Danish discounter Netto has launched ‘Fillop’, an ambient grocery online subscription service, following successful testing over the last nine months.
How does the service work?
- Shoppers place their first order, which is then regularly delivered ‘every 14 days, every month or every other month’. Future orders can be amended on a regular basis, while users are free to ‘pause, change frequency, postpone a delivery, or unsubscribe completely’.
- Free delivery on orders over DKK 199 (USD 30) For orders under this threshold, delivery costs DKK 49 (USD $7.47)
- Orders are placed via the Fillop app, rather than on a website
Source: Salling Group, Apple
Targeting 'slightly dull basic’ items, those not requiring refrigeration
Netto’s launch page for the service stated, ‘Let Fillop take care of the...toilet paper, washing powder, canned tomatoes and other heavy and slightly dull basic items for your home. Then you can spend more time picking out the ripe avocado, the tender steak, the Italian pesto and other good spot items that you appreciate’.
Meanwhile, Fillop’s own website highlighted ‘The whole point of Fillop is that we deliver the basic items you forget to buy in everyday life. That's why we automatically deliver the Fillop box at regular intervals. Then you don't have to think about it anymore and you make sure you never run out’.
Benefit from Salling Group’s wider range and no need to be at home for delivery
As well as offering the entire Netto range, user can also benefit from purchasing select products that are sold in Salling Group’s other formats. Orders are fulfilled by PostNord, with users able to advise where to deliver the box if they aren’t at home.
Netto has also promoted the value proposition of the service, with products price matched to Netto’s own stores. An advertising banner highlights price comparison versus market leading retailers, pure play retailers and discounter REMA 1000.
So what do we think?
This new service from Netto aims to remove the need for regular purchase of basic, staple items, giving customers more time to spend shopping for fresh products, as well as Netto’s own SPOT (when it’s gone, it’s gone offers). Netto’s SPOT offers are a key footfall driver to its stores and so the fact that these are not available online should still encourage shoppers to visit them, while hopefully purchasing other fresh goods, such as ‘the ripe avocado, the tender steak’.
Removing the need to refrigerate orders helps Netto keep costs down, while partnering with PostNord maximises delivery reach across the country.
The subscription nature of the service should drive regular revenue and offers shoppers added convenience too.
Being part of the wider Salling Group has other benefits. Here, Netto is set to benefit from Salling Group’s wider experience and expertise in the online channel, while users of the new service can also choose from select Salling Group products. This widens the range available, having the potential to drive revenue further.
The app-only nature of the service taps into trends towards digitalisation, with over 90% smartphone penetration in Denmark. Also, according to Deloitte, 25% of people across the Nordic region (Denmark, Sweden, Norway & Finland) preferred to use their smartphone to make an online purchase in 2019. This has more than doubled from 10% in 2017. The same survey also showed that 76% of those aged between 25 and 34 and 69% of those aged between 35 and 44 used their smartphone to make an online purchase in 2019. This suggests the development of the Fillop app is especially relevant for Netto's target audience of families with children.
Other app-only grocery operators in Europe have driven significant revenue growth. For example, Picnic, which operates in the Netherlands and Germany tripled its turnover in 2018, although still reported a net loss. It has since raised €250m to drive further growth through a robotic fulfilment centre.
While this is an exciting development for Netto's future growth ambitions, there will likely be profitability challenges. The Danish online grocery market has also become increasingly competitive, with Salling Group and Coop Danmark offering their own online grocery services, while Nemlig.com's solution is increasingly sophisticated. From a discounter perspective, Lidl currently has a non-food and wine click and collect service in the market, while REMA 1000 offers a community-focused home delivery service.
Although Netto's service was in development before the Coronavirus (COVID-19) pandemic, IGD research expects that ‘elevated online grocery penetration’ will be one of the ten ways that the pandemic will change grocery retail. While Denmark was one the first European countries to relax some of its lockdown measures, this latest innovation from Netto is especially timely given social distancing.
Meanwhile, when it comes to the discount channel specifically, IGD research has highlighted ‘the need for a stronger ecommerce proposition’ as one of the ten hypotheses for the future. As with this innovation, we expect retailers to accelerate grocery ecommerce trials and investment.
Looking for more insight?
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• Post-COVID-19: how the pandemic will change grocery retail
• Post-coronavirus (COVID-19): impact on discount trends and areas to watch
• Post-coronavirus (COVID-19): how it will impact online in 2020