E-commerce lowers brick stores' profits

E-commerce lowers brick stores' profits

Online sales are detrimental to the business model of physical stores. That is the conclusion of financial specialist Marshoek, who however claims that supermarkets just have to go through with it.


Online growth

Even though the research was only done in the Netherlands, the conclusions may be interesting far beyond the Dutch borders. Marshoek found out that out of 265 supermarkets in franchise, the average profit dropped by 7000 euro or 0.1 % due to profits on a web shop having significantly lower margins compared to offline. On the other hand, turnover is rising even more significantly because of e-commerce: online turnover in Dutch supermarkets has risen to 1 billion euro last year. The market share for online has risen from below 1 % in 2014 to more than 3% now. 


The lower profit rate does however not mean that supermarkets can simply ignore e-commerce, as the latter is one of the channels with the highest predicted growth for grocery shopping, says Marshoek. Moreover, it is quite possible that when (e-commerce) turnover goes up, profit rates might do the same. 


Food waste

Another important aspect in the Supermarket Benchmark is the attention to food waste. The researchers nudge supermarket owners to up the fight against food waste, even if only out of financial motives. On average, 1.5 % of a supermarket's turnover goes out of the window because of food waste, amounting to over 126.000 euro per store per year. For all the Dutch supermarkets in franchise, the total cost of food waste is a staggering 172 million euro per year.