Provide an insight in the grocery industry, corresponding trends, and share typical margins for store and online transactions

Introduction to Grocery

Worldwide, 26% of consumers purchased fresh groceries online (more than 40% in mature markets), resulting in an expected 10% of online grocery market share in the next years. This increase of online sales also means a shift from store-based fulfilment to home-fulfilment.

Margin dilutive home delivery – The basis

Retail used to be based on the consumer doing the fulfillment themselves, coming into the store, doing ‘the pick’, and doing the ‘last-mile logistics’ themselves. Yet now we’re all increasingly setting the expectation that this massively value-adding activity can be owned by the retailer without getting fully reimbursed for this service. And this expectation of service keeps growing: shorter lead times, smaller delivery windows, etc.

Margin dilutive home delivery – The transactional costs

Every transaction that moves from store to home delivery tends to be margin dilutive. Typically grocers can reach an indicative profit margin of approximately 5% on a store basket, while home delivery typically entails an extra 7-13% of costs. It does not take a mathematician to conclude this has a significant impact.

Offline transaction

Online transaction

Online transaction

Sources: Deloitte analysis, company P&L data, annual reports, desk search, expert interviews