As people shift their spending to e-commerce, businesses are having to revaluate their business models in order to find new opportunities, says Ahold Delhaize’s digital chief.
Speaking on a recent webinar during World Retail Congress, Farhan Siddiqui, chief digital officer at the grocery retail company Ahold Delhaize, which operates significant presences in Benelux and the United States, explained what was changing. (For more, read WARC’s in-depth report: What next for e-commerce? Insights from Zalando, Ahold Delhaize, Crate & Barrel)
“I think we’re at a very interesting point where we actually can create habits and, no matter where this goes, I think it’s for us to be able to make sure we’ve figured it out and not let [customers] go back to the old ways because we’re missing out on delivering them the convenience and the experience,” he explained. Omnichannel offerings are no longer differentiated – they are fast becoming table stakes.
Part of the shift’s drama comes from the massive arrival of customers. “I think in the US alone, within the first quarter we saw [that] 30% of [e-commerce] sales came from entirely new customers.”
As mentioned, with demand for groceries “built in”, the challenge now is to make the key infrastructure investments in order to respond.
“If you go back six months, when everybody looked at projections of what your penetration online is going to be, no one was predicting more than seven or eight percent in five years,” said Siddiqui. “This story has blown those numbers away."
For Ahold Delhaize that means doubling down on their previous efforts “so we’re going to get to about 1,100 click and collect centres by end of this year”.
But the number that has not changed in food retail is profitability. “It’s not a single variable,” Siddiqui noted, but the process of “pick, pack and ship” (the costs of which used to be the consumer’s responsibility) is really expensive because these costs have to be absorbed without customers being willing to pay any more.
It is early days yet, but he anticipates the emergence of alternative revenue models that will make this work, although this will likely require some adroit communication.
Sourced from WARC