PMR: 2020 was a turning point for online grocery market in Poland

Wpis dostępny jest także w języku: polski

For years, industry observers had speculated about events that might accelerate the slow-to-take-off online grocery market in Poland. The consensus was that one or both of the following things probably needed to happen: major innovations in logistics technology that made deliveries cheaper and quicker at the same time, or more large grocers launching online shopping. In the end it was the outbreak of a global pandemic in 2020 that proved the catalyst.

Covid-19 causes surge in online grocery shopping

The coronavirus pandemic, which reached Poland in March, turned out to be a game-changing event for the country’s online grocery market. The extraordinary restrictions on social and economic activity imposed to contain its spread catapulted demand. Advised to stay at home as much as possible, and facing onerous restrictions on customer numbers in stores, Poles turned to the internet to buy food in unprecedented numbers.

In a PMR survey in April, about 25% of respondents said they had bought food on the internet in the three weeks prior to being interviewed, including 7% for the first time in their lives. In June 2020, 16% of internet users in an annual survey for eCommerce Polska said they shopped for food online with varying frequency. While lower than for most other product categories – in the case of consumer electronics the figure was 42%, and in the case of fashion, 35% – this represented a 50% increase on previous years (in similar surveys in 2018 and 2019, only 10-11% reported buying food on the internet).

Importantly, grocery chains moved fast to meet the jump in demand. Throughout the remainder of 2020, hardly a week went by without new reports of grocers launching or ramping up e-commerce.

Explosion of click&collect

Very early on in the lockdown, some chains offered home deliveries of “essentials packages”. More important was the explosion of click & collect. For grocers, it provided a good way to start with online shopping, or to extend it to more cities rapidly, before adding more advanced options. Customers found “order online, pick up in-store” an attractive solution, combining safety, speed, and affordability.

Let’s give a few examples, starting with multi-format grocers who already had an online presence. Carrefour run a classic online grocery delivery service in several cities at the time of the outbreak. In April, it offered click and collect from several dozen of its hypermarkets and supermarkets. By August, it expanded it to all of them. Auchan offered online grocery shopping in the Warsaw metro area only. By July it extended it to six other big cities by enabling in-store pickup from hypermarkets in Wroclaw, Krakow, Lodz, Gdansk, Katowice, and Komorniki near Poznan.

Stokrotka and Polomarket are two instances of nationwide supermarkets who made their first steps into e-commerce in April by launching click and collect. (In December Polomarket added curbside pickup.) Eurocash’s Delikatesy Centrum offered click and collect from 1,200 of its 1,600 stores in November. This was a very important development, as Delikatesy Centrum has more stores in rural areas and small towns than any other of the click and collect adopters.

Zabka, the largest convenience store chain, also launched click and collect during the first lockdown, initially from select locations. By December, it expanded it to all of its 6,800 stores. Importantly, Zabka says orders are available for pickup within just 15 minutes of being placed. You order in the app and pay in-store.

Some grocers also invested in deliveries. Carrefour expanded the list of cities in which it offers classic home delivery to 10 by October. The same month it began rolling out a superfast home delivery service called Carrefour Sprint, which promises to get orders to customers’ homes in up to three hours. People living within a 5 kilometre radius of participating stores can take advantage of Carrefour Sprint, which at the time of writing was available in 20 cities.

Stokrotka launched home delivery in October in its native Lublin, before expanding it swiftly to Bialystok, and then to 15 other cities across the country in December. Spar began a home delivery trial in November in Warsaw. On the other hand, Zabka scrapped its deliveries project in July after a three-month pilot. But that may not be its last word. According to reports, the chain is considering opening a dark store for online order fulfilment.

More grocers partnered with delivery apps, of which there were quite a few in Poland at the time of the outbreak, albeit in most cases specialising in restaurant orders. For some, like Biedronka, which works with Glovo, it remains the only online channel. For others, like Auchan or Carrefour, it supplements other channels. There were also some other interesting partnerships, such as Kaufland’s with Mango, the teleshopping brand, during the first weeks of the lockdown.

Largest online supermarket expands beyond Warsaw

In another vital development, Frisco.pl, the largest pure-play online grocer in Poland, made its first foray beyond Warsaw in 2020 by launching in Wroclaw, the country’s fourth city by population and economically one of the most successful ones.

Founded 14 years ago, Frisco.pl has had a very good pandemic, too. By December, when it started operations in Wroclaw, it served nearly 120,000 households in the capital, a top executive at its parent Eurocash even admitting in an interview that it struggled to cope with demand. The decision to expand beyond Warsaw, which it had contemplated for some time, was accelerated by Covid-19.

Wroclaw is just the first step. Frisco.pl can now count on support from Eurocash, which raised its stake in the company to 100% in June 2020 and whose logistics infrastructure it can use to gain a foothold in new cities. Eurocash says Frisco.pl will be in all of the country’s big cities in 2-3 years.

Who fills the gap left by Tesco?

Paradoxically, 2020 also saw the exit of one the leaders of the online grocery market in Poland. Tesco shut down its Tesco E-zakupy service on 1 November, a consequence of its decision to sell its entire Polish business to Netto. (Agreed in June, the deal is currently subject to review by antitrust regulators.) On the surface, the situation appears similar to the one in 2016, when Alma24, one of the market leaders at the time, closed down after its parent Alma Market went bust. But in fact it is quite different.

On the one hand, the online grocery sector in Poland is much more developed now, both in terms of the sheer number of competitors and their delivery footprints in the biggest cities, than it was when Alma24 closed. There is no shortage of players who could potentially replace Tesco. Loyalty to grocery brands being weak in Poland, we assume customers could move between different stores.

But the jump in demand for online grocery, including classic home delivery, caused by Covid-19 means Tesco E-zakupy’s closure creates problems on the supply (capacity) side of the market. The only way to achieve a substantial increase in capacity is through the construction of automated warehouses. Yet access to this technology has become difficult amid increased demand for it. The needs of giants like Amazon are met first.

Some of Tesco’s customers will switch to other e-grocers who offer deliveries – this will be easier in the biggest cities – or to click & collect. Its withdrawal also creates new opportunities for delivery apps like Glovo or Everli. But for the reasons just stated, fully replacing it will not be easy. So it is not just because of a very challenging comparative base that we expect the growth rate of online grocery in Poland to be slower in 2021 than in 2020; the closure of Tesco E-zakupy is another reason.

What next for grocery e-commerce?

Online grocery has enormous growth potential in Poland. Compared to consumer electronics or fashion, it remains a nascent market. The nature of its product poses special problems that do not exist in other categories, though. The main challenges are logistical. Packing and delivering bulk orders of heavy items such as mineral water, sugar, or flour is costly, as is providing the kind of quick local delivery that is so essential in the case of fresh items. On the other hand, the opportunity is so big that even Allegro is contemplating expanding into deliveries of fresh food.

Poles can also be expected to increasingly shop online for specialty food items, such as coffee, tea, spices, or cooking ingredients from all over the world. In this segment, there will be opportunities not just for big grocery chains, but also for small, specialty e-tailers who can gain a competitive edge by offering unique and niche products.

About the author

Agnieszka Skonieczna

Retail Business Unit Director

Analyst with over twelve years of experience. She heads the Retail department at PMR. Areas of specialisation: grocery retail, DIY and home furnishing markets.

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