Which Way is the Wind Blowing in eGrocery?

Retail strategists and the analysts that inform them face a conundrum. At Retail Cities, we call that conundrum the, “Which way is the wind blowing conundrum?”

Any weather buff knows that there are multiple ways to measure the wind, but the least accurate method is to stay close to the ground and put your finger up in the air. The reason for this lack of accuracy is what most people call, “swirling.” Swirling happens when trees, hills, buildings or other objects force gusts of wind to move temporarily in a direction counter to their ultimate path.

We’re seeing some swirling right now on the question, “Has eGrocery reached a growth limit?” There are several ways to measure the situation in eGrocery. The most popular way is to simply scan news headlines and see how many retailers say that eGrocery has reached a limit.

If you use this approach, you will have two big headlines that would support the argument that eGrocery has reached a limit.

1.????? Sainsbury’s CEO Simon Roberts says that online grocery levels have fallen back to pre-pandemic levels

2.????? Getir announces a withdrawal from the USA and Europe

The trouble with this approach is it only looks at some of the picture, not the whole picture. More importantly, it fails to look at bigger trends in where people, live, work, and most importantly, eat.

If you were to take a broader look at headlines, you might notice a few metrics worth factoring into your forecast model which predicts which way the wind is blowing.? Here are just a few:

1.????? The Centre for Cities has declared that the City of London will reach an all-time record of inhabitants in 2024.

2.????? Kantar has declared Ocado the fastest growing major grocery chain in the UK

3.????? Deliveroo is predicting 2024 growth in revenues between +5 to +9%

4.????? The percentage of UK residents with a driver’s license and access to a car in London will reach pre-pandemic lows in 2024/25 – more importantly, the number of trips the average UK citizen takes for shopping has dropped from 185 in 2019 to 165 in 2023

Predicting eGrocery in 2024/2025

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There can be little doubt that we are facing some swirling in 2024 when it comes to eGrocery. This means that on the one hand we will see companies such as Sainsburys and Getir proclaim that they do not see an immediate opportunity for a return on investment and would prefer to focus on other investment priorities.? On the other hand, companies like Ocado, Deliveroo and their partners may say that new opportunities are on the horizon and that they will pursue these with energy.

If we look at global eGrocery as a whole, two truths stand-out. First, the UK is one of the world’s most developed eGrocery markets and therefore serves as a great example for other eGrocers to learn what works and where there may be pitfalls to avoid.? Second, the vast majority of eGrocery in the UK is conducted in England’s Southeast – ie London and its suburbs. This means that the lessons learned from eGrocery in the UK only apply in situations where shopping and consumption patterns are similar to those in London and its suburbs.

The Retail Cities view is straightforward.? If you measure the winds blowing in the upper atmosphere there are some undeniable truths:

1.????? The world is urbanizing at record levels despite a brief pause in the long-term pattern from 2020-2022

2.????? Young people can barely afford rents or mortgages in many of the world’s largest cities, let alone car ownership, insurance, parking, and fuel to power a personal vehicle

3.????? The ‘living space’ per person in the world’s most advanced economies is falling, meaning it is growing more and more difficult to stock up a home with lots of foodstuffs

4.????? There’s a race to develop robotic technologies which will dramatically change the economics of food delivery

In the end, the Retail Cities view of eGrocery in 2024/25 is simple: Don’t give up on eGrocery despite some recent swirling