Professor of Retail Marketing Laurens Sloot:

"Deep pockets needed for online retail concept"

Picnic, Google, Hello Fresh, Marley Spoon, Mathijs' Maaltijdbox, Streekbox. We asked Laurens Sloot, Professor of Retail Marketing at Rijksuniversiteit Groningen and founders and director of the EFMI Business for their opinions of the future of online food retail. Is it a hype, a trend or a real future proof retail concept?

Investors
"An unbelievable amount of online retail initiatives have been taken over the years. The internet and the new social media made a lot of new concepts possible, because you can focus directly on the consumer without having to have a physical store or pay for advertising. The threshold to starting something new is low. There is also a lot of capital floating around venture capitalists, who are comfortable in online concepts. There is a lot of 'risk money' behind a lot of those concepts such as Hello Fresh, Marley Spoon and maybe even Picnic, where the goal is to take a lot of market share in a short period of time to pull that market towards yourself. Many of those concepts are chased into the market as a start up. You can already see that there will be too many, but this often doesn't bother the investors. A Rocket Internet finances hundreds of start ups, only a few have to be successful to make back all the investments and more," says Laurens.

"In England the online groceries are already at 4.5% but this is from years ago. At the end of the 90's Tesco Direct was pushing and later Ocado joined. In France the online market is at around 3.5% and in the Netherlands it reached 1.5% this year. Still niche markets at the moment, but we estimate with EFMI Business School that the market for online grocery shopping in the Netherlands will be at 4 to 5% in 2020, a tripling of the current market share," says the Professor of Retail Marketing.

Meal boxes
"The market for meal boxes is another separate component within these groceries and is in fact the multi fresh speciality online. The assortment is more limited than that of a regular supermarket, but wider than that of a fresh speciality business, there is this new in between segment. There are also possibilities for fresh suppliers from a certain region to combine things. You see a party like Hello Fresh aggressively enter the market. How that online market of meal boxes develops isn't just a question of demand, but also of supply. Whether it will last, depends on how good the initiative is against the existing alternative of the regular supermarkets. It is clear that a certain audience is interested in meal boxes with their easy, surprising and educative element. But I don't expect there to be a huge market for it. With all the pressure of investors and suppliers that you're seeing at the moment, I expect it to grow to 2-2.5% of the turnover at most in four years."

The question is whether these initiatives will be the alcohol free beer of tomorrow. This product also had a market share of almost 10% in the late 90's, but partially due to Youp van 't Hek has been knocked back to 1 or 2%. I'm no specialist in meal boxes, but I do follow online retail and as an economist mainly look at the resistant potential," continues Laurens. "An Allerhande meal box is often 30-40% more expensive than buying the articles yourself and that percentage is even higher for Hello Fresh. I think few people are prepared to structurally pass through such a rise in price for their groceries. It's good for a year or so, but eventually the novelty wears off. The real food fans also often don't mind going to the supermarket or speciality store themselves."

Laurens Sloot isn't that surprised that the online initiatives don't come from the growers themselves. "Retail is a separate branch of the sport. I sometimes read about frustrated growers who believe it is unfair that they get 9 cents for their cucumber and that the retail makes too much profit. My response to this is: fine, start your own shop. You can complain but you can't keep doing it. You have to do it differently eventually. In the case of retail you'll see it's a special branch, in which large investments are needed and where there is incredible competition. Starting something new like Bilder & De Clerq is fantastic, but that doesn't mean it's successful. The same goes for Marqt, which is still making a loss. You need deep pockets to bring out a concept that might be profitable."

Farm shops
Laurens does see the farm shops taking over part of the position of the speciality businesses. "Small scale and authenticity provide a need. Part of the population has a distrust for processed food with all the preservatives and likes to buy fresh and from the source. There is a lot of added value in a farm shop and there is a group of people prepared to pay a premium for that. These farm shops can often develop into a regional or local brand. I think a great example is the Zuivelhoeve, which has now founded 38 speciality shops. A good example in the fruit and vegetable world is the strawberry grower Kalter. Of course the fresh sector could continue on its current path, but if you continue to supply a commodity you are dependent on the global market price. The pig sector can talk about this. There is little they can do about the Russia boycott, but it is causing a huge price erosion. In short, I see space for farm shops, that can make a brand operation out of their product operation over time."

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