When talking about the Big 5 in German retail (see previous postings) we always have to be aware that this is the picture of 2017 and will most likely be completely different already next year. But there is a not so new number 6 in the ranking of German retailers, which should get our main attention. A player who made a rocket start into German retailer ranking in 2016 and is there to stay and overtake.
In March German Lebensmittelzeitung published their annual Top 30 retailer ranking1 again, which is for the time being dominated by Germany´s giant grocery chains. I will leave out the variances in growths and give a brief overview about their total 2017 turnover in Germany here:
- 56 €b 2017 Edeka group (including Netto)
- 40 €b Schwarz group (Lidl + Kaufland)
- 38.5 €b ReWe group (including Penny)
- 30.5 €b Aldi (North + South)
- 13 €b Metro (including Real)
- 12 €b Amazon
There are some key-learnings here:
- All of them managed to grow their business in Germany in 2017.
- The discounters are showing an organic growth in 2017 towards 2016 (Aldi 7.6%, Lidl 4.5%, Netto 3.1%, Penny 3.0%)
- The traditional supermarkets of Edeka and ReWe grew marginally through acquisitions. However, this is primarily due to the takeover of the Tengelmann Group. Their owner family has decided to withdraw from the brick-and-mortar food retailing in order to be able to concentrate on “our future-oriented business fields”. This also includes equity investments in the online sector. Some may already recognize this as a sign of the times.
- Amazon had some kind of a sneak-entry into the ranking in 2016 and generated 12 €b in 2017, which is kind of exotic as it is mainly nonfood-turnover in a grocery ranking. Which means – if the market size is not increasing immensely at the same time – it is already turnover that other brick-and-mortar retailers are not generating (anymore or anylonger).
It will definitely be exciting to watch its future developments as through acquisition of Whole Foods, Amazon is testing in-store retail as well and is strongly pushing forward with their Amazon Fresh delivery services. Reports of Amazon being interested in buying Carrefour can also be found.
It will be exciting to watch if German retailers will be able to keep up with online business and home delivery services. Amazon does not necessarily need to earn money with selling goods, at least not during a starting period. Collecting experience and data as well as administrating customer access would already be fine for them.
The expensive final mile is of course crucial for home delivery services. Looking at this, Amazon´s patent of Amazon Key appears genius.
The development of online delivery services lead McKinsey & Company to the conclusion that within 2 – 5 years German retail chains will lose 10% of their turnover to online delivery services. As a matter of fact retail chains will be forced to wipe those products off of their shelves which are moste likely to be bought online, i.e. canned food, sanitary- and other nonfood items. Interesting also, how other German onliners like Otto or Zalando will try to keep up, already starting to transform their business models from being traditional traders to becoming online platforms.
The retail world is changing fast. We are spotting trends in growth of discounters and an ultrafast-paced transformation of commerce through Amazon.
Raise your hand if your business is already prepared for both!