In times of corona crisis, e-commerce seems to be more relevant than ever especially for offline grocery retailers. The number of e-food orders increased rapidly. But what is to be expected after the pandemic? Will corona be able to drive online grocery shopping long-term? Or will it be only a phenomenon?
The pandemic triggers global fear and uncertainty. The panic reaction of the Germans is reflected particularly in the high demand for durable products. The consequences are empty shelves and overworked staff in the supermarkets.
Social distancing is the most important imperative at this time, whether at work, during leisure time or while shopping. To protect the general public, various strict measures have been implemented to ensure compliance with the minimum distance. Restaurants are adapting and reacting to the strict restrictions by offering more home delivery options.
The avoidance of cash was a clear recommendation from the federal government and World Health Organization (WHO) to minimize the risk of infection. Since the beginning of the year contactless payments have increased by 50% . According to the German Banking Industry (DK), currently more than half of all Girocard payments are contactless. In December, this proportion had still been at 35%. In case of Mastercard payments, 75% are currently made contactless. 
The consequences of corona are not only observed in the physical retail, but also in the online food sector. Therefore, let us take a look at the e-food market in Germany before the outbreak of the pandemic: When considering the total online turnover, the share of online food retailing reached only 1%.  This is primarily represented in large cities such as Munich, Berlin and Hamburg. And 90% of online food retailers do not manage to survive on the market in the long term.  In comparison, lifestyle articles and clothing account for more than 25% of total online sales. Although e-food sales have increased by 17,3% since last year , groceries are the laggard in the eCommerce world.
The German e-food market can be divided into five clusters that are illustrated by a few market players below.
Similar to the stationary trade, the ordering intensity has risen significantly. Online grocery delivery providers benefit from increasing popularity of online purchases. In the last few weeks, various companies report an order growth, e.g. Picnic has a demand increased by almost 50% in all areas of their business.  This also increases the need for additional personnel. For example, HelloFresh plans a staff increase of 50%. The sales boom is not only due to repeat customers but also to a large number of new customers. Since the corona crisis, the HelloFresh has recorded 25 times new customers of compared to 2019.  Especially the demand for durable food has grown by a third. In general, there is a visible growth in the percentage of an older customer group.
The effects of the pandemic on the grocery shopping can be seen after a few weeks. But the exciting question is what consumer behavior looks like after the corona crisis. Does corona boost the e-food industry? Are people changing their habits towards e-food in the long-term?
There are a couple of indications that after the pandemic, the spread of panic in society will ease and the majority will return to their longer-term habits over time. During the corona period, some buyers felt compelled to switch to the online channel for their own protection or due to a shortage of certain goods in stationary supermarkets. But, after the return to normality the usual visit to the supermarket around the corner could take place again.
As the high demand also leads to capacity problems of online providers, new customers might have had negative first experiences in e-food. For example, Picnic and Rewe are currently sold out of delivery slots. So, customers who once made these repelling experiences might not try it again. They prefer the convenience and immediate availability in the supermarket just around the corner. This might even be enhanced as the corona virus has awakened a helper instinct of many. People got emotional about the personal fates of small business owners around the corner leading to a stronger willingness to support them by buying their groceries locally. Furthermore, people like going grocery shopping because for them, this stands for experience. They enjoy the inspiration while strolling through the shelves as well as meeting people. Besides that, the megatrend of sustainability is widespread among consumers and influences their purchasing decisions. This could be one reason why, after the crisis, customers are returning to stationary trade and renouncing home delivery for the good of the environment.
All these aspects justify the opinion that old habits will return as soon as the exceptional circumstances pass. This could be an indication that grocery shopping will remain a traditional business.
Due to the exceptional situation, new customer groups (e.g. seniors) form a new target group of e-food suppliers. Even though some of them might have had a bad experience with the delivery times, the online purchase barrier has dropped. For them, awareness for this possibility is built and they discover the advantages of online orders such as time independence, increased personalization and convenience. Furthermore, especially this group of people is challenged by carrying the purchases to their homes – which lapse by home delivery.
Currently, no one knows how long the quarantine period will last. In Germany, the situation is expected to continue at least until summer. Until then, the e-food suppliers might increase the capacity to meet the customers’ expectations regarding delivery times and product availability and the new habits may have re-established themselves.
In addition, the (potential) customers have an ever-increasing choice of different features and values which solve different needs.
They can choose between different types of contract like subscription models or transaction-based purchases.
They can choose e-food suppliers which focus on sustainability by offering local food or non-plastic material.
They can select a flexible delivery time frame, next day delivery and the tracking of the delivery.
Especially the people who completed a subscription and the offer continues until after the quarantine, a lock-in effect might occur.
The high demand on online purchases may also result in new functions and simplifications such as new payment methods. For example, Klarna has recently introduced the option of purchasing with only two clicks. The company itself calls the new function “Klarna instant shopping”. This express button is intended to simplify the shopping process and make it available at any point. The basis for this is a closer cooperation between Wirecard and Klarna in order to develop a joint and enhanced payment solution. If Klarna's instant shopping function is integrated, merchants will be able to offer their customers all payment methods from instant bank transfer to purchase on account to installment purchases. According to Klarna, the launch of the new button has already resulted in sales growth of 30%.
This might be a pioneer of new, customer-oriented functions. Most of the online shops currently concentrate on further developing their offerings. This entails a long-term effect on the customer experience and will make it even more simple to buy products and services online to all customer groups.
We do believe that the corona crisis is leading to a sales boom for the entire e-commerce market, which will continue in the future.
Even though the corona crisis has devastating consequences for the all mankind, it also offers opportunities. There is a strong urge to drive digitization in SMEs and to find new creative digital solutions that will have a lasting impact . The visible expansion of newly acquired customer groups – in particular, elderly customers – is an indication that barriers to online shopping have been removed and consumers are more open to e-food offers.
Corona can be seen as a driver of innovation. Businesses have been already innovative by offering cash-free operations (e.g. restaurants) or contactless services to customers (e.g. Lieferando). Also, new ideation formats come up. For example, from 20th to 22nd of March thousands of people were involved in the #wirvsvirus hackathon and worked on ideas to facilitate life during corona. With 43 000 participants it was the largest hackathon ever. Some of them developed solutions for virtual queues in shops or supermarkets. Others established online shops for small business owners to sell their products online.
For us, all these arguments indicate that e-food will endurance a persisting upswing. We believe that corona is a driver of e-commerce and especially e-food. Nevertheless, we doubt that the success due to the current e-commerce boom will be lasting without supporting measures. Plus, the market is highly competitive.
The operation of an online shop alone does not guarantee the success. The increased order intensity shows that some online grocery providers were not prepared for the sudden online growth. In terms of digitalization there is still room for improvement. The online food retailers will need to set up a scalable technology and logistics to meet the customer demand. Also, businesses should use the change of habitual patterns as a chance. By enhancing the retention strategy (incl. retargeting and loyalty measures) and improving direct-to-customer model e-food players might have the opportunity to bind new customer acquisitions in the long-term. A good example of successful customer retention is AmazonFresh, which offers access to free food delivery as part of the Amazon Prime membership.
Another key to success is the implementation of customer experience. In the online sector, customer expectations are high, they are used to short delivery time and customer centric services. It is therefore important to craft a business model that covers the high customer needs and is extremely flexible to stay competitive. Moreover, other trends from abroad are being observed and might have an impact on Germany as well. For example, in China platform live streaming is very popular right now. Applications – partly also supported by platforms such as Alibaba – for live streaming (e.g. for farmers) are booming.
Since the mindset of German consumers in the food sector is still strongly tied to the stationary trade today, the stationary traders should strive for closer integration between the online and offline world, in other words, a well-implemented omnichannel strategy is highly necessary. This includes providing services across channels, tracking customer data and achieving the flexibility of transactions.
And last but not least, there should be an open mindset towards innovation. Some start-ups are already presenting innovative service models to make the e-food sector more attractive. An example would be Kesko, a Finnish company that delivers food to refrigerated parcel stations. Or the Swedish supplier MatHem, which delivers the delivery right into the customer's refrigerator.
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