Karl Munthe-Kaas, co-founder and CEO of Norwegian online supermarket Oda, is adamant that online grocery has the capability to compete with offline discounters on price – if executed in the right way.
Speaking to Siobhan Gehin, Senior Partner, Retail & Consumer at Roland Berger during Day 2 of ShopTalk Europe, Munthe-Kaas said that “If you do online groceries right, and you do it efficiently, it can be more efficient as a value chain than offline – and even offline discounters.”
He added that online grocery has historically been “mainly an upper-middle class phenomenon”, and that “to really penetrate the mass markets, we have to acknowledge that 80% of households do live on budgets.
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“If online is ever to become the infrastructure that we know it has the potential to be, we need to get the price level down to match discounters – so that the home delivery convenience is an added benefit.”
Founded in 2013, Oda is a pureplay online grocer that currently has more than 70% market share of online grocery in Norway, and recently set its sights on expanding overseas. It has spent years refining a supply chain and fulfilment system that lets it compete on price with offline discount supermarkets, and which Munthe-Kaas says would allow online grocery – which in Norway is estimated to have had just 1% penetration prior to the pandemic – to achieve mass market penetration.
Here’s how Munthe-Kaas believes that online grocery can compete with discount supermarkets on price, why he thinks that pureplay online grocers have an advantage over omnichannel grocers, and what Norway’s dominant online grocer has planned for the future.
How to make online grocery competitive on price
Oda was founded by a group of 10 co-founders, seven of whom had a background in technology, and three of whom had a background in operations. “We definitely came from the system side of things,” Munthe-Kaas said – something that helped when creating the unique value chain on which Oda is built (more on this in a moment). The business was originally called Kolonial, which is Norwegian for “corner shop”, and rebranded as Oda in 2021 after raising a round of funding to help it expand internationally.
The rebrand was motivated in part by this international expansion, since the name “Kolonial” has quite different connotations outside of Norway, something that Oda wanted to avoid. Oda’s scope and ambitions in 2022 are also far beyond the humble corner shop: its primary competitors are Norway’s large incumbent supermarkets, and the average value of an order on Oda is 119€.
Scale is important for the value chain that Munthe-Kaas says is the secret to Oda’s success at competing on price with offline discounters. He highlighted three figures that he says are key to enabling a pureplay online grocer like Oda to be competitive: more than 200 UPH (Units Per Hour, referring to the number of items picked per labour hour at a warehouse), more than five DPH (Drops Per Hour, referring to the number of deliveries per hour), and more than 100 euros in average order value. “If you’re able to achieve these numbers, then in fact online grocery can be more efficient than offline discount, which means you can then price it at online discount,” said Munthe-Kaas.