E-commerce for everyday consumables: a niche or growing market?

October 2016

It’s an average evening in Germany: lines at supermarket checkouts are growing longer, customers hurry through the aisles to quickly buy the ingredients they need for dinner. Will these scrums among the shelves and at the counters soon be a thing of the past? The foundations for this change have already been laid since retailers already offer the option of ordering everyday consumables online and having them delivered. However, when it comes to shopping for groceries and other fast-moving consumer goods such as drugstore items, Germans only rarely reach for their laptop or smartphone.

The digital revolution is not just a phenomenon which is widely discussed and described, it is also very clearly visible, for instance in our inner cities. Retail outlets are closing; the number of vacant stores is increasing. One reason for this is that Germans are no longer going to specialist stores for specific products and are ordering them conveniently online instead. Already over 40% of sales of computers, computer accessories, music, films and software take place over the internet. But when it comes to the largest retail sector – groceries and drugstore goods – there is scant evidence of the online shopping trend. Data from GfK’s Consumer Panel and POS Tracking reveals that in 2015, just 1% of revenue for everyday consumer goods was generated online.

Big hits online: it’s all about computers, music and films

It’s a different picture entirely in other retail segments: alongside the media and computer products mentioned above, consumers use the internet in particular to buy toys (proportion sold online: 34%), photo products (30%), and electrical appliances, as well as books and calendars (29% each). Additionally, in the areas of telecommunications, health and beauty and multifunctional technology (such as headphones), around a quarter of all sales are made online, followed by sport and leisure products (23%) and consumer electronics (21%). Online business involving automotive and motorbike accessories accounts for 20% of sales, with the figure for large electrical appliances, lifestyle products and fashion somewhat lower at 17%. The share of sales of kitchens and furniture generated online stands at 12%, and this goes for light bulbs and lighting too, followed by DIY products (11%) and gardening tools and grills (9%). Optical supplies and glasses are bought considerably less online with just 4% purchased this way. However, this is still 3% more than for everyday consumer goods.

Evidently there are still barriers to overcome when it comes to ordering groceries and other everyday consumables online. Is it because we would prefer to see the produce properly rather than fill up our shopping carts virtually? Or is it because, even though customers can do an online shopping trip from the comfort of the sofa, they have to know beforehand when they will be home to receive the delivery? What about when you just forgot to get a liter of milk or some eggs? Do you really want to wait for several hours? Whatever the reason, it doesn’t seem to rest upon people’s fundamental openness towards this form of shopping. A quick look at household reach shows that one in every five households in Germany occasionally turns to the convenience of a computer or smartphone to order fast-moving consumer goods. Here Germany is on a par with other European countries: in France and the United Kingdom only 3% and 4% more respectively sometimes buy groceries and drugstore items on the internet, which equates to almost a quarter of households. However, this converts to significantly higher market shares of 4% and 6% respectively when it comes to online sales in this segment. The difference is even greater when you look beyond Europe: for example, in South Korea, 60% of households order fast-moving consumer goods online now and again, giving online retailers a market share of 13%.

Reasons to shop online determined by type of buyer

So what can retailers such as Rewe, Edeka, etc. do to attract customers not only to their physical stores but also to their online stores? First of all, they should get to know the actual and potential online buyers and their motives. Here, an analysis of the GfK data shows the different customer groups: first there are the “heavy buyers”, who already satisfy 14% of their needs by ordering online; then there are the “medium buyers”, who buy 1.7% of the fast-moving consumer goods they require via the internet. Of course, there is also still a very large group of “non-buyers”, who only buy their everyday consumables in the store. Naturally these three groups show different age distributions, but when they are standardized so that each group notionally has the same proportion of young and old people, the actual differences aside from age effects become clear.

It would be easy to assume that stressed people in particular would turn to the world of online goods and become internet buyers, but this would be a mistake. The proportion of people suffering from above-average stress was similar in all three groups. Buyers who used the internet for their shopping even complained less about time pressures than non-buyers, so this cannot be the deciding factor for online shopping. Additionally, buying online in no way reduces the number of physical shopping trips. Those who buy using the internet are not generally doing so to avoid outings to shopping malls, supermarkets or discount stores. Instead, the number of physical shopping trips seems to be completely independent of online shopping habits. So what are the causes then?

Heavy buyers like convenience; medium buyers selectively supplement their shopping cart

A specific inquiry into the reasons for such purchases sheds light on the situation here. Heavy buyers simply enjoy the added convenience when buying groceries online and 30% of these buyers state that this is their main reason for buying on the internet. Clearly, the offer of a delivery service also plays a central part in this argument and is cited by 20%. In contrast to this, cost savings and the exclusivity of certain products offered (products which are only available online) conclusively rank almost equally in first place for medium buyers (with 28% and 27% respectively). Both are clearly rational motives.

Of course, cost arguments are relevant for heavy buyers as well. Attractive prices are mentioned by almost one in five respondents in this group, which puts it in third place. However, the fact that certain products can only be found online is of little relevance for this group (12%), while only 11% of medium buyers cite convenience as a reason for shopping online. The two groups only agree on the aspects of “time-saving” and “large choice of products”. As already suspected, the time saved by shopping online was named as a reason by just 13% and 10% respectively. The general range of merchandise on offer was only cited by 12% and 10% respectively.

Shopping carts: medium buyers choose selectively online

The various reasons for shopping online are apparent not only from the responses of those surveyed, but also from looking at e-commerce shopping carts. People who value maximum convenience fill their cupboards with all kinds of products with a few clicks of the mouse. This is why heavy buyers’ shopping carts encompass almost all product categories: vegetables account for the largest share at 10%, with cosmetics the smallest at 2% and other product groups scoring around 5-7%. Medium buyers’ shopping baskets look completely different. These shoppers, who search above all for products and bargains which aren’t available elsewhere, reach in particular for body care products (22%), as well as for alcoholic beverages (12%) and coffee (10%). In contrast, fresh produce such as fruit and vegetables is only rarely found in their online shopping carts. Those who only occasionally buy via the internet evidently use it as a tailored complement to physical stores.

So what does this mean for retailers who want to utilize the market potential of online shopping? There are still challenges ahead. Retailers who accept grocery orders online and then deliver the goods as well have to have the appropriate logistics in place and must be able to guarantee unbroken cold chains and be able to deliver an extremely diverse range of products in a short time. Supermarket chains and discount stores such as Rewe, Real or Lidl, which have made fast-moving consumer goods available for purchase online, currently sometimes offer a delivery service for a reduced range of goods in some, mainly urban, regions. However, this could change. The online retailer Amazon now also offers groceries at the click of a mouse and delivers them to its customers – at least in the UK. There is much speculation and debate about whether this service will launch in Germany too and how this would affect local supermarkets and discount stores. Perhaps in Germany, Amazon’s concept would outperform traditional grocery retailers online and thus become a new competitor. But  maybe this impetus is precisely what is needed to boost the online market overall, something which journalist Michael Scheppe already suspected over a year ago in an article in the „Handelsblatt“ when he wrote: “For the German market, the launch of Amazon Fresh is set to be the start signal for online grocery shopping.” A signal from which many could ultimately benefit.

Source: GfK Conference 2016, presentation of Thomas Bachl.

If you have any queries concerning this article, please contact Thomas Bachl, GfK SE.

Contact person for queries about Compact: Claudia Gaspar (e-mail to hello@nim.org).