Price war could usher in “new era” in grocery industry

Online grocery store Nemlig.com is aggressively taking on supermarket chain Netto – will consumers be the real victors?

Nov 5, 2013

Consumers may soon reap the benefits of a price war on groceries, and best of all they won't even have to leave their homes.

Online discount supermarket Nemlig.com has launched an aggressive attempt at securing more of the grocery market by selling more than 1,200 goods for prices similar to the most successful discount supermarket Netto.

The founder of Nemlig.com, Stefan Plenge, said he expects to double his sales next year by matching prices with Netto.

"We have decided to expand business with a new and complete discount selection covering all the essential grocery goods," Plenge told Berlingske Business. "Now Danes can get their groceries brought directly to their door for the same prices as at Netto."

It is the first time ever that an online store has directly targeted an established Danish discount chain.

Nemlig's delivery charge is between 19 and 29 kroner, which the company contends is less than what many costumers spend on driving to and from the stores. So far the service is only available in selected parts of Zealand like Copenhagen, Helsingør, Roskilde and Køge.

First surplus since 2010
Since Plenge founded Nemlig.com in 2010, the store has grown from him being the only worker to now employing 250 people, which makes it the fastest growing online supermarket in Denmark.

While he has not divulged Nemlig's revenues, Berlingske Business estimates that it will be near 500 million kroner this year and Plenge revealed that he recently generated a surplus for the first time.

"We have reached a break-even point and we have found a business model that works," he said. "That is the reason why are going into this offensive against the discount stores."

A new era in discount shopping
When price joins convenience as an advantage of shopping for groceries online, it could mean that a new era in shopping is approaching, said Mogens Bjerre, a marketing professor at the Copenhagen Business School.

"It is a direct attack on a sector that previously has been able to stand alone with their low prices," Bjerre told P1 Morgen radio.

According to Bjerre, Nemlig's success depends on whether or not it is able to attract the type of consumers who tend to shop in discount chains.

"If they can attract the price-sensitive customers, that will be about a quarter of the population, and that is when things get moving. Then we will see a new era."

Bjerre said that he is positive that Nemlig will be able to shake things up on the established discount market, which is already under pressure.

Will Netto strike back?
Claus Juel-Jensen, the managing director, has not commented on Nemlig's strategy, but Mads Hvidtved Grand, the press coordinator at Dansk Supermarked, the company that owns Netto, said that it is closely observing how the online market develops.

According to Grand, it is possible that Netto will open up for a similar online sales strategy in response.

"We can't leave out the option that Netto will come up with a business strategy in response to this campaign," he told Berlingske Business.