Grocery stores are continuing to cash in on the surging e-commerce channel. 2020 saw some triple digit annual percentage gains and many chains are looking to raise the bar. One example is Ahold Delhaize. The Dutch operator of U.S. brands including Stop & Shop, Giant Stores, and Food Lion, intends to continue its heavy investment in online ordering and fulfillment.
The firm already owns Peapod and most recently acquired a majority stake in FreshDirect, another leading grocery delivery service. Online order fulfillment is expensive especially for the last mile of delivery. So expect online retailers to emphasize curbside pickup which has gained popularity with click-and-collect consumers who also save by avoiding delivery fees.
The following excerpt from a Wall St. Journal article reports more on the topic:
The finance chief of the owner of Peapod, Stop & Shop and Food Lion plans to keep investing in new distribution channels and technology so that online shopping will become a larger part of the grocer’s overall revenue.
For Ahold Delhaize NV—the Zaandam, Netherlands-based owner of the U.S. grocery chains—the pandemic served as a wake-up call to accelerate its e-commerce business, including click-and-collect services that allow customers to pick up online purchases from a store, and home delivery. In the U.S., Ahold’s biggest market, online sales grew to €1.97 billion, equivalent to $2.37 billion, in 2020, up more than 100% compared with the previous year.
Still, this represents roughly only 4.3% of the company’s U.S. sales, which totaled €45.47 billion last year, up 15.6% compared with the prior-year period. Chief Financial Officer Natalie Knight is working to increase online sales further, she said.
“We doubled our investments in omnichannel in 2020, and we will do that again in 2021,” Ms. Knight said, declining to provide a dollar amount for these investments. Overall, Ahold spent €2.6 billion on capital expenditures in 2020, slightly higher than the €2.5 billion it originally forecast. The company intends to allocate about €2.2 billion on capital expenditures in 2021.
Overview by Raymond Pucci, Director, Merchant Services at Mercator Advisory Group
