Consumers: What’s the problem with expanding food delivery services?

Consumers: What’s the problem with expanding food delivery services?

Aldi Süd has been testing a food delivery service in three Ruhr area cities for several months. The market is considered difficult. According to a trading expert, the offer may still be successful.

The delivery of fresh food to the doorstep – so far this has not been possible everywhere for consumers in Germany. This is also because the retail chains pursue the business with varying levels of passion.

Some deliver in selected regions, some forego it entirely and others, such as Aldi Süd, are experimenting to a limited extent. In August, the discounter announced that it wanted to deliver food to customers in Mülheim an der Ruhr, Duisburg and Oberhausen on a test basis.

How’s it going? Aldi Süd does not want to expand the offer to its entire distribution area, at least for the time being. “A comprehensive implementation is not currently planned,” says a spokeswoman for the company. The offer is to be continued in the three Ruhr area cities; the test phase has not yet been completed. Aldi Süd does not want to say how long it will last.

The food delivery business has also grown significantly as a result of the corona pandemic. Many consumers were able to save themselves the trip to the supermarket and thus avoid infection. According to the Cologne Institute for Retail Research, the online market share of the food and delicatessen sector was only 2.4 percent in 2022, but grew by almost a quarter compared to the previous year.

High cost of deliveries

However, the market is considered difficult for various reasons. Because of the high costs for personnel, raw materials and logistics, online food trading is “currently not a profitable business model,” says Aldi Süd. Delivery fees represented a hurdle for many people “in times of absolute price sensitivity”. The fee for an Aldi delivery is 4.50 euros, and delivery is free for orders over 50 euros.

Kai Hudetz from the Cologne Institute for Retail Research (IFH) finds Aldi Süd’s decision understandable. “From my point of view, the result was to be expected. Door-to-door delivery of fresh food is extremely time-consuming and expensive.” The margins in food retail are extremely low, and discounters in particular cannot compensate for the high costs.

Hudetz can still imagine that food delivery services can be successful in the medium term. To do this, customers must be convinced that “the service, with its enormous convenience, is worth the extra charge.” It is not possible to get a premium service like door-to-door delivery for the same price, says the IFH managing director.

Discounters are still holding back

The topic of delivery services is not new for Rewe and Edeka. Many independent Edeka retailers have been supplying their customers with food locally for years. The company has been involved in the delivery service start-up Picnic since 2021. According to its own information, it supplies 140 municipalities across Germany – free of charge. According to the Cologne Institute for Retail Research (EHI), the Rewe supermarket chain is currently the market leader in online food and beverage trading. Last year, the company achieved net sales of 650 million euros, with message in a bottle in second place with 467.9 million euros.

Rewe currently delivers in 90 cities with populations of 50,000 or more; the fee is between 0 and 4.90 euros, depending on the order value and time window. More than 3,000 employees are now employed nationwide for the delivery service. The company is convinced of its business model. It is said that e-food is not a short-term phenomenon and will continue to develop and gain market share in the long term.

The discounters, however, are still keeping a low profile when it comes to delivery services. “We have no plans for the time being and are watching with interest what comes out of Aldi Süd’s test,” says a spokeswoman for Aldi Nord. Lidl also does not currently want to introduce a corresponding offer.

Source: Stern

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