How does it look?
BY SANDY STRASSER
On 15 March 1948, Migros in Zurich opened the first self-service shop in Switzerland. Its founder: Gottlieb Duttweiler. He had a sales organisation without the middle man in mind – a direct ‘bridge from the manufacturer to the consumer’. Today, the company is the largest retailer in Switzerland and is one of the 500 largest companies in the world. But what will our consumer behaviour look like in the future? What requirements do retail businesses – particularly in the food industry – have to meet? We spoke to Herbert Bolliger, President of the executive board Migros-Genossenschafts-Bund about the topic of food delivery in the digital era.
Households spend a significant portion of their money on groceries. However, only about 1.5 percent of Europeans do their shopping online. Mr Bolliger, where do you think this reserve of purchasing groceries on the internet comes from?
Herbert Bolliger: In Switzerland, we have an excellent supply of grocery shops. With Migros, Migrolino, Voi or Denner, we are close to the consumer everywhere – in rural areas, city centres and residential areas. The availability and quality of the products, particularly fresh products, is high. However, primarily working customers and households with small children are increasingly benefitting from the possibility of buying even their groceries on the internet. Following England, with over five percent market share in sales of groceries over the internet, Switzerland is already in second place with almost two percent of home deliveries. LeShop.ch, the online grocery shop of Migros, records a pleasing growth every year and is Swiss market leader in internet retail with a revenue of over 170 million francs. In total, Migros generated a revenue of more than one billion francs last year with online activities.
Other B2C markets are considerably more successful in online business at around 15 percent. Why is it more difficult for food retailers to get a foothold in this area?
H. B.: Online food retail is the free section of E-Commerce – the ordering and delivery of foodstuffs is a transaction of trust. Customers expect fresh products, just like in the shops. If they had positive experiences, they stick with it. That is why 85 percent of people using LeShop.ch are return customers. By the way, 92 percent of all online orders are for fresh produce. That is the best mark of confidence.
Le Shop was founded 18 years ago as a pioneer company by private entrepreneurs and has been a subsidiary of the Migros-Genossenschafts-Bund since 2006. The online food retailer has got a good foothold as one of the first in Switzerland and has not only got its attractive full range, but also the service extensions and a consequent development of the multi-channel strategy with home delivery and collection centres to thank for its growth. Customers can also order when on the go via mobile and have the goods delivered to a location specified by them, such as to a Migros branch or a Migrolino shop in their neighbourhood. PickMup is the name of this service, which is currently being developed. With both drive-in locations, we are also gaining positive experience and are creating pioneer work here in Switzerland.
How much potential do you think there is on the market for branches like yours?
H. B.: LeShop still has a lot of potential for further growth. In the first six months the company recorded a revenue of 89.5 million francs. With a plus of 6.5 million francs or 7.8 percent, this has been the strongest growth for five years. We will also close the year with an extremely pleasing plus.
How can shopping by mouse click be quite literally made palatable for customers? After all, you can neither smell nor taste food this way.
H. B.: The majority of customers who decide for shopping by mouse click do it for reasons of convenience. Here, saving time is the main factor. Clear product information such as ingredients, nutritional values, origin, storage and special offers help customers in choosing their products. Attractive ordering and delivery conditions as well as an overview of FAQs offer them security in their decision to buy online. Beyond this, the online shopping process has to be as simple as possible. They have to be able to order on the go with a smartphone. Migros and LeShop offer suitable apps for this.
How has purchasing groceries changed over the past few decades? What will the supermarket of the future look like?
H. B.: The inner quality of the product is becoming equally as important as the appearance and taste. This means that the customers want to know exactly where the product originates from and what conditions it is produced under. Goods which are bought domestically and abroad have to fulfil criteria which guarantee the customer ‘indulgence with a clear conscience’. The majority of the groceries which Migros offers in its range are generic brands which the Migros industrial firm produces itself. That is why in addition to optimum value-for-money, we put great value on regionality, Swissness and social and ecological production conditions.
To what extent do retailers have to adapt to the customers’ changed requirements? What services have to be offered in your opinion?
H. B.: Excellent service in trade is becoming ever more important. Friendly, cooperative and competent personnel is a given. Constant availability and first class freshness of the products too. Wifi in all shops is a must. Today, customers also want to be able to pay with their smartphone, they want to be able to view the customer loyalty programme on their mobile at all times, order products on the go and pick them up in the evening at a location of their choosing. They should be able to access information on their mobile or tablet at all times or inform themselves about special offers, recipes, and new products on location.
What logistic challenges have to be mastered in order to be able to supply customers with groceries personally?
H. B.: With E-Commerce in general and food retail specifically, it’s all about speed and the greatest possible planning precision in terms of time. Currently we are able to offer substantially more precise delivery periods as we have expanded the service throughout Switzerland. Of course the question arises of how the products are packed. We have learnt a lot about this over the past 15 years: we deliver with multiple different cooling compartments and a sack of potatoes should not be put on top of a box of eggs. That sounds banal but it is a challenge when we are talking about 200 tonnes of groceries per day. Almost 60 different products on average per order, seven chock-full paper bags weighing 65 kg, 92 percent packed with fresh products, 22 percent with frozen products, delivering all that within a few hours and with all the ordered goods across the whole of Switzerland is a logistical challenge.
If we look at new concepts such as those of the Dutch online supermarket Picnic, we can see that they are already doing completely without storage space. Instead of this, there are three set days per week when the ordered goods are delivered. What is your opinion on this?
H. B.: With our logistics centres and both drive-in locations we are in the position to deliver extremely quickly and deliver goods fresh – all this six days a week. Sophisticated logistics and significant storage space is the key behind it all. The Picnic concept also works from a central storage in Nijerk and delivers to interim hubs from which the end consumers are supplied. However, we do not work with advance orders – people can shop with us at all times.
Key word long tail: what solution models are there which allow the product range to grow without having to create space for real storage? What can be learnt from Amazon here?
H. B.: We have over 13,000 different products on offer so that we can cover the requirements of our customers in terms of supermarket range: the Migros range, brand-name items, fresh products. We can cover quite a large part of the food sector even of the so-called long tail. For non-food items we have Galaxus, Switzerland’s largest online warehouse with branches such as ‘household’, ‘do it + garden’ or ‘sports’ – a platform which offers hundreds of thousands of items without having to have these in stock.
Herbert Bolliger completed his degree in Economy at the University of Zurich in 1980. Three years later, he began his career with Migros. First employed as Area Controller, he rose to the position of Vice Director of the Bern Genossenschaft (cooperative) and became a member of the company management. Seven years later he was appointed as Director of the Migros-Genossenschafts-Bund, Zurich. From 1998 until 2005 he was Managing Director of Migros Aare and since 2005 he has been President of the Executive Board at the Migros-Genossenschafts-Bund.
This article was published in The Produktkulturmagazin issue Q4 2015. Picture credit © Stephan Rappo