Covid-19 impact on food shopping behaviour in Italy
The longer the extent of the crisis, the more purchasing behaviour will shift towards online e-commerce. The value of the e-commerce market in Italy could rise by over 50% in less than a year.
By Giancarlo Addario, Principal at Five Seasons Ventures
Italy was the first western country to be hit by coronavirus and payed a high price in terms of deaths, sense of uncertainty and restrictions on the lives of millions of people.
At Five Seasons Ventures, we analysed the effect of the COVID-19 crisis on the food business system of a country, Italy, where food consumption has been characterized by a very strong link to traditions and a low propensity to innovation, including the adoption of the online channel to buy food.
When the pandemic started in the North West and North East regions of Italy at the end of February, people started to run to grocery stores and stock up; this phenomenon was amplified in the Southern regions in the weeks immediately before and after the lockdown (March 8th), to then stabilise around a more rational approach, as the new context of the confinement measures started to synch in.
The more evident lifestyle changes linked to more time spent at home were:
· accelerated digitalization
· a new balance between the values of convenience and experience
The result, in term of shopping habits, has been a boost of e-grocery and click-and-collect, a slight reduction of home delivery from restaurants, and an increased purchase of ingredients for home cooking and baking.
1) Accelerated digitalization
Queuing up for ages, keeping distance from fellow shoppers and wearing a mask, severely damage the shopping experience. People want viable alternatives to increase get convenience back in the mix.
However, the boost of e.commerce goes beyond a matter of strict necessity: people and companies are experiencing the massive use of digital tools for smart working, online classes for their children, meeting friends and relatives, leisure and, of course, shopping, at an unprecedented intensity: they “live” more online. Indeed, pushed by necessity, for a large number of people this represents a new experience that can have an impact on their future habits.
2) Stickiness: are “the new habits” here to stay?
Let’s rewind the tape: before the Covid-19 crisis, about 50% declared that they were not willing to spend online to buy food in 2020 (Statista survey carried out on over 1000 Italian respondents between November and December 2019)
This picture is connected with the low penetration rate (online consumption/total consumption) of e-commerce in Italy (7.3% vs 21% in UK, 15% in GER and FR) in 2019, of which food and grocery was a minimal part: 1%, yet growing at +42% for overall revenues of €1.6bn.
Consumers’ sentiment has indeed changed fast: the picture below shows the result of a simulation (source Statista-BeBeez) where the basic scenario forecasts restrictions lasting until May plus two additional months to go back to normality. In the worst scenario, the restrictions would last until December + six additional months needed to go back to normality. In both scenarios it is assumed a complete closing of borders among European countries. The result: the longer the extent of the crisis, the more purchasing behaviour will shift towards online e-commerce. In the worst-case scenario, the value of the e-commerce market in Italy could rise by over 50% in less than a year.
We, at Five Seasons, believe that this shift is here to stay:
- Many more “late adopters” have had the chance to enjoy and get accustomed to a new, easier way to shop for their food, from a source they did not know or trust before (this is more acute for fresh food), and with whom it is easier to communicate.
- “Pre-Covid” barriers to the adoption of food e-commerce, like the need for tight time slots to accept deliveries, or the need to “pick and choose” from a supermarket shelf may still have some impact that is, however, mitigated by the improving ability of many companies to improve consumer experience.
- For many food businesses, the confinement period is not dissimilar to a “large scale pilot”: they have been challenged to experiment (proximity shops) or to consolidate (bigger players) their ability to be flexible and to build partnerships, to create added value to their customers and to strengthen their digital relationship and the possible foundation of their omnichannel strategy of the future
3) From eating out to eating…in
Bars and restaurants are places where one can buy experience and/or convenience. For people spending most of their time at home, the convenience factor has been dramatically reduced, which is reflected by an estimated 20% drop in revenues for the big food delivery players (Glovo, Deliveroo, Just eat, Uber eat etc.) despite many bars and restaurants were still allowed to sell via e.commerce channels. When it comes to experience, Italian service MyMenu is bucking the trend delivering from premium restaurants: they have registered a burst in the orders mainly on Fridays and Saturdays. On the other hand, people have re-discovered the pleasure of cooking at home, sharing meals with their family, eventually involving kids in cooking/baking experiences. This is reflected by >20% sales increase in the grocery and, particularly in the fresh food sector.
3) Companies: resilience in action
Soaring online demand for food products has been challenging for early stage companies and the incumbents alike.
Cortilia, the leading fresh e-grocery player had to stretch the limit of its capacity to meet peak demand, while, at the same time, offering priority and free delivery to elderly people and to hospital workers. Esselunga, market leader in the grocery sector, extended delivery times, locking the orders in bigger cities such as Milan and Turin and delaying or cancelling orders. Other big players such as Carrefour, Eataly, Amazon Prime Now, Coop, Conad, Pam and Supermercato24 have had to stretch their organizations and infrastructure to cope with increased demand.
In most cases their adaptation strategy involved one or more of the following actions:
- Limiting the orders to serve a wider number of customers
- Converting points of sales into hubs and/or pickup points, shifting employees within departments
- Moving towards or testing an omnichannel strategy for the first time
- Improving the digital channel to retain/strengthen the relationship with the consumers
- Partnering with delivery platforms
- Ordering by phone (for elderly customers)
- Pre-packed mystery boxes
The coming months will show if this trend is here to stay and how the Covid cohorts will behave compared to the past. We do expect a lot of these new digital customers to remain online though and continue the discovery and experimentation with the many features and benefits of technology-enabled services not just to order their next movie, but also the food and drinks that go with it, to give the full night-in experience.
