point
Consumer
places order
online
Consumer picks up 3.2%
Home
C delivery
Bike delivery (e.g. Uber eats/ Deliveroo) Consumer places order online
Source: EFMI (2018), Roland Berger analysis
6 RETAILes: The Dutch grocery sector in 2030
Figure 3: Amazon consequently focusses on customer needs – The corresponding supply
chain is
Figure 3: build
Amazonthrough reverse engineering
consequently focusses on customer needs – The corresponding supply chain is build t
End-to-end digital information flow
Inbound flow Distribution Outbound
center
Fully digital Anticipatory Relentless Efficient picking Last mile
supply chain shipping supplier process excellence
management
> End-to-end digitalization > Predicative analytics allow > Amazon has perfected the > Amazon has its
of administrative processes Amazon to send products to costly picking process own transportation
> Ordering processes have the warehouse closest to the through utilization of fleet, partly operated
a zero touch policy anticipated customers – technology (incl. robots) through contractors
either directly from suppliers > Range of goods offered > Utilization of
> Integration of suppliers or from within their logistics does not alter the effort alternative methods
into data collection and
> Returns are likewise required to fulfill them like bike couriers and
data management
processes automatically send to the crowd logistics allow
likely area of the next order faster deliveries in
congested areas
Source: Roland Berger analysis
RETAILes: The Dutch grocery sector in 2030 7
through reverse engineering
Jumbo’s Pick-up “Solo” next to the highway and Albert
Heijn’s “Mobile pick-up point” (which is, for example,
located next to a camping area during summer sea-
son). The click-and-collect model offers customers the
flow convenience of online shopping and at the same time,
speed or immediacy. that home delivery cannot (yet)
offer. The solution also provides a benefit for people
who are not home during standard delivery times.
Incumbent retailers need to rethink their
supply chain in the e-commerce model
Home delivery is expected to remain the leading
model in online groceries. The underlying drivers of
Assortment Understanding home delivery are the increased consumer concern
planning/category customer needs about convenient solutions, the rise of free delivery
management and faster delivery solutions. In China, for example,
Alibaba recently launched Tmall Supermarkets, an on-
> Amazon is able to meet > Amazon collects and uses line grocery service company that provides one-hour
and exceed customer its own Big Data tool ('S9' express delivery to its customers for free. Home de-
expectation through a supported by Nielsen & livery is however a costly model for grocery retailers.
holistically planned product GfK) to systematically
range analyze customer behavior Currently, most players have a minimum order size in
> Individual categories are and needs place to cover the delivery costs. Minimum order siz-
regarded as strategic > Adding value to the es in the Netherlands range from EUR 25 (e.g. Picnic)
business units and are customer is at the heart of to EUR 70 (e.g. Albert Heijn). Current trends of faster
regarded separately all initiatives and processes delivery and lower order sizes will however make the
business case more challenging. Albert Heijn is current-
ly performing tests with regard to lower minimum order
sizes; on Wednesday and Thursday the minimum order
size is EUR 50 instead of EUR 70. To be able to offer a
home delivery solution that is sustainable in the long
term, traditional players must rethink their supply chain
and/or channel margin mix.8 RETAILes: The Dutch grocery sector in 2030
One of the key components of a sustainable e-com- the industry. Automation and efficiency is required to
merce model is demand planning. Online sales trends be able to deal effectively with peak demand during
change quickly and stock-outs in the online world are rush hours and to be able to provide high speed deliv-
costly. Use of big data and forecasting techniques must ery on a larger scale. Nonetheless, automated players
be embedded in the organization to ensure that the dis- such as Ocado are also struggling with the high distri-
tribution channel is optimized. Amazon is well advanced bution costs per order and overall profitability.
in this area; their supply chain is built through reverse
engineering with focus on customer needs (Figure 3). Finally, players should focus on how to deal with the
Amazon currently has a patent in place for a technology complexity and costs related to last-mile delivery. The
that predicts what customers will buy so they can ship it last mile of the transportation process will become the
before the order is placed. This forecasting model uses new arena for logistics. Both volumes and margins are
data from prior Amazon activity, including time on site, significantly higher in these last meters than in long
duration of views, links clicked and shopping cart activ- distance transport (the last mile accounts for approxi-
ity. As such, Amazon has decisive support in place that mately 60% of the total logistic costs). Various players
enables the company to proactively ship and supply the are experimenting with different solutions for last-mile
market, saving time and money. The same principle will delivery in order to try to balance customer preferenc-
most likely become the standard in the online food re- es with cost control. Pure online grocery player Picnic
tail market, driving retailers slowly towards a transition uses a “milkman” model, in which it delivers to custom-
from responsive retail to predictive commerce. ers following fixed times schedules. Amazon is current-
ly using its Whole Foods network in the United States
Another key component of a successful model is a fu- combined with flexible delivery drivers to realize a two-
ture-proof fulfillment center. Fulfillment centers need to hour delivery service as a premium service to selected
be further optimized to be able to handle peak demand customers. Traditional players can follow a similar ap-
and to realize high speed fulfillment in an OPEX-friend- proach by leveraging their existing asset base and using
ly way. Ocado operates smart warehouses called Cus- their store network as distribution hubs to minimize de-
tomer Fulfilment Centres that are illustrative of what livery time. Supermarket PLUS is already exploiting this
is to come in the future. Every order there goes from alternative with PLUS Express; for EUR 8.50 groceries
warehouse to bag without being touched by a human. are delivered within 2 hours (if ordered before 4 o’clock
The UK’s biggest pure online grocery retailer is able to in the afternoon).
collect orders of over fifty items including meat, dairy
and produce in just five minutes. The smart Distribution
Center (DC) has a grid in place with a fleet of over 1,000
robots that work together using an advanced real-time
optimization system. This highly advanced and efficient
solution stands in stark contrast with the traditional
and manual-heavy DC’s that are being used in most ofRETAILes: The Dutch grocery sector in 2030 9 Rise of direct-to-consumer model (DTC) category. Basically, Public Goods resonates with con- and platforms have the potential to change sumers in suburban or rural areas without Whole Foods the grocery retail sector establishment in their neighborhood. Delivery costs The direct-to-consumer model is currently practically can be paid from the discount realized by a shortened non-existent in the grocery landscape. This model is supply chain. Direct-to-consumer models such as the fundamentally different from the traditional online gro- example described above can potentially threaten the cery retail proposition and can lead to change to the future position of the retailer in the value chain. The sector. Direct-to-consumer startup Public Goods offers same goes for online B2C marketplaces. Marketplac- low prices for premium products by way of a USD 59 es can bring a number of consumer advantages from yearly membership. When the company was launched a convenience and cost perspective. Consumers have in 2015 it offered clean personal care products; it direct access to multiple products (also local products) then expanded to household goods free of harmful and marketplaces are more efficient and economical ingredients and anno 2019, it has a new healthy food than traditional brick-and-mortar shops. Players should focus on how to deal with the complexity and costs related to last-mile delivery. The last mile of the transportation process will become the new arena for logistics.
10 RETAILes: The Dutch grocery sector in 2030
Grocery players should think carefully about how to
prepare themselves for the scenario in which direct-
to-consumer models and marketplaces make their
entry into the grocery sector. A key question is
whether grocery retailers should invest in setting up
their own open platform within the Dutch grocery in-
dustry to stay relevant in a future market.RETAILes: The Dutch grocery sector in 2030 11
12 RETAILes: The Dutch grocery sector in 2030
PUBLISHER
Roland Berger Amsterdam
World Trade Center Amsterdam
Strawinskylaan 581
1077 XX, Amsterdam
The Netherlands
+31 20 796 0600
www.rolandberger.com
EFMI Business School
Groeneveld 2
3744 ML Baarn
The Netherlands
+31 35 303 7777
www.efmi.nl
AUTHORS
Alexander Belderok – Alexander.Belderok@rolandberger.com
Mireille Einwachter – Mireille.Einwachter@rolandberger.com
Marcel van Aalst – MvanAalst@efmi.nl
Joris Winkelman – Joris.Winkelman@rolandberger.com
Rosie Veul – Rosie.Veul@rolandberger.com
DISCLAIMER
This study has been prepared for general guidance only.
The reader should not act on any information provided in
this study without receiving specific professional advice.
Roland Berger and EFMI Business School shall not be liable
for any damages resulting from the use of information
contained in the study.
© 2019
Roland Berger and EFMI Business School
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