This increase over the past year is a change in the markets that otherwise might have taken 2-3 years. It means that several development projects such as new warehouses, automation and efficiency projects are needed now. As demand has increased at a much faster pace, we need these solutions earlier than expected. Moreover, we have lost time, when we actively could have focused on developing our daily business. Now it is vital for MatHem to ensure that we have the resources to work with this in the long term, focus on efficiency and not only on day-to-day business. It has previously been a challenge to understand how to prioritise between short- and long term.
JT: What do you need to continue expanding and growing? What are the bottlenecks? Is it investments in facilities, machinery and systems, personnel or IT?
JL: The greatest bottleneck is the logistics facilities. It takes time to modify existing facilities and build new ones. We must also configure and install automation systems, which have long lead times. Around 600-700 new staff members have been hired during the past year, which also requires time and resources. From an efficiency perspective, it is challenging, as it take times for new employees to get into full work speed.
The availability of delivery vehicles has been a challenge, as we found out when trying to order refrigerating trucks from Italy and Germany last year, when production was temporarily shut down. For some areas, it is easy to find temporary solutions, while it is more difficult with the logistics and automation solutions.
JT: How do you see the future roles for incumbent store-based food retailers and the new online players? Advantages and disadvantages for each? What will be needed to be competitive and viable in tomorrow’s groceries marketplace?
JL: In ten years, I think the competitive landscape will have changed and more players will have entered the market compared with today. In comparison to other European countries, Sweden is unique, as we only have about four major players that dominate the market today. Generally, I think it is good if the number of players in the market increases. It will benefit the end customer who gets more choices.
MatHem will be at the forefront in terms of e-commerce. The other players will also succeed with mixed models, where some will probably continue to focus on physical stores. Everyone will find their own niche. Of course, our ambition is to grow and take market shares, which means that someone else would need to lose share. However, the biggest players today have too large a share of the market in order for it to be healthy for the end customer. There is no doubt that online grocery retail will continue to grow and take shares from the physical retail. We are well positioned to pursue those opportunities.
The incumbents enjoy great benefits in purchasing power owing to their size. But their physical distribution networks are not beneficial for what tomorrow's marketplace will look like, and I am not envious of needing to manage that. A disadvantage for these traditional players is the conflict in deciding whether to optimise the store-based offering or the online offering. It is always a trade-off and it creates friction internally. I also believe that it is challenging for incumbents to change and adapt at the same pace at which change happens. The organisational structure can be an obstacle, where there often is a built-in inertia. I would therefore say that their largest benefit is the purchasing power.
JT: Is there a sustainability challenge for online food retail? Are emissions from home deliveries an issue? If we decide to get everything delivered at home instead of physical shopping, will the emissions increase not be a problem? What is your view on this?
JL: I would say it is the opposite. Our data show that it is more efficient that one vehicle from MatHem delivers food to 30-40 families, instead of all of these families doing the grocery shopping themselves. In addition, Mathem strives to provide a wide assortment, allowing the customer to do several errands at the same time. Synergies can thus be achieved, and one does not need to travel to different areas. We also work on how to further reduce emissions and use fossil-free fuel or electric vehicles. There is still much to improve in those areas. In e-commerce, we purchase from the supplier who delivers to our warehouse, from where it is ultimately distributed to the end customer. In offline retail, the supplier delivers to the central warehouse, which delivers to the physical stores from where end customers pick up goods and bring them home themselves. That is an additional transportation step, which creates emissions. With shorter lead times and fewer storage hubs, we can drive better sustainably from the product side.
There are of course other aspects as well. Online is a sustainable way to shop, as it supports the customer in making smart choices. It is easy to compare the products, easy to get access to information and the customer can make smart choices, both personally and for the environment. That is also an interesting aspect, regarding what power we can give the customers and support them in the sustainability journey. It is a strong focus for us: both how we can support customers, how we act and what requirements we should put on our suppliers. For instance, we put requirements on package solutions, and it is important for us to take responsibility, partly since our owners expect that, but also because our customers want to see this development. We do what we can, and as an example, we will have Stockholm's largest solar panel park on the roof of our new warehouse opening in 2022, that supplies 50% of the electricity it needs.
One critical area of focus for us now is data. We are investigating AI and machine learning to optimise processes and to customise customer experiences in apps and on the web. This offers the potential for better margins, improved customer experiences and also better sustainability. If we can optimise the distribution routes for our trucks and inform customers so they are able to choose sustainable delivery time slots, we do not need to drive the same distances as now. It will become a greener alternative. I believe this area will be a crucial factor for determining who succeeds and who does not succeed in this industry.