The Opportunities of Digitalization: E-Commerce in the Drinks Industry
Unlike in England and France, the e-commerce market for Fast Moving Consumer Goods (FMCG) in Germany is still in its infancy. FMCG covers consumer goods catering to everyday needs, such as drinks, food, and household products. In 2015, its proportion of total e-commerce sales was still below one percent, but drinks accounted for almost 50% of those sales. The German market is growing, however – in 2016 one in three online shoppers bought food and drink over the internet – showing that it is high time that the drinks industry and beverage wholesale market (referred to as GFGH) joined the trend towards digitalization.
According to a survey commissioned by the digital association Bitkom, 43 percent of people buying food online have already shopped at least once at the online store of a physical food retailer (referred to as LEH), such as rewe.de. At 38 percent, the number of people that have shopped at purely online food retailers is not far behind. What’s more, classic online delivery providers such as Amazon and eBay are also enjoying popularity in the food and drinks e-commerce market, with 15 percent having ordered food from those sites before.
Physical Retail Has Recognized the Potential of Digitalization
Physical retail has already recognized the potential of digitalization, and in turn the potential of food e-commerce. Many LEH providers offer their products in their own online shops and have expanded the scope of their shipping and warehouse logistics as a result. In the GFGH and drinks markets however, this is not the case. According to an internal survey among member companies of the Federal Association of the German Beverage Wholesale Trade (Bundesverbandes des Deutschen Getränkefachgroßhandels e.V, BV GFGH) digitalization does not yet play a central role for 90 percent of companies. Despite the fact that 70 percent of the respondents already have their own e-commerce platform, the potential threat posed by internet platforms such as Amazon is clearly still being underestimated. Their focus is currently more prevalently on the expansion of food and drink physical retail.
Opportunities and Challenges for Food and Drinks E-Commerce
According to a study by university institute IFH Cologne, food and delicacies are amongst the strongest drivers in e-commerce with a growth rate of 27.6 percent, and it is likely to remain this way for some time to come. As opposed to physical retail though, in e-commerce it is all about the product, not the supplier. This is why special offers are particularly good at fulfilling the needs of online shoppers. As the German food and drink market is generally a strongly contested segment with price-driven competition, it is becoming increasingly important for GFGH and the drinks industry to closely monitor their competitors and their prices, as well as their target audiences. E-commerce in the FMCG sector is particularly appealing for shared accommodation, families, and busy professionals.
The biggest challenge facing retailers is logistics, because they need to take product considerations into account – particularly for fresh items – while still meeting the demands of online shoppers. These include, for example, fast and inexpensive delivery. One solution for this logistical challenge is the Click & Collect concept, which sees customers find their desired products with just a few clicks of their mouse in a convenient online store, purchase them, and then personally collect them from their nearest supermarket, rather than laboriously searching through the physical LEH and GFGH. This allows problems with logistics to be easily solved, or even circumvented entirely.
Personalization of the shopping experience also presents new opportunities for drinks retailers: If, for example, a customer buys an organic drink, similar products can be suggested to them for their next purchase. If the online store offers its customers added value through high-quality content – such as food industry provider Hello Fresh’s recipes – then the potential of e-commerce can really be exploited in the industry.
Retail and Specialist Traders at drinktec in Munich
drinktec allows interested parties from the retail and specialist trade sectors to find out more about the digital transformation in the Innovation Flow Lounge, hall B1. At Talking Table 1: Digitally Driven Drinks the participating experts will discuss how exactly digitalization will change the drinks market. And, held in parallel for the first time, at PRO FachHANDEL, the leading trade fair for the German beverages and convenience specialist trade industry, visitors can discover the most important themes, trends, and developments in the drinks sector.
Innovation Flow Lounge is supported by:
- FoodBev Media
- Sahm GmbH