Supermarkets as crisis winners

The grocery trade is booming – also because many other shops had to close, as the example of the Rewe chain shows. The delivery trend also poses problems for retailers.

From David Zajonz, WDR Business cheers from companies are rather rare these days. The Cologne-based Rewe Group was able to announce it today. The retail company recorded a 20 percent increase in sales in the Corona year 2020 compared to the previous year. Part of this goes back to the takeover of the wholesaler Lekkerland, but Rewe posted double-digit growth in the supermarket business alone in Germany.

A lot of sales apart from groceries

Industry-wide, the German trade association speaks of an eight percent increase in sales in the grocery trade, while clothing stores, for example, have to accept dramatic losses. The supermarkets benefit from the fact that other retailers have to close their shops temporarily, says Gerrit Heinemann, retail expert at the Niederrhein University of Applied Sciences: “In food retailing, depending on the retailer, ten to 50 percent of sales are made with products that are not groceries.”

“A little unfair”

In the large Rewe centers, for example, customers can buy many everyday products, from frying pans to shoes. While kitchen outfitters or shoe stores went into lockdown, the Rewe stores were allowed to remain open during the pandemic. That is actually “a bit unfair,” says Rewe CEO Lionel Souque: “If I were a textile chain, I wouldn’t understand either.” Rewe itself only benefited slightly from this, because many smaller branches do not offer such a wide range of products. Nevertheless, the effect is noticeable. Souque confirms that the large Rewe centers have developed better than the classic supermarkets during the pandemic.

“Home office effect” for online deliveries

In addition, the food trade has also benefited from the closure of the catering trade, says trade expert Gerrit Heinemann: “People have increasingly bought food and drinks in the supermarket.” In addition, there is the “home office effect”. Those who work at home have to buy more in the supermarket: “Just toilet paper”. Another big trend is the booming grocery delivery business. Consumers are still far more likely to have books sent home than potatoes. But the Corona year led to a “dam break”, says retail expert Heinemann, and the proportion of groceries bought online has grown significantly: “However, it has come from a very low level – to just over one percent of the entire market.” The food deliveries are – at least for Rewe – a losing business: “We continue to lose money, but you don’t have to see that negatively,” says CEO Souque: “We see it as an investment in the future.”

Competition grows

The hope for further growth in online trading is causing more and more players to pour into the market. “Instant delivery services” like Gorilla and Flink in some large cities promise food deliveries within ten minutes of ordering. However, retail expert Heinemann believes that it is almost impossible for delivery services in Germany to work profitably: “The margins in the food retail sector are very low.” Consumers are used to low prices because of the many discounters. This means that the high delivery costs for the dealers are hardly manageable. In fact, it is difficult “when customers order three cases of cola on offer on the fourth floor,” admits Rewe boss Souque. On the other hand, the corona pandemic brought many new customers to food suppliers. So the cake is growing, and players both old and new want their share of it. Industry expert Heinemann says that he does not believe that the online share in the food sector will rise over ten percent of total sales in the next few years: “But even then, food would be one of the largest online product groups.” Supermarket chains and start-ups will probably continue to fight for online customers despite all the difficulties.