2.7 The Online Grocery Boom

Online grocery, which has taken on new significance in the age of COVID, continued to grow in revenues across Europe in 2021, rising by 8.8% compared with 2020 levels, according to McKinsey & Company.3

Most of online’s growth occurred in the first quarter of 2021; in the following quarters, online stayed at roughly the same level as in 2020. This growth was unequal across Europe: countries in Southern Europe (such as Italy and Portugal) and Central Europe (like Poland) saw a decrease in online revenues. On the other end, Germany, the Netherlands, Sweden and the United Kingdom recorded robust growth in 2021.

McKinsey’s research suggests online growth might “take a year-long pause” in 2022 in many markets. This pattern could be especially evident in markets that have less-developed online offerings, where consumers might even reduce their spending online. In markets with mature online offerings, consumers say they will further increase their spending, albeit at a slower pace.

But going forward, McKinsey expects online growth to continue, with e-grocery reaching above 20% of total share in 2030, depending on the country and scenario.

To create growth, online offers need to become more “differentiated” and tailored to the needs of additional consumer groups and shopping missions, says McKinsey.

The most prominent new online market segment is “instant delivery” – typically within 30 minutes, often delivered by drivers on electric bikes or scooters. It offers the fastest and most convenient delivery of a reduced assortment at a higher price per item, similarly to what convenience formats offer in the offline channel.

Online players differentiate themselves through larger assortments (for example, Ocado), local or organic offerings (for example, Farmy in Switzerland and Rohlik), or a lean value proposition (for example, Picnic). Thanks to these more differentiated online offerings, McKinsey sees consumers starting to split their online purchases across different online shops. About one-third of frequent online shoppers (that is, those who shop online at least once a week) regularly order from three or more e-grocers. The more often consumers shop online, the more online grocers they use. There is therefore a good chance that as the online market matures, several different online formats and value propositions will coexist and compete for consumer baskets, the researchers argue.

Within online, instant delivery experienced a year of marked expansion in 2021 with major inflows of funding, says McKinsey. In the first nine months of 2021, nearly $5.8 billion (€5.9 billion) was invested globally in “dark convenience stores” or microfulfillment centers. The top 15 players in Europe opened more than 800 dark stores by the end of 2021. Further, many traditional grocers formed partnerships with instant-delivery companies to extend their offerings beyond physical stores.

Still, the instant market remains small. McKinsey research suggests that the instant-delivery market in Europe reached between €3 billion and €6 billion (US$3.1 billion and US$6.1 billion) in 2021, accounting for less than 1% of the total market but with three-digit percent growth annually.

Incumbent grocers, notes McKinsey, have responded with instant propositions (for example, Ocado Zoom, Sainsbury’s Chop Chop), partnerships, or even “VC-like” investments in instant players (for example, Carrefour and Cajoo, and Rewe and Flink).

While in most cases online shopping means having orders delivered to shoppers’ homes, another option is “click and collect,” whereby shoppers pick up their online orders at a store or other location from a refrigerated locker.

Click and collect has experienced considerable development since 2018, becoming a tool of large-scale retailers, particularly in Europe. For example, in early 2020 it accounted for 7% of

total grocery sales in France, according to Epta, which produces the #EPTABricks click-and-collect R290-based refrigerated lockers.53 Because of the COVID pandemic, Epta saw a 300% jump in sales of #EPTABricks in April 2020 (compared to the same period in 2019). In 2022, in Italy, 34% of online shops offer the click & collect option, said Epta.

Click-and-collect solutions offer shoppers a convenient shopping experience, minimizing waiting times and being available 24/7. It allows a significant increase in online order collection points and makes it possible to collect the order on the same day.

#EPTABricks, for example, can be installed close to metro stops, companies, hospitals, schools and offices – not necessarily close to the store of origin. Retailers can thus increase their presence in areas where it is not possible to open physical stores.

Retrofit opportunities

Internet shopping is having a strong impact on the format of stores and consequently on the type of equipment. This is resulting in new opportunities for retrofits and installation of refrigeration equipment with R290 or CO2 – potentially even low-charge ammonia for microfulfillment centers. In Europe, click and collect, using R290 refrigerated lockers, is expected to experience healthy growth over the next few years. Epta projects click and collect will reach a turnover of around €45.1 billion (US$44.6 billion) in Europe in 2023.

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