According to a new Kantar Worldpanel report, online grocery sales grew 30 %, in stark contrast with the overall 1.3 % increase. Online sales now contribute 4.6 % to the overall FMCG sales, but that will grow to 10 % (145 billion euro) by 2025.
Regional differences
These results are for the twelve months leading up to March 2017. The United Kingdom is still the leader of the European pack, with a 7.5 % online share. France, home to the “drives”, has 5.7 %, the Netherlands 2.6 %, Denmark 2.2 % and Germany 1.7 %. Belgium has not received a number at all. For most Eastern European countries, the numbers vary from 0.3 to 1.7 %. Kantar Worldpanel’s new report indicates that the mature markets, like the United Kingdom and France, have slower growth now, although Spain has progressed a lot, with a 25 % market penetration now.
There was also rapid market penetration growth in the United States for online groceries: about 30 % of the population bought food online, but that is a mere 1.5 % of the total turnover. To counter Amazon’s growth, chains like Walmart and Kroger invested in pick-up formulas, but only 10 % of American stores currently offers that option, which leaves plenty of room for growth. Latin American shoppers are still entirely focused on physical stores.
The highest growth can be found in Asia (+ 44 %): 19.7 % of South Koreans buy groceries online. Online sales contribute 7.5 % to the Japanese turnover, 6.2 % in China and 5.8 % in Taiwan. There is also strong growth for Thailand, Malaysia and Vietnam. Asian consumers love new technology, particularly mobile technology and Alibaba obviously plays a major role here.
Pure players in pole position
Remarkable: according to Kantar Worldpanel, ‘pure players’ are in ideal position, despite the success traditional retailers may have with their online formulas in Europe. They even represent 95 % of the overall FMCG online market in France. Store proximity is also a valid argument in the United States, considering 90 % of Americans live within 15 minutes of a Walmart. However, there is a shift: pure players are attracting new customers more easily. Across the Channel, Ocado already has a 15.4 % online market share, which has given it the fourth spot. Asian pure players are the main engine for growth there, with technological development as an important factor.
Another interesting fact is that eCommerce mainly thrives is megacities. Online already contributes 10 % of FMCG sales in cities like London, Beijing, Tokyo or Shanghai. Paris is a notable exception with a 3.8 % online share, which is well below the French average. Their abundance of convenience stores is probably to blame.
In the short term, online shopping has a positive effect on the FMCG market: consumers spend significantly more (both online and offline together) in the first year they shop online, compared to the year before. That effect wears off rapidly: starting in the second year, shoppers limit their budget, become more faithful users of online channels and also save on offline purchases. It is at that time that physical stores experience that these channels cannibalize on their sales. According to Kantar Worldpanel, that could pose a threat to the entire FMCG market, because online shoppers keep true to their shopping list and have fewer spur-of-the-moment purchases. Brands and retailers face a serious challenge in that sense.
