The second smallest chain entered the fight for the Czech online food market

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The segmentation of the online grocery market with home delivery has begun on a larger scale than before. A number of classic chains are rather modestly testing the physics of the online world in a corner. Billa entered the scene much more dynamically and has the power to shake up the entire market.

Internet rivals will compete for customers from large chains – perhaps primarily from hypermarkets, from traditional stores, but also among themselves. Players expand more into regions.

According to Euromonitor’s estimate, the Czech online food market will grow by 56 percent by 2027. Last year, online “supermarkets”, which also include e-shops that offer food as a secondary assortment, took in a total of 33 billion crowns. The three biggest players, Rohlík.cz, Košík.cz and Tesco, came to 16 billion in the Czech market. Rohrík, with sales of around 11 billion, leads the way.

Part of the customers will move to the Internet from the traditional market, which is dominated by multinational chains such as Lidl, Kaufland, Tesco and Albert. This market represented 517 billion crowns last year.

“Customers are also pouring into the online environment from hypermarkets. They make big purchases online,” says Petr Toupal, head of the Billa e-commerce chain. This merchant, who recently started delivering purchases to homes in Prague, Brno and the surrounding areas of these cities, sees differences in customer spending in physical and online stores: On average, people spend over 1,000 crowns in an e-shop, but 300 in a traditional store.

The largest grocery e-shops

The data shows that hypermarkets are the biggest losers among brick-and-mortar stores of large chains. Analyst company NielsenIQ said in its report last year that sales in hypermarkets fell by six percent in real terms, while single discounters grew by two percent. Discount stores, i.e. Lidl and Penny Market in particular, did well because they were able to curb high inflation more than their competitors.

Internet retailers in regions where they have been expanding more recently after occupying large regional cities report a growing popularity of bulk purchases. In Košík, the year-on-year share of purchases above 2,000 crowns increased by 5% and now accounts for three quarters of orders. Rohlík.cz reports 30% higher interest in the regions.

Cart counters large purchases with volume discounts it learned from Makro. Both companies have been working together for a long time. Thanks to the use of wholesale warehouses, the basket expanded into the regions. The property of both companies is linked by the billionaire duo Daniel Křetínský and Patrik Tkáč, who control Košík.cz and are the largest shareholders in the German parent company Makra Metro AG.

The online grocery market is heating up. It is felt not only by traditional chains, but also by online sellers. Over the years, three main rivals have emerged on the market: Rohlík.cz, Košík.cz and Tesco. The Billa chain has ambitions to change the established order. Naostro started six months ago in Prague, Brno and the surroundings of these cities, and by the end of 2025 it wants to overtake Tesco and Košík and become the number two market after Rohlík.

For all players, the service is primarily used most by young families. The trigger for buying groceries online is usually the birth of a child.

Other players from traditional brick-and-mortar chains also have e-shops, but no one rushes into the digital world as hungrily as Billa. Within a short period of time, she built two greenfield warehouses in Prague and Brno, developed a website, a mobile application and a logistics and warehouse management system on her own. It wants to cover most of the Czech Republic by the end of 2025 and is therefore investing massively. The e-commerce team has sixty regular employees and is hiring another 60-80 externs. With the expansion, not only people, but also warehouses should increase.

“By the end of next year, we would like to cover all regional cities, larger cities and regional cities with the service, a total of 80% of the territory,” describes Toupal’s ambition. “For all players, the service is primarily used most by young families. The trigger for buying food online is usually the birth of a child, because it is not entirely easy for parents to pack up a child and take them to the supermarket,” he says, adding that he also sees great interest among older customers who have experience with the brand’s brick-and-mortar stores.

The e-shop started half a year ago by importing from Prague and Brno. In April this year, he added Mělník, Kralupy, Kladno, Vyškov, Rousínov and adjacent parts of Brno. In June, it will be the turn of Kolín, Poděbrady, Beroun or Dobříš, and at the end of the year, for example, Hradec Králové or Pardubice.

“The impetus for us came during the pandemic, when we saw that the demand for online is great and is not decreasing. Although e-commerce decreased slightly last year, food grew,” added Toupal.

Other chains chose a more cautious approach. Albert started in 2021 in Moravia and only this year will launch the service in the very competitive Prague. So far, Penny only delivers in Pilsen. Globus does not deliver to homes at all, but at two hypermarkets in Ostrava and Zličín, it made it possible to pick up purchases from the e-shop. Lidl and Kaufland have completely avoided online groceries. The first has a very successful e-shop with consumer goods, the second launched a marketplace.

Four main competitors are emerging. “Unattainable” Rohlík, who reports that the Czech and Hungarian markets are already profitable and this year the entire Rohlik Group should be profitable, including activities in other countries such as Germany and Austria. It expects sales at the level of one billion euros.

But it is also expanding in the Czech Republic, where it used to cover mainly larger cities. Last year, it increased the delivery zone by 25%, built a new warehouse in Ostrava and added districts such as Bruntál, Frýdek-Místek, Nový Jičín, Žďár nad Sázavou, and this year, for example, Písek, Strakonice, Tábor and Ústí nad Orlicí. It covers 86% of cities and towns. “Our ultimate goal is to be able to offer the service to every Czech household,” says spokeswoman Denisa Morgensternová.

The cart has been on the market for eight years, but it still hasn’t turned a profit. Last year, the loss of the e-shop reached hundreds of millions of crowns. Tesco does not publish the results for online, but its turnover may be similar to Košík, around three billion.

Everyone in the market realizes that Rohlík is miles ahead of the rest. But the plan to catch up with Košík in two years is also ambitious. Hundreds of orders left Billy every day in September, and now there are over a thousand, according to the company. There are probably many more in the basket. “Currently, we are dealing with lower hundreds of thousands of orders per month, and their number increased by roughly a quarter year-on-year. Košík was the fastest growing online supermarket last year,” explained the head of Košík, Ivan Utěšil.

The advantage of Billy is the background of 264 stores, which will also serve as delivery ports in places with worse access from warehouses, and the relatively good image of the chain among customers, which also offers products from local farmers. Tesco, which was the first to launch an e-shop in 2012, also uses its hypermarkets as logistics ports.

The company’s expansion plans target smaller cities and towns. On the e-shops map, there are still plenty of deaf places with agglomerations of tens of thousands of inhabitants, where nobody really wanted to go yet. The basket is going to 25 new municipalities this year, the coverage will increase by 5% to 70% of households. For example, they will head to Karviná, Česká Lípa, Písek or Příbram, which have 60,000 inhabitants. So far, they are neglecting the Highlands, but it is also said to be planned soon.

New locations are also being prepared by Tesco, which have not yet delivered to a number of cities with tens of thousands of inhabitants, such as Znojmo, Litomyšl, Klatovy or a large part of Most. It currently covers approximately 66% of the Czech population. However, the British chain did not specify its specific plans. They claim online shopping is growing and customers are returning more often.

“This year we plan to expand and improve the quality of our online services. At the same time, we plan to add other areas where we will take our purchases,” spokeswoman Iva Pavlousková responded.

Tesco embarked on a sharper competitive battle with a three-month campaign for free delivery in Brno, Ostrava and the surrounding area. In September, when it launched, Billa began to attract customers for cheaper transport than the competition. Initially, it offered a free service for purchases over 500 crowns, now it is 700. However, it is a temporary benefit, which is intended to initially bring new customers to the store. In the long run, free shipping is not at all economically efficient for companies.