UK supermarkets 'losing millions from online shopping'

UK supermarkets might have emerged as the big winners from the Covid-induced online shopping stampede but it seems the higher cost of building ecommerce supply chains is actually losing them hundreds of millions of pounds in profits.

According to new figures from trade credit insurer Euler Hermes, British grocers stand to lose £246m in profits for every percentage point increase ecommerce sales take of the total grocery spend.

And with online sales now accounting for 12% of total grocery market revenue in the UK, British supermarkets are highly exposed to cost pressures associated with online fulfilment.

Euler Hermes’ “European food retailers: The bitter digital aftertaste of the Covid-19 legacy report”, estimates that for every percentage point increase in online grocery sales across the Eurozone, retailers will lose €13.6bn in sales and up to €1.9bn in profits.

Euler Hermes advisor for macroeconomic research Aurelien Duthoit said: “The UK’s already well-developed appetite for online grocery shopping has left it overexposed by the surge in household demand during the pandemic.

“As we head into the traditionally busy ‘golden quarter’ amid disruption and increased costs across the supply chain, it’s imperative that retailers are able to meet any further uptick in online demand efficiently.

“While grocers are looking to attract customers back to their stores following successive lockdowns, they should be looking to rotate their investment to adjust for a sustained increase in ecommerce.

“Investment in the past 12 months has rightly focused on expanding online capacity but more sustainable models will need to prioritise profitability – including a redesign of current logistics infrastructure and extensive uptake of new warehouse automation technologies.

“We’d also expect to see fledgling partnerships between traditional retail brands and food technology businesses continue to blossom – be that delivery specialists, dark store operators or logistics companies offering software and warehouse services.”