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From waiting in-line to going online: Norway’s grocery market disruption

By: Britt Myrset, Director, Retail Industry Lead, Accenture Norway
Bjørn Hortling, Managing Director, Products, Accenture Finland
Snjezana Maric, Consultant, Accenture Strategy Norway

The grocery market in Norway is changing fast. Today, three main players dominate. And the high entry barriers in the Norwegian market suggest that we’re not likely to see a new player launch with a concept that suddenly takes a major market share. But what is more likely—and the evidence suggests that this is happening—is that a growing number of small players are creating niche offerings—from breakfast delivered to the door, to luxury items reserved for a treat at the weekend—that could gradually erode the main players’ dominance across multiple segments and disrupt the power balance in the market.

What does that matter to the large players that between them account for 96 percent of the market in Norway today and have the average Norwegian shopper visiting a store four times a week? Well, the commercial logic is simple. A relatively small decline in overall market share can have substantial impact on profits. Accenture’s analysis shows that a 5 percent loss of market share translates into between 25 percent  - 30 percent reduction in EBIT margin.

Sales growth in physical stores is, once inflation is stripped out, largely stagnant. On the other hand, online growth is expected to surge—with one estimate putting it as growing by 100 times in the next four years. New concepts are emerging all the time, and consumers are avidly taking them up. The younger demographic is particularly keen on online delivery. One report suggests that some 60 percent say that they want to purchase their groceries in this way.

Changing consumer preferences in the digital era have also changed the concept of loyalty. It’s no longer the case that consumers show unwavering commitment to a brand. Their loyalty is now more likely to be given to the experiences they receive from a retailer or service provider. So elements such as personalization, speed and convenience become critical to meeting those new needs. That’s something that nimble new digital entrants have in their DNA, but it’s less easy for large players to acquire those characteristics quickly.

But there are also significant opportunities for the large players to press ahead with their digital strategies. They enjoy several advantages that position them to forge ahead in a multi-channel market—not least of which are their established distribution networks. But to operate successfully across multiple channels, today’s large grocery retailers must become more customer-centric. Building services that interact across all stages of the customer journeys is essential. Customers who shop in at least two channels spend more money, which means rethinking how pricing and profitability is calculated, to reflect the profitability of customers rather than channels. And the key to that profitability will be efficient fulfilment and distribution, driven by supply chain excellence.

With a physical presence across the country and high levels of awareness, the large grocery retailers possess assets that it would be very difficult for a new player to acquire quickly. However, that should not leave room for complacency. With new entrants constantly coming into the market, the time to start moving forward is now. By combining their traditional strengths with the new, customer-centric, capabilities that digital demands, large established retailers have every reason to look forward to prospering in the disrupted market place unfolding before them. But there’s no time to lose.

References:

  1. Accenture analysis: Is your retail supply chain your weakest link?

  2. EY: Nordic Food Study 2015, referenced in Aftenposten 26.08.2015