“No one will buy s̶h̶o̶e̶s̶ groceries online.” — How Picnic is proving the German naysayers wrong — town by town.
TL;DR: The complexity associated with storing, automating and optimizing different food categories at multiple temperatures is what makes the online grocery market so difficult relative to other categories. Doing this at scale and profitably is really hard. Picnic found a model to crack the market and began to disrupt the industry. Co-founder Michiel Muller describes how they do it in an OMR Podcast (link below). Since the disruption will impact our society I want to spread the word and share my notes and thoughts.
2008 Zalando was founded. End of 2014 they IPO’d. It took them another 5 years to convince the Germans that it is very profitable to sell apparel online. Don’t remember? Just read some articles from 2014 and don’t forget to check the comment sections. Zalando is just a prominent example to point out how German retailers and local governments wasted a decade to adapt and change. It took them way too long to realize that most brick-and-mortar stores are going to die. I am not even sure they’re fully aware of the fact that pop-up stores, a few shops from online players (Zalando Outlet, Mr. Spex, etc.) and great concepts like b8ta will not save their beloved “Innenstadt”! And while some are still in denial, the next punch to the gut is already waiting; namely Flaschenpost and Picnic. If you also add Gorillas to the “mix” you have the perfect storm for the big four German grocers and even very popular drugstores like dm. My guess: Ten years from now they will have closed a significant number of their stores and I keep wondering how exactly this will turn out. Factors like work from home, automation, autonomous driving, etc. will influence this trend heavily and one can just guess how all of it will impact UPS/DHL/Hermes & Co, my former colleagues at Aldi, real estate prices, society in general, …
The pandemic and the recent acquisition of Flaschenpost by The Oetker Group hopefully will lead to more awareness among officials. But for me the even more interesting company is Picnic. It is extremely difficult to crack the online grocery market, but Picnic did it. And soon they’ll come to your town and you’ll be a customer. With my own (failed) startup, I was very close to e-food industry and in touch with most of the players which existed back then (around 2015). Everybody was losing money, no one had a convincing product and almost all projects/companies are no longer in existence. Therefore, for me, the OMR podcast with Picnic co-founder Michiel Muller was one of the best podcasts I’ve listened to in 2020. Finally, a team could crack the market and Michiel shares how they did it. It is a great case study and if you know someone who should listen to it (someone in your local Gemeinderat, city planners, your local IHK etc.) please forward the podcast. Change is not only coming to their beloved “Innenstadt”, the “Grüne Wiese” is next in line.
Here the link to the podcast. Jump to minute 4:40 to skip the German introduction to the episode.
By the way: If you are interested in the topic and speak German you should also listen to the conversation/debate between Christoph Werner (CEO at dm) and Alexander Graf from Kassenzone.de. Christoph would probably disagree with lots of what I wrote above and makes some good points.
Some of my notes of the podcast with Michiel Muller (better listen to it instead of keep reading — there is so much more to learn):
#1 Picnic is for everybody: One would guess that Picnic did start off in Berlin, Munich or HH. Instead, they went for second-tier cities like Mönchengladbach which is their fastest growing city. Picnic is not a premium service and not only for the typical early adopters living in Kreuzberg.
#2 The milkman (model) is back: Key to cracking the market seems to be the use of daily delivery slots instead of specific delivery times i.e., they deliver groceries to multiple consumers living in the same community at a specific time on a daily basis. This is highly efficient — they have a customer in almost every street.
#3 A fleet of 1000+ CUSTOM made electric vans: Slim- built (makes it easier to park in second row), side canvas for speed (2 minute delivery time at each stop) and they have a low range (=much cheaper) as they stop in every street anyway.
#4 They don’t outsource: From the tech team to the drivers, Picnic does not outsource anything in order to constantly optimize every little detail rapidly.
#5 The sixth order is decisive: Customers usually stick thereafter. That figure surprised me to be honest.
#6 App only: Customers have their grocery list always with them. Family accounts let families place orders in the same basket. Although it may sound like a no-brainer but if you know the market, you’ll realize that it isn’t.
#7 No VC money: Four wealthy-family funds NPM Capital, De Hoge Dennen, Hoyberg and Finci with a long-term view and vision back the company. Edeka holds a minority stake in Picnic.
#8 Impressive traction: In some cities the share of online groceries sales went up from less than 1% to over 4% in about 4 years. Picnic generated a turnover of 300 million euros in 2019 in the Netherlands and 300,000 customers in 2020 in the Netherlands and Germany
#9 No marketing needed: Picnic has a a customer in every street, their cars are noticed by everyone (imagine ten cars, in one area, rolling in at the same time, every day!) and word of mouth is strong. Long waiting lists in neighboring cities. Some member to member discount coupons and online advertising is the only ‘real’ marketing.
