Hermes study: Food retailers face losses due to online trading
According to a study significant drop in profits. Unlike in brick-and-mortar retail, the online sale of groceries is currently associated with losses, regardless of the type of delivery, according to a study by the credit insurer Euler Hermes available to the German Press Agency. Since part of the value chain – picking and delivery – is effectively shifted back from the customer to the retailer, costs have increased.
The result: With an average operating profit of 3.7 percent for food retailers in Europe, the study assumes that every percent of food sales that is made online threatens a profit of at least 500 million euros – provided that the margins in online food retail be zero, which is already optimistic. In the worst case – with a margin of minus ten percent – the losses could rise to up to 1.9 billion euros. According to its own statements, Euler Hermes examined the markets in Germany, France, Italy, Spain and Great Britain.
“Food retailing is clearly one of the winners of the crisis,” said Aurélien Duthoit, retail industry expert at Euler Hermes, with a view to last year’s sales increase of 5.3 percent in European and 7.9 percent in German food retailing. But not all that glitters is gold. “Because the increase in online trading is squeezing margins and leaving a bitter digital aftertaste.” The e-commerce share is currently three in Germany and eleven percent in Great Britain – and the trend is rising.
So far, German food retailers have been relatively hesitant to expand their online offerings, so negative margins in e-commerce have had less of an impact, said Duthoit. “But: Every percent of purchases that is made online endangers around 2.4 billion euros in sales and profits between 87 and 324 million euros in Germany.” The reluctance also leaves the door wide open for new providers. “In the future, these could fill the online gap that is hardly filled and undermine the established market participants.”
Grocery retailers should focus on adapting their store mix, going digital and partnering with players who are fully digital models, Euler Hermes believes. “There is currently music in there,” said Duthoit, referring to delivery specialists such as Deliveroo, Delivery Hero or Gorillas. (dpa/rw)