Quick commerce at discounters: what’s happening in Europe?

Date : 14 April 2021

Maxime Delacour

Senior Retail Analyst

The discount channel is slowly catching up with grocery ecommerce as it seeks to remain relevant with shoppers. The many recent partnerships with aggregators (last milers) across Europe prove the online transformation of the channel is inevitable and it is now accelerating, especially around quick commerce. We look at the different developments in the region and what this could mean more widely for the retail industry and suppliers.

Partnering with aggregators to win in the short-term

Discounters still refrain to launch grocery ecommerce for two main reasons:

  • Profitability is still difficult to achieve
  • Their physical store model has been optimised over the years to become one of the most efficient and profitable across the industry

However, shopping behaviours have changed with the COVID-19 pandemic. Many shoppers will continue to shop online and the channel will need to embrace this if it wants to remain relevant.

Source: Aldi Portugal

While only a handful of discounters have launched their own click and collect service including Aldi UK, Action (France, Netherlands) and B&M France, many have decided to partner with aggregators. This is a very quick way to win with grocery ecommerce in the short term. The limited investments, rapid pace of implementation and already high awareness of the different aggregators by shoppers proved to be a convenient solution for discounters looking to launch grocery online services.

Below is an overview of the current partnerships between European discounters and aggregators as of April 2021:

Source: IGD Research

Aldi Spain and Portugal are the latest discounters to partner with am aggregator in Europe. Glovo and Everli have ambitious plans for Europe. It’s worth keeping an eye on their expansion to anticipate where discounters could potentially initiate new partnerships.

So how big could online be at the discount channel?

Discounters are accelerating their online development either via aggregators or by slowly expanding click and collect and home delivery (Mercadona, Penny Italy). But how big can online at discounters be if it ever takes off?

In the next couple of years, it’s likely to remain marginal as only a limited number of discounters currently offer this service, and operators will remain focused on the profitable and efficient physical store model. However, as profitability of online improves and the size of the channel grows, more discounters will be launching grocery ecommerce.

In the longer term, there will be strong differences from market to market depending on the penetration of the online channel. We forecast that online at UK-based discounters will be much bigger than for those operating in Germany where the online penetration is 10  to 12 times smaller than in the UK.

The discount channel in Europe is the second largest one with sales of €300bn in 2020, accounting for 24% of the grocery market.  According to our estimations, the online channel has a market share of 3-4% of modern trade in the region. So, what if online were to reach 2% of total sales across the discount channel?

  • Online sales at discounters would be around €6bn, more than the combined sales of the online channel in Italy, Spain and Germany in 2020
  • With Lidl expected to reach the €100bn sales mark this year, online sales at the discounter could be €2bn, more or less the size of Ocado in the UK in 2020 !

While estimates, these numbers show the important role discounters could play within the online channel in the near future.

New marketing opportunities for brand suppliers?

Discounters partnering with aggregators is good news for suppliers, not only for the potential additional sales but mainly because it offers new marketing opportunities. The discount channel is well-known for the limited opportunities it offers for brand activation. The different aggregators could provide brand suppliers with opportunities to create marketing campaigns to push their products at discounters.

Recently Coca-Cola partnered with Biedronka and Glovo for a campaign offering free delivery.  

Source: Biedronka

Even if the share of sales from quick commerce at discounters remain small, it might be strategic for brand suppliers to engage directly with aggregators to unlock new marketing initiatives.

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