RETAIL es The Dutch grocery sector in 2030...6 RETAILes: The Dutch grocery sector in 2030 The second mega-trend is the changing habits of consumers.Changing consumer demand and prefer-ences

RETAILes: The Dutch grocery sector in 2030 1

INTRODUCTION

RETAILes

The Dutch grocery sector

in 2030

2 RETAILes: The Dutch grocery sector in 2030


BACKGROUND

Roland Berger and EFMI Business School have re-cently conducted a joint study to gain insight into the future of the Dutch grocery sector and understand how the industry could transform itself over the next 10 to 15 years within the context of a rapidly-chang-ing world. In order to capture accurate insights from within the sector, we organized roundtable discussions with CEOs and senior management of a wide variety of players active in the food and retail industry – both incumbent companies and innovative newcomers. In addition to the insights gained from these roundtable discussions, EFMI and Roland Berger conducted an in-depth food industry survey in which 150 Dutch ex-ecutives from retailers, fresh food companies, brand- and private-label manufacturers gave their views on the future of the grocery sector. Next to these insights we added information collected from (desk) research.

Rather than trying to cover the full scope of the future of Dutch grocery shopping, we will focus on specific developments in a number of selected deep dives or “RETAILes” (Figure 1). In this introduction, we will first provide you with an overview of what the grocery sec-tor could expect in the coming years, with a special fo-cus on the following:• How industry developments and trends will impact

the physical footprint of grocery retailers and how brick-and-mortar stores will change in terms of in-store technology

• How online grocery shopping will evolve and which e-commerce models will become most important in the sector

• How the social function of grocery players could change in a world where sustainability, value chain transparency and consumer health is becoming in-creasingly important

In the study we propose to focus on 3 selected areas: developments in brick-and-mortar, digitalization and social impact

Figure 1: RETAILes: The Dutch grocery sector in 2030

Figure 3: Trend radar – Survey results of trend impact and timing assessment

Figure 2: Overview of assessed trends from the in-depth food industry survey

Figure 4: Trend assessment on opportunity vs. threat to traditional grocery players

Introduction to RETAILes: The Dutch grocery sector in 2030

The grocery store of the future

BRICK-AND-MORTAR DIGITALIZATIONINTRO SOCIAL IMPACT

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0 1

Innovative in-store technology2

Online grocery shopping3

E-commerce models4

Sustainable supply chains5

The pursuit of health6

Source: EFMI and Roland Berger in-depth food industry survey of 150 Dutch executives (2018)



14. In-store robotics

12. Smart homes

16. Self-driving vehicles15. Drone delivery

13. Cashless stores

11. Smart stores10. Big data and analytics

1. Aging population2. Smaller households

7. Transparency & sustainability8. Personalization

4. New consumers

9. e-/m-commerce

6. Health5. Convenience

3. Urbanization

DIGITALIZING WORLD

DEMOGRAPHIC TRANSITION

CHANGING CONSUMER HABITS

TECHNOLOGICAL (R)EVOLUTION

12. Smart homes11. Smart stores10. Big data and analytics9. e-/m-commerce

Increase in use of smart home appliances (smart fridge, virtual assistants)Increase in use of smart and connected devices in stores (RFID, beacons)Increase in use of customer data for marketing and sales purposesIncrease in online grocery sales through laptops, smartphones and tabletsDIGITALIZING

WORLD


4. New consumers3. Urbanization

Increase in the share of elderly in the Dutch societyDecrease in average household size; increase in single-person householdsIncrease in population and importance of the city areaRise of a new generation of consumers (millennials, generation z)

Increase in demand for convenient products and servicesIncrease in importance of health and vitality

Increase in demand for a personalized product and service offeringIncrease in demand for transparency and sustainable products



6. Health5. ConvenienceCHANGING

CONSUMER HABITS



13. Cashless storesUse of in-store robotics for inventory management and customer service

Use of autonomous vehicles in grocery logisticsUse of drones for home-delivery of groceries

Use of cashless store concepts with automated payment technologyTECHNOLOGICAL (R)EVOLUTION

TREND IMPACT

TIMING OF IMPACT

HIG

H IM

PACT

MED

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IMPA

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LONG TERMMEDIUM TERM

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Trend category Trends selection Description

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Threat Opportunity

50%Threat (1-3)

100%Opportunity (5-7)

Cashless storesBig data and analytics

HealthIn-store robotics

ConvenienceSmart stores

Aging populationTransparency & sustainability

E-/m-commerceSmaller households

New consumersSelf-driving vehicles

UrbanizationSmart homes

PersonalizationDrone delivery

TREND TREND THREAT/OPPORTUNITY (AVERAGE) TREND THREAT/OPPORTUNITY (RESPONSE %)

1 = very large threat 7 = very large opportunity share of respondents that see trend as a threatshare of respondents that see trend as neither a threat nor an opportunityshare of respondents that see trend as an opportunity

In a series of “RETAILes”, Roland Berger and EFMI Business School will paint a picture of a potential future of the Dutch grocery sector


• The Dutch non-food retail sector is being transformed, but the grocery sector has remained largely unaffected to date

• The four mega-trends “demographic transition”, “changing consumer habits”, “a digitalizing world” and the “technological (r)evolution” will shape the world in which we live – Change to the Dutch grocery sector is on its way

• The changing landscape is a breeding ground for new forms of competition – Incumbents must arm themselves to safeguard their future position

• Dutch food executives are optimistic about the future, but it remains to be seen if the Dutch grocery sector is ready for the developments that will shape the business over the next decade(s)

KEY TAKEAWAYS OF THE INTRODUCTION:


The Dutch non-food retail sector is being transformed, but the grocery sector has remained largely unaffected to dateThe Dutch non-food retail sector has gone through a number of important changes in the past decade. Practically non-existent 10 years ago, e-commerce has developed itself into a channel that currently accounts for about 16% of all consumer good sales1. Discounters have gained in popularity and the rise of mixed retail has further blurred the lines between retail categories. Additionally, some products even disappear from the (online) shelves due to streaming (e.g. books, cd’s, com-puter games etc.) These and other recent developments have scarred the Dutch retail landscape. For example, department store V&D, which had been inextricably linked to the Dutch shopping street since 1887, filed for bankruptcy in 2015. In the same year Macintosh Retail Group, known for its formulas Dolcis, Invito and Man-field, also closed their doors. Other traditional Dutch retailers such as Blokker and HEMA are facing difficult challenges and are being forced to reinvent themselves.

In contrast to most non-food retail categories, the Dutch grocery sector has remained relatively calm (apart from the rise of discounters) and unaffected by the changing environment. The main Dutch grocery players have re-ported growing revenues over the past years and trends such as digitalization still have had only limited impact on them. In 2018, the online share of Dutch grocery sales was only 3.2% versus an average online share of 16% for retail sales of all consumer goods1.

1 EFMI; Thuiswinkel.org; GfK (2018)2 CBS (2018)

Four mega-trends “demographic transition”, “changing consumer habits”, “a digitalizing world” and the “technological (r)evolution” will shape the world in which we live – Change to the Dutch grocery sector is on its wayIt is inevitable that the Dutch grocery sector will experience disruptive effects in the near future. We have identified four mega-trends that are rapidly affecting the world in which we live.

The first mega-trend that will shape the grocery in-dustry is what we dub the demographic transition. Changes in population composition, continuing urban-ization and the rise of a new generation of consumers (Millennials and Generation Z) will have a large impact on the demands for products and services. People are also living longer. CBS estimates that approximately one quarter of the Dutch population will be aged 65+ in 2030, compared to one in five people in 2018. The total number of people aged 80 and older is expect-ed to increase by ~58% between 2018 and 20302. Retailers must anticipate these developments to ensure that they can keep meeting the demands of a changing population.


The second mega-trend is the changing habits of consumers. Changing consumer demand and prefer-ences will have a profound impact on retail in the com-ing years. Driven by busy lifestyles and digitalization, consumers increasingly demand convenience and per-sonalization when purchasing products. Also, consum-ers tend to focus more on aspects such as health and sustainability. These changing preferences are likely to impact the retail product and service offering and affect the upstream side of the supply chain.

The third mega-trend is the digitalizing world. Digitali-zation will continue to increase interconnectivity among consumers, devices, appliances, homes and stores. A growing number of “online” devices in consumer homes and in stores will generate valuable data that can be used to identify needs and effectively target consum-ers for commercials purposes. Using big data to provide tailored solutions represents a large opportunity for the retail sector, resulting in more personalized products and marketing. Gathering and analyzing data is becom-ing increasingly important for understanding customer demands, providing tailored solutions and ultimately for moving from a customer push to a pull model.









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E-commerce models4







12. Smart homes


13. Cashless stores




4. New consumers

9. e-/m-commerce


3. Urbanization

DIGITALIZING WORLD






WORLD









CONSUMER HABITS






TREND IMPACT

TIMING OF IMPACT

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Threat Opportunity

50%Threat (1-3)













The fourth and final mega-trend is what we call the technological (r)evolution. Technological developments will continue to shape the retail sector in the next dec-ade. Innovations that will impact the sector include new payment methods and in-store robotics. Co-op (UK), Albert Heijn Tap to Go (Netherlands), BingoBox (China), Auchan Minutes (China) and with the well renown Amazon-Go (US), are all examples of new forms of con-venience stores using innovative self-service technol-ogies. Other new payment solutions like self-checkout and mobile payments, already common in cities, will be-come more common in the retail space. Automation of

the brick-and-mortar store and of distribution centers, as well as the use of in-store robotics will become es-sential for the retailer of the future. These innovations will save customers time, improve in-store experiences and reduce the operational cost base.

The results of our EFMI and Roland Berger in-depth food industry survey of 150 Dutch executives indicate that these mega-trends and a wide variety of sub-trends will have a profound impact on the grocery sector in the next 10 to 15 years (Figures 2 and 3).









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E-commerce models4







12. Smart homes


13. Cashless stores




4. New consumers

9. e-/m-commerce


3. Urbanization

DIGITALIZING WORLD






WORLD









CONSUMER HABITS






TREND IMPACT

TIMING OF IMPACT

HIG

H IM

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Threat Opportunity

50%Threat (1-3)













The changing landscape is a breeding ground for new forms of competition: Incumbents must arm themselves to safeguard their future positionThe changing landscape is a breeding ground for new forms of competition and innovative concepts. New forms of competition have already emerged in the grocery sector. Pure online player Picnic entered the Dutch market in 2015, providing free home delivery of groceries, and is slowly expanding its business. Pub-lic Goods, a direct-to-consumer e-tailer, is working on a direct-to-consumer model that cuts out the retailer from the value chain. In their envisioned “supermarket of suppliers”, different suppliers will hold inventory po-sitions at a central distribution center and Sjoprz will work together with a third-party logistics provider to process the orders, assemble the products and deliver the order to consumer homes for free. Delivery costs can be paid from the discount realized by a shortened supply chain. Recent international events such as Amazon and Alibaba’s entry in grocery and developments in non-

food retail categories (e.g. exponential increase in e-commerce) also indicate that change can come rapidly. The grocery sector will have to adapt to the changing environment and grocery retailers must be prepared to take measures to ensure that they can stay competitive in a new landscape with new competition.

Dutch food executives are optimistic about the future, but it remains to be seen if the Dutch grocery sector is ready for the developments that will shape the business over the next decade(s)So far, the traditional industry players are optimistic about the future (Figure 4). The results of the survey indicate that the majority of evaluated trends are seen as business opportunities, not as potential threats. But is the Dutch grocery sector ready for the develop ments that will shape the business over the next decade?

The grocery sector will have to adapt to the changing environment and grocery retailers must be prepared to take measures to ensure that they can stay competitive in a new landscape with new competition










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E-commerce models4







12. Smart homes


13. Cashless stores




4. New consumers

9. e-/m-commerce


3. Urbanization

DIGITALIZING WORLD






WORLD









CONSUMER HABITS






TREND IMPACT

TIMING OF IMPACT

HIG

H IM

PACT

MED

IUM

IMPA

CT


12

5

9

10

1211

8

6

7 34

15

16

13

14


32 754 61

Threat Opportunity

50%Threat (1-3)












CONCLUDING THOUGHTS

The new foundation of the future grocery landscape is being laid now. Read the following “RETAILes” to learn what the future grocery landscape could look like in 2030.




PUBLISHER

Roland Berger AmsterdamWorld Trade Center Amsterdam Strawinskylaan 5811077 XX, AmsterdamThe Netherlands+31 20 796 0600www.rolandberger.com

EFMI Business SchoolGroeneveld 23744 ML BaarnThe Netherlands+31 35 303 7777www.efmi.nl

AUTHORS

Alexander Belderok – [email protected] Einwachter – [email protected] van Aalst – [email protected] Winkelman – [email protected] Veul – [email protected]

DISCLAIMER

This study has been prepared for general guidance only. The reader should not act on any information provided in this study without receiving specific professional advice. Roland Berger and EFMI Business School shall not be liable for any damages resulting from the use of information contained in the study.

© 2019 Roland Berger and EFMI Business School All rights reserved.

https://www.rolandberger.com/

https://www.efmi.nl

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RETAIL es The Dutch grocery sector in 2030...6 RETAILes: The Dutch grocery sector in 2030 The second mega-trend is the changing habits of consumers.Changing consumer demand and prefer-ences