"Online grocery trade is more of a marathon than a sprint"

Online sales of groceries have taken off slower in Finland than in the neighbouring Sweden. However, the pace is now picking up forcefully, and K Group targets 100% growth with net sales of over 40 million euros in the online grocery trade next year. Three million people in Finland already have access to K Group's online grocery sales. Popular products include coffee and rainbow trout. The potential entry of international companies such as Amazon to the Finnish market would accelerate online sales, but K Group believes that its combination of online and brick and mortar stores will prove a winning concept also going forward.

Sunday evening. As the weekend draws to a close, thoughts turn to the upcoming week and the increasingly empty fridge, which requires action on Monday evening at the latest. What are we going to eat tomorrow and rest of the week? Especially families with children and calendars full of work duties and hobbies need to get food on the table as quickly and conveniently as possible. That is why an increasing number of Finns are tackling the empty fridge challenge on Sunday evenings online.

The trend can also be seen in K-Citymarket Iso Omena in Espoo, which has been offering online grocery sales since February 2017. The store now makes some 800 online deliveries each week, with as many as 250 orders coming in on the busiest days.

"We tend to see a peak in orders on Sundays between 7 and 11 pm, as people prepare for the upcoming week. Orders also come in towards the end of the week when people buy special treats for the weekend," says retailer Toni Pokela.

When Pokela's K-Citymarket started selling groceries online, everything was still new. Over the past two years the system has been honed and the collection of items from store shelves has become fast routine. According to Pokela, online already accounts for some 10% of the store's total sales, and volume has doubled on the year before. Online sales have become a tangible and inseparable part of the store's operations, and K-Citymarket Iso Omena now delivers groceries to customers in Espoo and the bordering Kirkkonummi.

"To ensure quality, frozen food travels in freezer boxes, while fresh basil rides in the cabin of the delivery vehicle." Toni Pokela, retailer

Online grocery sales have taken off slower in Finland than in the neighbouring Sweden, but the pace is now picking up. The online grocery market in Sweden is ten times the size of the Finnish market. In recent years, annual growth has averaged 40%. The online grocery sales of K Group are now growing clearly faster than that.

"Compared to last autumn, K Group's online grocery sales have grown by 75%, and the pace is accelerating fast. The percentage has gone up throughout the year. For example, this autumn there have been 20,000 orders per month, with the figure rising each month," says Antti Rajala, Sales Director for Digital Services in K Group's grocery trade division.

The growth is the result of increased supply. K Group has expanded its online grocery sales significantly over the past year and the pace is set to continue. K Group is targeting 100% growth in sales next year, which would translate into net sales of over 40 million euros.

More than 140 K Group grocery stores already offer online sales, and the number of stores is constantly growing. This year there have been significant new openings in Helsinki, Oulu, Turku, Kuopio, Kerava, Jyväskylä and Lahti, with big K-Citymarkets and other big K-food stores launching their online grocery sales.

"In places where online grocery store services have not been available before, we must work to get the people online. The size of the town or city affects people's views on how necessary the service is. Also, people living in city centres with a store downstairs will have less need for online services than people living in the suburbs," says Jani Karotie, K Group's VP in charge of store operations.

According to Rajala, online food sales are off to a very good start in Oulu and Turku, for example, and customers have been quick to discover the benefits of ordering their groceries online. Similar development is expected in other localities, too. Rajala believes that in five to ten years' time, customers in the Greater Helsinki region will use physical and online stores to an equal extent.

"You should, however, see online grocery trade more as a marathon than a sprint, as it requires a change in consumer behaviour and habits as well as active communication on our part."

For customers, time is money

One-off purchases online are notably bigger than in brick and mortar stores, and people tend to stock up on, for example, flour and toilet paper as well as fresh foods. Because the products come from existing stores, online customers get to choose from a selection as wide as that found in K-Citymarkets.

"As a rule, all the products that can be bought from our store can also be bought online. People may request, for example, for 500 grams of our special cabbage quiche by writing the order in the 'Additional information' text box, and that too is equally available to online buyers as it is to people visiting the store," says Toni Pokela. 

Typical customers tend to be busy working mothers and fathers with small children. Perhaps somewhat surprisingly, price-conscious customers are also active online grocery shoppers.

"Such customers are likely to factor in how much their time is worth. They can also be quite systematic, and make lists and order groceries for the whole week," says Karotie.

Online sales of groceries are not a threat to traditional brick and mortar grocery stores. In fact, the two can actually support each other.

"Many companies are still making losses in online grocery sales, but we have found a model in which the operations are profitable and linked to sales in our physical stores. Customers who buy groceries online also visit our stores more often than before."

"Pick products you would pick for yourself"

What kinds of foods do Finns order online? Pretty much the same foods they buy in K-Citymarkets, K-Supermarkets and neighbourhood stores. As a coffee-crazed nation, Finns naturally buy a lot of coffee also when shopping online. This is closely followed by fresh Finnish vegetables such as tomatoes and cucumbers. Bananas are also popular. Online shoppers have been very satisfied with vegetables picked by someone other than themselves.

"Rainbow trout fillets have been a hit product from the start. When it comes to the collection of fresh food, we stress the importance of picking products you would pick for yourself. In any case, it would be very short-sighted of us to disappoint our customers by choosing products of lesser quality," says Karotie.  

Pokela also stresses that consumers must be able to trust that they get what they order and that the cold chain stays unbroken throughout the delivery. 

"If a consumer buys an ill-fitting shirt online, they are likely to be disappointed, but the problem is not acute. However, if someone buys fish online for dinner and the product is inedible, the whole evening is ruined. That is why our frozen foods travel in freezer boxes, while fresh basil rides in the cabin of the delivery vehicle."

"In 5-10 years, customers will use physical and online grocery stores equally." Antti Rajala, Sales Director

Customer satisfaction in online grocery sales is even higher than in traditional stores. The Helsingin Sanomat newspaper recently compared online grocery stores that deliver in the Greater Helsinki area. K Group turned out to be clearly the most affordable alternative, with K-Citymarkets offering the widest selection. A Finnish consumer magazine, meanwhile, found K Group's online store easy to use, thanks to features such as one-click creation of a shopping list based on personal purchase history.   

K Group believes that the key to growing online sales and response to competition is to offer convenience and a personalised shopping experience. Many online customers already add requests to their order regarding e.g. the ripeness of avocados. Customers have also trusted the judgement of their retailer in the selection of sweets and Christmas hams. The more often a customer shops online, the better the online store can anticipate what items the customer is running low on, and what the customer's favourite cheese is.

"The fact we can offer hypermarket selections online is definitely one of our strengths. Warehouse stores can be efficient in their own way, but if you want to offer nearly 30,000 items like us, a store is the only alternative," says Pokela.

Online payment will make accepting deliveries easier

Three million people in Finland already have access to K Group's online grocery sales, with a lot of active users especially in the more densely populated areas in Southern Finland. In some countries, certain products are now delivered within a matter of hours, and delivery times are a talking point also in Finland. Technical solutions to make the collection of items at the store faster are constantly examined. One possibility would be to have electronic price tags send alerts as the collector approaches products on their list, thus making the products faster and easier to find.

"Customers also factor in how much their time is worth." Jani Karotie, VP in charge of store operations

Currently, items ordered from K Group's online grocery store are delivered within the same day if the order is placed before 8 am. Going forward, delivery times are likely to get shorter as more customers start using the services. For now, customers have been happy with the current delivery times, as most people tend to shop online in the evening. Still, K Group is constantly examining and exploring alternatives. Jani Karotie stresses that the most important thing for the customers in knowing when the delivery will take place.

"At the moment, we can sometimes pinpoint the delivery time with 30-minute accuracy once the products have been collected at the store, and customers can track the delivery on a map in real time. Next year, we will be testing a model in which the customer will be given a one-hour time window for the delivery when the order is submitted. This will make it increasingly easy for our customers to plan their days."

Another area K Group is focusing on is payments. Some customers would like to pay for their groceries before delivery. This would enable, for example, teenagers to accept the deliveries, with no payment needed at that point. However, products such as fruit and vegetable, which need to be weighed after collection to determine the exact price, pose a challenge. Karotie promises the issue can be resolved, and K Group is planning a model where the order is charged from the customer's account once the groceries have been packed.

"Some of our customers also want to handle grocery shopping for their elderly parents, for example, and shopping online is a useful solution to that. When we can enable online payments, that will also help in dealing with the monetary side of things," says Pokela.

How often do Karotie, Pokela and Rajala buy groceries online themselves? All three say they are accustomed to shopping online, especially during busier weeks.

"Like many others, our family often maps out what we will need during the upcoming week on Sunday evening. Sometimes we also list products we are running low on throughout the week, and make a big order at the end of the week," says Antti Rajala.

Jani Karotie, like many other Finns, starts buying increasingly online in the autumn, when less time is spent at the summer house. Retailer Pokela goes to his store almost every day, but still uses the online store every now and then.

"Waiting for our delivery is like waiting for Santa Claus. When we know delivery will take place between five and six in the evening, we'll be at the window eagerly waiting at half past," says Pokela.

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