Can the magic continue for these giant German discount grocers while still shunning the Internet? Both companies are sticking with their bets that avoiding the online grocery space in favor of lowering costs while boosting quality in stores represent the best chances for long-term profitable growth in an industry with razor-thin margins.
It’s an interesting argument, especially since the companies’ own data show consumers increasingly purchasing groceries online. They don’t argue against that consumer trend; rather they dispute whether any of their competitors can make money from online operations. The theory is that spending lavishly to build up online operations where margins (0.5%) are much lower than in-store (3%) is a dangerous gambit. The fear is that those new sales are cannibalizing old ones but while replacing them with much lower profits.