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Online grocery shopping hardly impacts physical supermarkets

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People are increasingly shopping for groceries online. Last year we ordered products worth 1.4 billion euros online. This amounts to a 3.6 percent share of total supermarket turnover. We expect this market share to rise to 15 percent in 2025. Yet, this substantial growth is not a threat to the physical supermarket. The population is expected to increase and the supermarket spending per person will grow. This means that there’s even room for more supermarkets in growth regions in the country. 

Supermarket landscape keeps expanding
There are now 6,338 supermarkets in the country, with more being added all the time. Last year saw a new record, with 193 opening. As a result, Dutch supermarkets’ total retail area has grown substantially, to almost 4.7 million square meters. A seventh of all retail space in the Netherlands is now a supermarket. Nevertheless, expressed in square meters per inhabitant (0.27) this is still less than in Germany (0.42) or Denmark (0.42). The Dutch level is more in line with the UK (0.24) and Poland (0.26). Viewed this way, our supermarket sector does not seem that large.

Total turnover is also growing. In 2018, it reached 38.7 billion euros, up 3.5% on the previous year. According to Statistics Netherlands, this makes supermarkets one of the country’s best performing retail types. This year promises to be another good one, with an expected total supermarket turnover in 2019 over 40 billion euros.

Traditional supermarkets dominate online
Currently, three out of ten Dutch people sometimes buy their groceries online. In 2018 the market share online increased from 2.9 percent to 3.6 percent share of total supermarket turnover. That may seem like limited progress, but is a growth of 30 percent in one year. Albert Heijn controls almost half of the online groceries market and is the largest supermarket in this domain as well. Jumbo follows with approximately 20 percent. Traditional chains thus dominate online sales.

Hardly any online impact on physical supermarkets
We expect online’s market share to rise to 15 percent in 2025. This does not pose a direct threat to the physical supermarket, as is the case for the fashion industry, for example. This is because the population is increasing and we forecast that supermarket spending per person will grow from about 2,300 euros a year now to more than 2,500 euros. As a result, total turnover in the physical stores will stabilize at around 38 billion euros per year.

At the national level, therefore, online’s impact on physical stores will be limited. But in regions where the population is falling or stable, a negative effect can be expected. Fewer mouths to feed and more online spending will mean less need for supermarket space in these parts of the country. The reverse is true in growth regions, where there is room for more supermarkets.

Supermarkets: the stable investment
This stability of the supermarket sector is one of the reasons why national and international investors are increasingly interested in supermarkets. Long leases guarantee a stable rental income over an extended period. Many supermarkets are remarkably stable. Of those operating fifteen years ago, six out of ten are still open on the same site. This amounts to an extremely low rate of attrition: slightly less than 3 percent a year. Moreover, supermarkets are one of the few retail investment categories the Dutch banks are prepared to finance.

Investors are interested mainly in stand-alone supermarkets and in local shopping centers with a minimum of 60 percent occupancy by a supermarket. As a result, total investments in supermarkets in the Netherlands rose by 20 percent in 2018 to a record high of almost 309 million euros. The expectation is that this volume will continue to increase. Their low rate of attrition, relatively modest area per consumer, and resilience to the impact of online shopping make supermarkets the most stable element in the Dutch retail landscape for investors. Not only now, but also for the future.
 

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Martijn Pustjens

Senior Consultant

Amsterdam

I started as a research consultant at Colliers in 2019. The research team is focused on the internal support of the various business lines in order to let them function as well as possible. In addition, we focus on external publications. With the pulbications we try to increase our brand awareness in the Netherlands and to be the expert on the future of real estate. 

Before Colliers I worked at The Class of 2020, the leading thinktank on student living in Europe, where I headed the research department.  Before that, I worked as a researcher at Savills, and before that at the real estate department of the Radboud University as a policy advisor.

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Alexandra Rosian

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Alexandra has over 12 years experience in real estate with a focus on retail. She joined the Capital Markets team at Colliers in February 2017 and created the Retail Capital Markets team. Today, the team successfully operates in all retail investment segments, from high-street assets to convenience centers and full-fledged shopping centers.

Previously, Alexandra spent 7 years at Unibail-Rodamco-Westfield, responsible for pan-European valuations and afterwards for asset management of office and shopping centre portfolios in The Netherlands. She also spent 1 year at EDGE (formerly OVG), developer of the world's most sustainable office building.

After her MBA, Alexandra worked for the first 5 years in finance in a start-up environment, before finding her passion in real estate since 2008.

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