PA’s Erik Fagerlid, food supply chain expert, has been extensively quoted in an article on E24, one of Norway’s leading websites for business and industry. In the article, Erik predicts that a large number of Norway’s grocery stores will die out over the next few years as online grocery shopping increases in popularity.
Erik explains: “Two of the most robust chain stores have web shop pilots ready to roll out […] Nobody wants to make the first move. Similarly, nobody wants to be the one who makes the last move either. The chains are watching each other closely and preparing solutions which will be ready for roll out when something happens.”
Erik goes on to predict that “People will visit the stores less in the future” and says that instead they will order the goods online, then pick them up themselves or have them delivered to their door.
“Imagine how many parking spaces there are between Bjørvika in Oslo and Sandvika in Bærum, and how many people that drive their cars to work in this area […] I also know of several Norwegian petrol station chains that are planning to position themselves as pickup-points,” explains Erik.
Continuing, Erik says: “If you have a warehouse at Alnabru in Oslo, within a one-and-a-half hour drive you can reach everywhere within the triangle of Lillehammer, Grenland and Halden. Half of Norway’s population lives there. That gives favourable conditions for growth.”
Speaking about scale of the change, Erik explains: “Our evaluations indicate that there will be a reduction in the number of grocery stores in Norway within the next five to ten years, from 4,000 to 3,000. These figures are based on our own analyses, and conversations with the trade […] We have quite a few unprofitable grocery stores in Norway. In the large cities, there are places where you can walk almost dryshod through parts of the city just by walking from store to store.”
In the article, Erik explains that some chains may continue to keep stores open, even if they are not profitable:
“Imagine that, for instance, Rema1000 shuts down a store. Then they know that Kiwi will move into the premises before long. That can give an impression of low turnover. This is something they want to avoid, therefore they continue to run the store even if the profit is marginal, or maybe even unprofitable […] In Norway it seems like the chains measure success in number of stores” he says.
Talking about Norwegians’ propensity to do grocery shopping up to four times a week, Erik says:
“We are not thinking through our purchasing behaviour, as it is irrational and expensive. When our teenagers grow up, they will not visit the stores four times a week […] The youth of today will not spend their time on the same number of store visits to buy groceries as their parents do. It is the unprofitable stores in areas with alternatives nearby that will shut down first.”
Erik goes on to reference a survey which shows that consumer loyalty to a grocery chain is 17 per cent higher when web shopping compered to when customers are shopping in a store.
“People today do not think about which store they are shopping from, Rema1000, Kiwi or Coop. Both price level and assortment is quite similar, so people visit the one which is closest […] Imagine on the contrary that you want to try web shopping, and you insert your credit card information at for instance Kiwi – then you are satisfied with your first, second, third and fourth web transaction. You discover that it works. You then continue to shop with Kiwi in the future, you don’t change supplier randomly after that.”