Are you planning for growth?

TGW proprietary research can help you understand what is likely to happen with your customer base over the next 5 years.

Over the next five years, global online spending on food and drink will increase from USD 2.5 trillion to over USD 3.9 trillion.

Globally, the worldwide Covid-19 pandemic has accelerated the growth of online grocery shopping significantly. However, as territories exit the pandemic, the lasting impact of this growth has been variable, to say the least.

For Grocers specifically, the North American grocery market is expected to be worth $1,172bn USD by 2025 and the European market $1,008bn USD by the end of the same period. Online grocery shopping is expected to increase from 7.4% to 12.7% of the total market in Europe, and North America is expected to grow from 9.7% to 12.3% over the same period.

In the United States and the United Kingdom, twenty-three retailers control two-thirds of the online grocery market - of these presently; only two are pure-play digital entities.

Globally nearly 90% have all online grocery orders fulfilled by retailers originate from a retail environment designed for Instore shopping.

Looking specifically at the UK, 80% of online fulfillment is currently pushed through the smallest half of stores sizes in the market. In the US, we can see this is broader, with a higher proportion of online orders being fulfilled from larger stores.

The UK network capacity is primarily limited by the capability of the retailers to service and manage their van operation from within their smaller store estate. They do this as well as they can by reshaping the geographies each of the stores serves on a regular cadence – However, whilst this may manage some volume growth in the short term, it is highly detrimental to last-mile fulfillment costs.

The spectrum of operating efficiency between retailers and territories is vast. Many large retailers in the States currently achieving Instore productivity rates of between a third and half of similar-sized UK retailers.

Retailers in the states are not burdened with the high costs of home delivery, with almost 68% of online grocery shoppers choosing a Curbside collection model. There is an excellent opportunity for US grocers in the immediate years ahead to utilise the learning and software from the UK for significant quick wins.

Ultimately, retailers have finite capacity whilst using physical stores for online order fulfilment.?

Currently, the options to grow are limited to the development of either stand-alone warehousing solutions within proximity of the customer base that delivered direct (dark stores) or the reconfiguration and investment in technologies and infrastructure to support the medium to long term growth of capacity in their physical stores at the expense of the in-store experience (reduced space or reduced range for example).

In recent years UK retailers have illustrated the difficulties of ‘dark store’ operations with all of the largest three retailers opening and subsequently closing such operations.

Currently, attention has been turned to Instore options; however, case studies emerge from early trials in this space with inconclusive results.

Our MFC Strategy Whitepaper looks at why this may be the case and what other retailers may opt for as an alternative, please get in touch if you want to find out more.

About TGW research

TGW has delivered supply chain solutions for clients since 1969 and has managed and advised on logistics assets in excess of 12bn EUR. (as of June?30,?2021).

TGW’s award-winning team of industry experts has decades of experience designing, managing, and implementing materials handling strategies for clients worldwide.

The team’s approach combines proprietary research with expert management to deliver strategies and solutions which target superior performance and precise outcomes. The team believes that more predictable and repeatable performance can be achieved by thorough market research aimed at removing human behavioural biases in so far as possible. As markets evolve, these strategies are continuously refined and updated to adapt to dynamic market conditions and incorporate ongoing research.