The challenges of the digital food and beverage industry
Culinary needs meets convenience
Who likes to stand in line during supermarket rush hour after work and then cheerfully carry groceries and beverages home in a good mood? Absolutely nobody. And this is exactly the point of departure for online food and beverage retailers.
Place the food you want in the online shopping cart, pay online, select the delivery time – and you're done? A good concept, but only used by 1.4 percent of consumers.
According to the BVWD (German Federal Association of the Digital Economy), even though every third German has done their shopping in an online supermarket at least once and would do so again, just as many people said they did not want to order their groceries online.
Why does the food industry find digitization so difficult?
Is everything fresh?
A study by the BVDW revealed that around two-thirds cite the disadvantage that they cannot inspect the goods on site. This refers in particular to fresh goods: the customer wants to touch the avocado and check how ripe it is before buying it.
"Many customers did try out ordering groceries online three to four years ago. But they were confronted with a high minimum order value and some other hurdles. And even if everything went smoothly, the nearest supermarket was still closer."
- Jens Drubel, Founder and Managing Director of the online supermarket Allyouneedfresh
One solution for online supermarkets is to rank products in some way in the shop. At ripeness level 1-2, the avocado would still be very firm, at ripeness level 3-4, it would be ready for consumption.
The right timing
Logistics and delivery can also become a vexing point for online grocery suppliers. The receipt of the goods must be planned by the supplier and the customer – especially for fresh and chilled products, the time of delivery has got to be relatively accurately timed beforehand: the customer must be at the delivery address and the supplier must arrive punctually.
There are several diverse problem-solving approaches, ranging from drones that drop off the shopping to modular delivery boxes that can keep content at the right temperature for a long time. Amazon Fresh makes use of the latter. These so-called Amazon Lockers are boxes that are divided into three different temperature-regulated compartments, ranging from -25 degrees for frozen food to +17 degrees for durable foods. This, of course, involves additional costs that affect the delivery price and this is a factor that deters many potential customers.
The price as a trigger?
When you’re looking for pasta, wine or coffee online, in most cases you will first use a search engine to compare prices and customer ratings.
Only 19 percent of consumers who order food online start their shopping in the online shop right away. And more than half of those 19 percent say they first go to Amazon to compare prices. 10 percent of respondents even mention Amazon as the first port of call for grocery shopping on the Internet. Amazon is clearly the number one online grocer, followed by Rewe and eBay.
What does the customer want?
There is only one answer: they want everything. Convenience, sustainability, regionality, trust in the retailer and healthy products are the biggest trends. But that alone is not enough. To compete with the supermarket next door in the long term, providers will have to entice customers with a comprehensive range of products.
As orientation: The average supermarket offers about 11,000 products, Amazon Fresh stretches the imagination with about 300,000 products, and Rewe Online comes up with 10,000 products.
The simple solution is: convenience!
Lower prices than in the retail sector are just one of the incentives that drives online purchases. This works very well in fashion, technology or cosmetics. But for food and beverages, this simple assessment of the situation simply does not cut it.
Even if product prices were at the same level as food discount stores, shipping and delivery costs would drive up the final price. This would neutralize the price advantage.
In this sector, dealers must focus on what currently is a less common advantage than on the lowest price: convenience.
- An extensive infrastructure that also covers rural areas
- Flexible deliveries and deliveries on short notice
- Technical and material requirements for the packaging in order to not interrupt the cooling process
„Digitalize or die! Technology and software will penetrate and significantly influence all areas of our lives. According to the theory of digital Darwinism (survival of the fittest), the most adaptive market participant will survive.”
- Thomas Kühn, Director of Corporate Digital Business Development, Lekkerland