Why the rise in eGrocery applications presents the need for flexible finance solutions

Oct 24, 2022


The COVID-19 pandemic seems to have changed the landscape of the grocery sector forever. For grocery retailers, positioning themselves to make the most of new consumer dynamics requires significant changes, everywhere from the processes in the warehouse, through to their vehicles for last mile logistics. This is where DLL provides support as a flexible finance partner, helping businesses worldwide to finance change and take advantage of the growing eGrocery trend.

One of the biggest trends to emerge from the COVID-19 pandemic is the stratospheric rise in online shopping and grocery delivery. Consumers have taken to their laptops, tablets, and phones to do increasingly more of their shopping, including in the fast-moving consumer goods (FMCG) and grocery sectors.

The eGrocery boom
Prior to the pandemic, eCommerce accounted for only 8.7% of grocery sales in the UK. However, eCommerce in the grocery sector peaked at 15.4% in February 2021, according to Kantar Worldpanel data. While online shopping sales have now slowed somewhat, Kantar figures for February 2022 show they have remained at 13.3% of all grocery sales, far exceeding pre-pandemic levels.

The future forecast for eCommerce in the grocery sector remains bright, with European sales values predicted to climb from 93.1 billion euros in 2021 to 193.4 billion euros in 2026.

Handling online grocery orders
Although many retailers offered eCommerce before the pandemic, consumer expectations have changed. There is now a greater demand for rapid delivery, with an expectation for consumers to receive their grocery orders in minutes or hours, rather than days. This has led to some stores partnering with rapid fulfilment experts and apps, such as Deliveroo, Uber Eats, and Just Eat, in order to improve delivery times. This surge in demand for online grocery orders has resulted in the need for massive investments by retailers, especially in terms of fulfilment and last mile delivery operations.

In recent years, the eGrocery sector has also welcomed many disruptive new entrants into a market that has, traditionally, been dominated by a handful of big traditional retail players.

For example, Dutch grocery retailer Picnic started in 2015 and has continued to grow in popularity, gaining 10% of the Dutch grocery market in its first three years of business. Typically, most grocery retailers pick up online orders from stores and deliver on-demand to specific pre-booked time slots. Alternatively, Picnic fulfils orders from a small number of distribution locations. Orders must be made by 10 p.m. for next-day delivery, and the delivery vehicle runs on a regular set delivery timetable, like a bus route, rather than delivering on demand.

Supporting new approaches to last mile logistics
DLL recently worked with Picnic to help finance its fleet of sustainable delivery vehicles to expand its operations into Germany and will continue to support Picnic as it expands into other European markets.

Picnic’s business model is just one example of how grocery businesses are changing their approach to last mile delivery. Retail and logistics operations are delivering a greater volume of ‘direct to door’ deliveries to customers. The large trucks that depart from distribution centers are not always an option for these tasks. In part due to their size in residential streets, but also due to emissions consideration where governments are legislating truck emissions in urban areas.

Some businesses are rethinking their approach, with out-of-town locations where deliveries from large trucks can be divided between smaller vehicles that head into urban areas. The use of low emission electric vehicles is growing, and there is a growing appetite for these smaller vehicles to have the lowest possible emissions. However, this is an unfamiliar area for many, and some companies may be unsure how to finance this technology.

DLL has experience financing electric delivery vehicles to aid eGrocery businesses through this transition. Like DLL’s partnership with ConnectBike, which develops e-bikes for different market segments, focusing on last mile delivery.

Financing change eGrocery warehouses
It is not just the last mile where there is change for eGrocery retailers. Some are considering ways to make their eCommerce fulfilment operations more efficient.

Instead of dispatching items from the shelf of the store or the shop’s backroom, some are exploring highly automated “dark warehouses” based near towns and cities to use as the main location for distributing orders. Online grocers, such as UK-based Ocado, have been using this approach for some time, with automated distribution centers that feature hundreds of robots that pick groceries from a grid before bringing them to human workers to pack and load onto delivery trucks.

Businesses adopting a new automated approach to grocery retail warehouses and distribution centers can partner with DLL to finance this change. DLL’s intralogistics finance experts can make automating all or part of a warehouse attainable, providing unique solutions with tailored payment structures that can cover the costs of new warehouse equipment, robotic systems, and automated trucks, in addition to consultancy and training.

Your partner for eGrocery
Reach out to DLL now to discuss flexible finance solutions to help your business take full advantage of the eCommerce boom.