March 4, 2014

Rewe arms for Amazon food delivery challenge

Alain Caparros, Rewe CEO (photo: Rewe Group)
Upping the ante for food online delivery: Rewe CEO Alain Caparros
Only days ago, Germany’s largest newspaper claimed that Amazon.com intends to launch a food delivery service here as from September. Adding fuel to the fire, our own publication reports that Rewe CEO Alain Caparros is looking for around 200 staff to man a new e-commerce project. Lebensmittel Zeitung also claims to have knowledge of an internal company document dating back to the beginning of this year in which Caparros warns that the US online giant could soon be starting in this country.

With his usual rhetorical flair, the eloquent French manager is also believed to have implored Rewe’s independent retailers to embrace the internet or read their name on a tombstone.

Under the project name "Rewe Digital" Caparros allegedly wishes to forge a uniform internet strategy for all relevant international operations and to build a national online delivery service. The latter would be meshed with the German food retail giant's physical store base and local independent members.


The head-hunters are out

Personnel recruitment agencies are already said to be approaching relevant sales, purchasing, marketing, IT, financial and administrative staff at Rewe competitors.

The new online unit will apparently not be situated at Rewe head-office in Cologne in order to give a start-up feel to the new organisation. This is surely to the good, given the suffocatingly hierarchical culture at most German bricks & mortar retailers and the fundamentally irreverent nature of your average young creative-techie type.

Rewe has already recruited Jean-Jacques van Oosten as Chief Digital Officer at the end of 2013. And two other important appointments followed earlier this year: Former A.T. Kearny consultant, Jens Rühle, now heads e-commerce strategy, and former AutoScout24-manager Robert Zores is the new CTO.

To date, Rewe’s click & collect viz. food online delivery activities in nine German conurbations have hardly got off the ground. Lebensmittel Zeitung estimates that its online shops still post annual revenues totalling less than €10m per year. Estimated capex of around €10m is also hardly likely to stop Amazon.com entering the market, if the Americans so choose.


Bugbear Amazon

So are the Yanks going to deliver food in Germany as Bild-Zeitung suggests? On the other side of the Pond, AmazonFresh extended its six-year home delivery experiment in Seattle to Los Angeles and San Francisco last year. The company is also said to be on the verge of entering New York and to be looking at 20 further national and international points of entry.

None of this, however, means that AmazonFresh is making any money, and there are even rumours in the US trade that the online giant doesn’t even own its bright-green delivery fleet which has already become a standard fixture in hometown Seattle.

Admittedly, the company has recently introduced its “AmazonPrime” membership fee model in California allowing it to mix food deliveries with more lucrative non-food ones. But, despite soaring annual group revenues and a 220-per-cent surge in the share price since 2008, CEO Jeff Bezos still needs to prove that he can make sustainable profits with AmazonFresh.

Meanwhile, in the UK, Amazon has to show that its ambient food delivery service can be extended to include a fresh produce and chilled food offer capable of wooing consumers used to the likes of Waitrose.


German online marathon

Here in Germany, Allyouneed.com boss Jens Drubel, who sees his online supermarket as a “creative disrupter” within retailing, doesn’t seem at all worried about Amazon sweeping in his own backyard: “We can only win, if other players enter the German market because all of us are faced with the same problem that too few local consumers order food online.” As pure online players have only succeeded in obtaining a paltry 0.8 per-cent share in German food retailing to date, the man surely has a point.

Professor Gerrit Heinemann at the E-Web Research Center of Niederrhein University also believes that “no-one needs to fear Amazon in the short- to medium-term”. He points out that the Americans have tried food online delivery here before only to withdraw from the segment gradually because it didn’t pay.

Heinemann goes on to mention that store densities in Germany, where you have a hard discounter on virtually every street corner, are considerably higher than in the US or UK. As he says, AmazonFresh would need to invest heavily in fresh produce and chilled/frozen food logistics.

So why is the German trade in such a tizzy at the mere mention of Amazon? Clearly, the name has already created considerable brand awareness among local consumers. And, theoretically, nothing is stopping the American colossus combining food with its existing non-food offer.

Presumably, Amazon would first look for a German partner in the same way that it co-operates with UPS, FedEx, and the U.S. Mail in the States. Perhaps the most logical partner would be Deutsche Post subsidiary DHL, which in turn owns Allyouneed.com. Meanwhile, what game in all this does Caparros intend to play?


Related article in German:
Lebensmittel Zeitung, Nr. 9, 28.02.2014, von Jan Mende, Manuela Ohs & Annette C. Müller 


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