Food delivery services have a hard time in Germany

Rossmann ends online cooperation with Amazon

There were two reports last week that caused a stir. On the one hand, Rossmann announced his intention to end the cooperation with Amazon. For about a year now, the drugstore chain has been selling around 5000 selected articles via the Amazon delivery service Prime Now. On the other hand, EDEKA has now announced that it intends to remove Red Bull and Mars products from its range in order to obtain more favorable conditions in the long term.

Even though the two headlines may not have much to do with each other at first glance, they both show that not everyone in Germany is yet ready for e-commerce with food.

Even Amazon does not make it beyond the borders of the test cities Berlin, Hamburg and Munich with its delivery services Prime Now and Amazon Fresh. And there are only a few indications that this will change in the near future. “The cooperation gives us an insight into how a prompt delivery service is accepted by our customers in Berlin” said Raoul Rossmann, Rossmann Managing Director. A delivery service for shampoos and changing pads is therefore not very much in demand. And Rossmann is not the only company that is withdrawing from the partnership with Amazon because the costs far exceed the revenue.

It has been known for some time that not every country reacts immediately to online food retailing. Although it is a very successful concept in France to put together shopping baskets online and have them delivered by delivery service, tests of this kind have failed in Germany. Amazon is also far more successful in the USA than in Germany.

There are two main reasons for this. First, Germany has a much closer branch network than the USA and France. Often the nearest supermarket is so close that the advantage of delivery to the front door is reduced to a minimum. Secondly, discounters such as Aldi or Lidl ensure that food prices remain low. In order to keep up, the online trade must also calculate differently and recover the low prices through high delivery costs.

As a result, the business grows only slowly. Although the number of online food orders has risen recently, these are usually only individual purchases, such as a certain type of honey, which is not available in the store. Weekend shopping almost never takes place online.

For traders like Amazon or the Dutch start-up Picnic it is therefore difficult to gain a foothold in the market. It is also not worth it for them to compete with German retailers such as Aldi, Lidl, REWE and co. as it is difficult to get their prices.

But while Rossmann can easily detach themselves from Amazon, Mars, Red-Bull and EDEKA have a completely different story to tell. EDEKA’s behavior towards its central suppliers shows that the company has no fear of losing suppliers to online competitors.