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The Covid-19 crisis has fast-forwarded Europe’s e-commerce transition:
In the top five markets, e-commerce penetration now ranges from between 3% to 11% of grocery sales with the UK and France leading the pack.

The growing penetration of e-commerce for groceries brings about two main challenges for established retail companies. First, it shakes up the competitive game by creating a new opportunity for retailers to place a greater emphasis on convenience and service vs. price competition. Second, it is a major threat to profitability: Online
grocery sales are made at a loss irrespective of the delivery mode. We estimate that every percentage of grocery sales moving online is threatening a corresponding EUR500m in profits if online grocery margins
are at zero, which is optimistic, or EUR1.2bn if they are at -5%. In a more pessimistic scenario, the profit losses could go up to EUR-1.9bn.

The double threat to market shares and profits will prompt retailers to place their e-commerce operations higher up on their strategic agendas, with three mains areas of focus:

        * An adaptation of their store mix and a rotation in investment to adjust for a greater penetration of e-commerce.
        * Investment in digital capabilities allowing for more efficiency, with a view to reach profit parity vs. physical retail.
        * Partnerships with companies in the fast-growing grocery e-commerce ecosystem (food-delivery, personal shopping and quick commerce specialists, in particular).

Click here to view the full report.

Research performed by Allianz and Euler Hermes

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