2022: The retail year in review, part 1

The years 2020 & 2021 were extraordinary years with many surprising events. Many discussions revolved around agility and resilience as companies struggled to respond to rapid changes.

This year was supposed to be easier as the pandemic restrictions were finally relaxed. However, everything changed in spring as Russia attacked Ukraine. The war, among other things, had significant influences on Western societies. This also influenced the retail markets.

However, some of the changes this year had been bubbling under already in 2021. In our review of 2021, the changes in the grocery markets started to be visible. Both Kesko and ICA were losing to markets. There also were some question marks about the long-term sustainability of the quick delivery operators.

After last Christmas, we reviewed some expectations for the upcoming year, 2022. Now is a good time to reflect upon those expectations and see how things panned out.

Expectation #1: Amazon advancing in Sweden

Amazon has yet to make significant strides in terms of revenue. However, it has continued to grow. In terms of web traffic, Amazon continued to grow on pace with the Australian Amazon store (as measured by months after the launch).

With the launch of prime in 2021, Amazon shows that it is taking Sweden seriously. In the coming years, Amazon will most probably become one of the biggest retailers in the country. This won't likely happen in 2023, but eventually, retailers will realise how Amazon has grown.

In Australia, Amazon currently has revenue of more than AU$1,75 billion (1,1 billion €). With that level of revenue, Amazon would be one of the biggest non-food retailers in the Nordics.

For more info on Amazon, you can find our “Ten things to know series” on the company here.

Expectation #2: Costco opening in Sweden

The world's third biggest retailer Costco launched in Sweden in 2022. Like Amazon, Costco's launch has yet to generate significant interest in any Nordic country.

The “problem” with Costco is that it is not a traditional retailing company. Therefore only a few retailers consider Costco as their competitor. You can find our review of the new Costco store in Stockholm here: This is America - Costo Arninge, Sweden.

Costco competes directly with very few retailers. Despite relying heavily on food sales, Costco is far from a traditional grocer. Despite selling TVs and other electronic products, Costco has little overlap with electronics retailers.

At the same time, Costco's volumes are so enormous that it competes with almost all retailers. Costco's growth will eventually impact numerous retailers.

Costco has announced plans to open five warehouses in Sweden. That would generate revenues of above one billion € in Sweden alone (the average Costco warehouse sells about 250 M€).

For more info on Costco, you can find our “Ten things to know series” on the company here.

Expectation #3: Quick commerce: where will it end up?

The most significant change from 2021 probably has been the implosion of the quick commerce players. 

The sector increased in 2020 and declined almost as rapidly in 2022. After this year, only a few quick commerce players remain. As Getir is acquiring Gorillas, they and Go Puff remain the only significant players.

In many markets, the gig economy platforms have started to serve the same need as quick commerce, but without the burden of having employees. The gig economy companies often also differentiate from quick commerce with somewhat slower deliveries. Instead of delivery in 10 to 15 minutes, the new norm seems to be around 30 minutes to an hour.

In central Europe, Rohlik operates an interesting concept with a "rather fast" delivery of two hours. This is smart as it caters to the impulsive need of the customer but still enables batching of the orders and, thus, more efficient deliveries.

All in all, the year 2022 has been a difficult one for all online grocery players. Most online grocery pure players that saw valuations rise rapidly during the pandemic have seen declining valuations. For example, during the spring of 2021, Ocado briefly eclipsed Tesco as the most valuable retailer in the UK. Today, Tesco is three times bigger than Ocado. Today Tesco is about three times more valuable than Ocado.

Most dire the situation has been for the quick commerce companies. For them the year 2022 proved fatal.

Expectation #4: Online grocery in Germany

At the start of the year, the German online grocery market seemed to be on the brink of a significant change. As change is often slower than initially thought, online in Germany hasn’t grown as quickly as one might think.

Of the new pure-play online grocers entering Germany, Picnic reported robust growth. Knuspr also had a positive launch with 35 M€ in revenues. The third exciting challenger, Oda, has used 2022 to build its warehouse. The launch will happen in early 2023.

Next year and especially the coming years will be interesting for the online channel in Germany. However, one should have manageable expectations for the year 2023. It is still time to build the foundation for these three challengers.

The expectations outlined a year ago have yet to materialise into significant changes. However, 2022 saw massive changes in the competitive dynamics between retailers—more of that in the review of part two of the year.