EUROPE: Food retailers take bolder moves to fight Amazon | Progresiv
As Amazon encroaches on supermarket territory, traditional European retailers are taking bigger steps to fight the U.S. ecommerce giant by offering more non-food products and using extensive store networks as delivery hubs. 
Persistent food price deflation across Europe helped trigger Britain's Sainsbury's bid for home products retailer Argos. That follows Dutch chain Ahold's purchase of leading ecommerce site Bol.com in 2012 and French Casino's decision to take full control of e-commerce retailer Cdiscount in 2011.
Sainsbury's hopes that using its stores as pick-up points for a wider range of goods will boost profitability. Ahold and Casino have both achieved more sales volume through their stores by encouraging customers to pick up non-food orders at their supermarkets. Ahold's online sales grew more than 30 percent in the fourth quarter while Cdiscount customers can collect goods from 2,500 Casino stores.
Britain is one of the world's most advanced markets for grocery ecommerce. Even German discounter Aldi, which has been sceptical about ecommerce, is feeling the pressure to change. Its British arm started to sell wine online in January. But it has taken pioneers like Tesco and Ocado decades to reach break even, as keeping fresh produce at the right temperature makes logistics pricey.
To have a chance of turning a profit in grocery ecommerce, retailers need scale and they are more likely to recoup delivery costs if they can get shoppers to add higher margin non-food items to their fruit and veg shop, or better still, they would prefer customers to pick up orders themselves from a store.
As ecommerce leaches sales from stores, many retailers have looked for ways to trim their expensive real estate portfolios. However, stores can be an asset in the fight against Amazon if used as distribution hubs for goods ordered online.
Sainsbury's Chief Executive Mike Coupe says buying Argos would give the combined group a major advantage over Amazon due to a network of 2,000 stores-cum-collection points. "The more points of distribution you have ... the more attractive and convenient that is for customers, because in the end, retailing generally is driven by proximity," he said. Coupe noted that department store chain John Lewis says half of its online orders are now collected in store, with 35 percent picked up from its sister chain of Waitrose supermarkets.
Recognising the popularity of "click and collect" in Europe, Amazon is setting up a network of parcel lockers to offer a broader range of pick-up options. Amazon is advancing into food to try and entice customers to shop more frequently. Amazon has been expanding its "Pantry" offering of packaged groceries for its Prime subscribers and is expected to eventually extend to Europe its U.S. Fresh service, which offers about 20,000 chilled, frozen and perishable products.
The next frontier in the race to provide the most convenient shopping experience for customers could be integrating non-food and food supply chains and delivery options.
Sainsbury's Coupe said he could imagine delivery of non-food items eventually piggy backing on existing food logistics.
Amazon Fresh trucks already deliver food and regular parcels together in some U.S. cities and the company is starting to locate temperature-controlled warehouses for food next to or near to non-food storage.
Bernstein analyst Bruno Monteyne believes it will take a long time for Amazon to establish the kind of consumer trust that supermarkets enjoy in food. But he also cautions against established players from fighting Amazon on too many fronts, "It is a game they cannot win," he said. (www.reuters.com)
