The purpose of the master’s thesis was to answer the research questions of how can online grocery landscape in Scandinavia be described, what are the existing business models and operational methods of online grocery retailers in Scandinavia, and what are the future trends and perspectives for online grocery in Scandinavia.
The investigation of this topic emerged from the author’s interest, working in an FMCG company that is directly impacted by the digital transformation of the retail industry. Moreover, recent changes in the competitive set-up and increasing number of players in all three countries prompted to investigate the online grocery landscape in Scandinavia and assess the future market potential.
All parts of the master’s thesis had significant importance when answering the earlier stated research questions.
The extensive literature review covered important areas within online grocery development, which usually are the most challenging for a retailer when starting operations in an online marketplace. Moreover, investigated literature helped to indicate the research gap of a shortage of studies that would focus on the local regions for Scandinavian countries. Furthermore, the conceptual framework presented later in the study helped to organize findings better and structure the whole process of answering the research questions.
The research philosophy of this study is pragmatism, while the most appropriate methodological choice identified as a qualitative research strategy, which is supported by the abductive reasoning and exploratory purpose of this thesis. The author used multiple sources of qualitative data to derive a well-designed study.
Primary data was gathered through semi-structured interviews with nine subject matter experts from several types of companies all closely related to the researched field. In addition, to support research findings, secondary data was collected from companies’ websites, annual reports as well as online articles and experts’
proceedings. Furthermore, the author conducted a thematic analysis of the collected data with the help of the NVivo software. The latter process enabled the author of this study to identify common themes and identify emerging patterns from a data set later used for the analysis. The empirical findings were organized based on the conceptual framework that helped to build the structure for the discussion part where the research questions were answered.
The first research question was answered by evaluating the current market situation, which was based on such criteria as consumer readiness to buy groceries online, available resources and degree of competition in the market. Analysis of market conditions led to a conclusion that all markets are developed and consumers, in general, are ready to buy groceries online. However, the level of development and degree of competition differs quite significantly in all three countries. Accordingly, grocery e-commerce is developed the most in Sweden, then follows Denmark, while the market with the least development is in Norway. The main reasons
identified in the research of why Norway has the least developed market for online grocery shopping are the cultural and geographical barriers that shaped certain consumer habits. As a result, Norwegians shopping behaviour is not designed to plan shopping, since due to one of the highest densities of grocery stores per capita, they shop on average 3-4 times per week. Contrarily, Swedes seem to have purchasing behaviour that is the most accustomed to planning shopping, since on average, they visit grocery store slightly more than once per week.
Findings also led a discussion around business models and operational methods of online grocery retailers, how it changes when the market develops and which is the more feasible business model taking into consideration the current market development. The main discovery from this part of the discussion, directly related to the research question, is that competitive landscape in all three countries is different in terms of what are the current operational strategies chosen among online grocery retailers. Looking at each country individually, in Sweden, all three biggest clicks-and-bricks have already started to combine different picking and delivery options. Consequently, they are gradually switching from manual picking in-store to more efficient picking in a warehouse or a dark store. In addition to that, they all provide home delivery and click-and-collect solutions to their customers.
Meanwhile, in Denmark and Norway, clicks-and-bricks are still choosing less capital investment requiring operational methods, such as store-based picking and home delivery with a third-party logistics company or offer click-and-collect services. Furthermore, pure players in all three countries pick groceries in dedicated warehouses and deliver orders with their fleets to customers’ home or pick-up locations as in Kolonial.no case.
The given situation in Scandinavia implies that there is no one-size-fits-all approach and retailers in Scandinavia choose solutions that are economically the most viable at the given time.
What is more, according to the findings of the research, online grocery in Scandinavia is expected to continue growing. However, in each country, the pace will be different. The most significant growth is predicted for Sweden, where shopping patterns are the most similar to the more mature markets such as France. Online grocery in Denmark should grow moderately until clicks-and-mortars start investing heavily in their online operations, creating a more convenient experience for their customers to shop online. In contrast, grocery e-commerce is expected to grow the least in Norway.
Furthermore, one of the most notable trends in the future in online grocery will be technological advancement that will start from warehouse automation and continue to autonomous delivery. Last-mile delivery is a considerable barrier in Scandinavia for making online grocery feasible business model due to high labour costs, complicated logistics, and low population density, especially in Norway and Sweden. Therefore, less
labour-intensive solutions could bring retailers economies of scale and help to accelerate the growth of grocery e-commerce in Scandinavia. However, automated order pick-up locations will remain economically more viable for the retailer and thus will grow even more in the future. By installing pick-up points in convenient locations close to the customers, such as offices, petrol stations, hospitals, retailers will be able to satisfy consumers willing to save on delivery costs as well as ensure desired convenience and flexibility. Lastly, consumers will increasingly demand seamless and frictionless experience among all sales channels. Therefore, the omni-channel approach, which is another significant trend in the retail industry, will have to be eventually integrated into business strategies by all retailers to respond to the changing shopping behaviour and consumers’ needs.