E-Commerce Rewe Online to Add a Marketplace

Matthias Queck (Research Director)
20 June 2017
Rewe Group is extending its online supermarket in Germany with a non-food offer from partners, focused on the kitchen and household categories. In what is said to be a test phase, the retailer plans to add five external non-food retailers to its offer from early July, creating a marketplace that can later be gradually extended. The test phase will involve 1,000 shoppers trialling the site and providing feedback. 

The first companies to sell via Rewe's Marketplace will offer international delicatessen, toys, pet food, perfumes, cosmetics and gift items. Goods will be dispatched to customers through the parcel service. Partners include Dallmayr, Käfer, Lieferello, nu3, myToys, ZooRoyal (a Rewe-owned online pet food retailer), Weinfreunde (wines, likewise Rewe-owned), Springlane, Butlers, Alternate, Geschenke.de and Idee Creativmarkt.

“It was important to us that customers have a central place to go for all of their everyday shopping needs,” said Jean-Jacques van Oosten, Chief Digital Officer at Rewe Group and former Tesco manager. Rewe.de will continue to offer home delivery for its fresh food orders in around 75 German cities, independent from these non-food parcel deliveries. 

The move comes after Rewe Group further extended its grocery e-commerce operations in Germany and Austria. Its Austrian Billa supermarket division just opened its first online distribution centre in Inzersdorf, investing EUR5mn. It stocks 8,000 articles in an area of 7,000 square metres, planning to extend this to 15,000 items in future for projected sales of EUR35mn. Profitability cannot be realistically expected before 2021, according to newspaper Die Presse.
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Matthias Queck (Research Director)
Matthias Queck (Research Director)

Opinion Now or Never

20 June 2017
The first thought is: Amazon! Amazon is the seemingly overmighty nemesis of grocers in Germany and elsewhere, especially now since its recent launch of Amazon Fresh in Berlin and Potsdam. Outgoing Rewe Group CEO Alain Caparros has made no secret of the fact that Rewe Group has to do everything to not lose out in the fast-changing retail world; he has been traumatised by the fate of the group’s electronics store chain Pro-Markt, which lost the battle against online – more precisely: Amazon – without ever awaking from its deep slumber before it was too late.

The withdrawal from electronics completed the group’s international withdrawal from non-food retail (the Toom DIY division aside). Tragically, what was definitely the right decision at that time to focus on grocery competence, seems like it is coming home to roost now when dealing with online retailers. It’s obvious: Amazon is attracted by the high volumes and frequency that food orders provide; and is willing to take the low margins, i.e. losses. A grocer like Rewe in return doesn’t benefit from the non-food margins, but has to shoulder the losses of the extremely complex grocery home delivery venture. (In percentage terms, its sales are now growing faster than its losses, Rewe was happy to announce earlier this year with regards to its German online food business.)

No wonder combining food with non-food seems the most attractive way to go omnichannel, and since there is no more non-food competence inhouse, Rewe needs to take in external partners and distribute the risks. That said, marketplaces have only had limited success with other retailers - many got quietly dropped or sales volumes simply haven't taken off, as in the case of Tesco in the UK. But in a longer vision, building up a German(-speaking) online marketplace that can compete to some degree with Amazon or Ebay is not impossible, after all – Ricardo.ch may prove this for Switzerland, owned by a national publishing house.

But besides the obvious Amazon, there is another retailer, a genuine grocer, that may be motivating the Cologne-based group to extend its e-commerce operations into non-food. Omnipresent Lidl. Non-food has always been a vital part of all the discounters’ instore offer, and Lidl has extended this to include online. According to LZ Retailytics data, Lidl Germany will achieve e-commerce gross sales of EUR475mn this year (non-food and food, although the food parcel service for dry goods does not look like a satisfactory business yet). This compares with a forecast of EUR170mn for the Rewe food delivery service, which makes it the number two.

Yes, Rewe Group’s discounter Penny sells such non-food goods online in Austria - as it seems with moderate popularity. But Lidl is not Penny, and we all know the steely determination and financial power all too well that drives Europe’s largest retailer Schwarz Group – so we can assume that Lidl and Kaufland will not give up on making their online business a success. For Rewe, combining the promising sales of the grocery home delivery service (just like Kaufland’s) with a site for food and non-food (like Lidl’s) should be worth a try. No, more than that: It’s a must.
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