Channel Blurring and E-Commerce Shake Up Grocery in Germany

29th November 2017
From Thomas Spieker

Channel Blurring and E-Commerce Shake Up Grocery in Germany

Amid unrelenting competitive and consumer pressure, Germany’s grocery retailers are rethinking how they present their offerings. Market consolidation gives German retailers more buying power, so prices can stay low. In fact, out of the leading industrial nations Germany has the lowest price level for Food.

The German grocery sector is well known for two of today’s most popular hard discounters: Aldi and Lidl. Early on in their history, these companies used low prices and simple bulk packages for their private label products. However, channel blurring and market consolidation and restructuring have changed these retailers’ strategies.

Channel blurring means retailers traditionally not associated with certain types of products now sell them. For instance, Aldi and Lidl have recently started to sell more premium products. Both companies want to replace their price-driven image as discounters to a more premium market positioning. While they move upwards, these retailers are mindful to avoid positioning their brands too high, which could cannibalize their own sales.

Meanwhile, Germany’s premium grocery retailers, Rewe and Edeka each offer discount brands in their portfolio (Penny and Netto, respectively) to compete against Aldi and Lidl. Penny and Netto have added more premium value to their offerings, such as free Wi-Fi in stores, television ads, more attractive private label packaging, as well as certain A brands and premium products.

As a result of this channel blurring across Germany’s grocery sector, consumers are confused.

Preparing for e-grocery success
While Amazon and Whole Foods make global headlines for igniting the e-grocery imperative, all German retailers have invested in an e-commerce website for omnichannel service options. They are also all losing money online grocery and home delivery due to high up-front investments.

Among the discounters, Lidl runs a successful online wine shop and Aldi is trying to catch up online. Lidl’s sister company, Kaufland Germany, has put the expansion of its e-commerce operation on hold to improve the efficiency of its delivery service in Berlin.

The most advanced e-grocery retailer is Rewe Digital, which has its own in-house agency. Rewe Digital creates digital marketing, including YouTube videos and online influencers, to stand out as it tries to advance faster than Amazon Fresh.

Now that Amazon is expanding nationwide, German retailers feel the pressure to offer the exceptional speed, scale and last-mile service that Amazon Fresh offers. Amazon Fresh is currently available in Berlin with plans to expand to Munich and Hamburg soon.

 

To give German consumers local e-grocery options, retailer Tegut, which operates in the south of Germany, sells its whole private label range on Amazon – and Amazon even does ads for them.

Amid all this channel blurring, intense competition and digital disruption, German retailers are looking for new ways to stand out and sell.

Winning with emotional storytelling
Germans enjoy going to their local shops, especially to buy food products, which is great news for retailers. However, consumer behavior has changed. Consumers are more concerned than ever about what they’re buying – such as whether a food is local, vegan, halal, non-GMO or environmentally-friendly.

To resonate and win over savvy shoppers, German grocery retailers are turning to emotional storytelling to prove their private label products are healthy and the product attributes reflect in-demand consumer values.

For instance, Aldi launched a marketing campaign whose core message was, “Aldi Inspires.” The campaign strives to elevate Aldi’s brand perception from a discounter focused on efficiency and the bottom line to a more premium retailer that genuinely cares about its customers. The television ads show images of families to evoke the idea that Aldi offers good quality products that delights multiple generations of consumers, and demonstrates a commitment to corporate social responsibility to align with shoppers’ values.

Rival Lidl also launched a powerful campaign showing images of schools in the Netherlands. The company provided free fruit to nearly 100,000 children at 500 primary schools in the country. This campaign also provided deliberate public relations makeover, as the retailer had a reputation for being harsh toward employees; however, it was now embracing a gentler, more caring profile.

Emotional storytelling can help retailers reposition their company by changing their brand story to appeal to new groups of shoppers.

How retail companies can stand out and sell
Since shoppers care about product attributes, retailers need new ways to communicate such details as a product’s country of origin, whether it contains reduced salt or sugar, or if it’s vegan or organic. Retail companies need a repository that contains all this product information, plus a way to verify that such product claims are true.

That’s where Trace One comes in. We help companies compete better by sharing accurate product data across their supply chain, which in turn helps retail partners communicate well to entice end consumers. Retail companies use our trusted global platform to share information about their corporate values and product attributes. That way companies gain more efficient communication across all channels – in stores, online and social – for a seamless experience for consumers.

Such collaborative information-sharing for private label products helps supply chain partners increase speed to market, improving their chance to be first to market, gain a differentiated competitive advantage and earn the consumers’ trust.

 

 

 

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