Picnic, the Dutch online grocery retailer founded in 2015,has developed a fast-growing, low-cost business model that is different fromvirtually all other grocery delivery services operating today. Two things setit apart. One, Picnic runs a regular delivery route instead of using on-demanddelivery, and two, Picnic prices for the mass market – not the premium market. Thesynergy between these two things has propelled its rapid growth and driven profitable sales.

The cornerstone of the Picnic model is a system of regular deliveryroutes. The structural cost advantage that comes from using this regular “busroute” model instead of the on-demand “taxi model” allows it to capture majorsavings. In turn, these savings allow Picnic to offer free delivery and a more affordable pricepoint which expands its customer pool.

Picnic then uses its expanding customer base to growprofitability: It builds waiting lists of interested consumers and adds routesonly when there are enough customers to make the new route profitable. Consumersreceive a small gift for each week they wait on the list, and the current listis reported to have several thousand people on it.

The net result is that Picnic has grown rapidly and isestimated to have gained 10% of Holland’s online market in just three yearswhile operating in just a few communities. (Albert Heijn had 50% and Jumbo had30% in late 2018.) It has also expanded into several markets in Northern Germany as of mid 2018.

BMC POV

Picnic is doing a lot of things right and it shows in boththeir growth and profitability. At thetop of the list is its positioning as a mass market delivery service – it hasavoided premium pricing that would otherwise narrow its appeal.

The big advantage of this positioning is that it attractsenough consumer interest so that Picnic has long waiting lists which give themvisibility into the demand they can expect from a new route before they open it.With this foresight, Picnic can almost ensure the profitability of new routes,and this reinforces the cornerstone of its business model.

Picnic can price for the mass market because of the savings,and these can serve as ideas for other online retailers looking to lower costs.

• The most important source of savings is that Picnicruns only regular routes with predictable sales; they don’t assume the highercost of delivering on demand.
• The other big source of savings is that Picnicconcentrates the assembly of orders in a small number of locations which ismade possible because orders must be placed by 10 pm the day before delivery. Thenthey use a two-step distribution process to get the orders to the home. Thiscentralization gives them the ability to:
  • More intensely manage the efficiency of buildingthe orders.
  • Buy perishable products only after they know acustomer has ordered them.

We’re aware of only a couple of online grocery retailers inthe world that have achieved profitability with delivery – but the fact that thisIS happening serves as an example that it can be done and will continue tospark innovations.

Thanks to Håkan Bengtsson for the sending this article toThe Lookout.

Photo credit: Picnic

For a look into their operations, check out the video below and read this www.supermarektblog.com interview with Picnic Co-founder Michiel Muller.

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