Netpris - online supermarket
The Scandinavian grocery market is a 60 billion EUR market, which has not yet been digitalized and disrupted. Netpris is an online shop that provides the lowest prices on well-known grocery brands delivered directly to the consumer’s door.
Netpris, based in Flensburg, is a subsidiary fully owned by Online Grænsehandel Group A/S and was founded about three years ago as an online border shop. The company that began by selling traditional border products, has over the years expanded its number of products and will in the future be offering an even larger assortment of well-known products.
Foreigners typically buy products in Germany due to the significantly lower prices compared to most other European countries, because the VAT (sales tax) on foodstuff is only 7%.
Consumers experience wildly different prices on identical branded goods across Europe and in some cases the difference is up to 130%. Price differences are not only caused by structural features such as VAT, fees on product segments, and consumer habits, but is also influenced by the competitive situation on the producer and retail levels. It is often considered too expensive for companies to execute business in small countries.
In October 11, 2013 the Danish tax authorities approved Netpris’ request to sell goods to the Danish market with local German VAT, if the consumers subsequently organize the transportation themselves. For the customers’ convenience, Netpris displays prices for distribution through a collaboration with Shippii.
Shippii is a marketplace that offers a variety of distribution services to benefit all the consumer’s needs, such as large or small volume shipments, same day delivery, etc. The shipping marketplace and distribution gateway Shippii will leverage existing resources enabling distribution to all of Europe. Netpris is neither engaged in nor have a commercial relationship with Shippii.
The European Commission is continuously focusing on developing the European Single Market that ensures the free movement of Goods, however the progress towards price convergence is slow. Netpris wants to fill that gap, and thinks that products should be priced equally and fairly across geographies.
So in essence, the European grocery market is unequal, too expensive, and highly inefficient due to the retailers.
The market has developed a great deal since Netpris was introduced:
Distribution costs are continuously dropping because more consumers choose to shop online
Though cost prices on goods are going down, this remains invisible to the consumers on the inefficient Scandinavian market
The well-known brand assortments are decreasing
Consumers don’t want to spend time buying “low” involvement products
Consumers want value for money and fair pricing
Online consumer behavior
There are two types of shopping purposes:
- To stock-up:
- Pre-planned, time-consuming, burdensome
- No need for physical inspection
- Stable composition and delayed consumption
- To top-up:
- Spur of the moment, quick and occasionally entertaining
- A certain degree of physical inspection needed
- Varying composition and immediate consumption
Stock-up and price-sensitive categories are usually best poised for e-commerce success.
Netpris aims to sell stock-up products to consumers at low prices with high quality service. Consumers should not spend their most valued resource, time, to go to a retailer to buy overpriced goods.
Netpris targets the grocery category that is most suitable for e-commerce, with a strategy of:
- Not owning any physical shops or inventory holdings through collaborations with several retailers and wholesalers,
- No distribution costs because the customers pay for the costs through Shippii, and
- Utilizing the VAT structure in Europe
While emphasizing equal offerings for all (same branded assortment for all customers regardless of origin in Europe), we also believe customers value their time, and that they don’t want to waste it on low involvement products while they could be doing something more purposeful. The internet and e-commerce allows them to do that.
Our business & market situation
Netpris started delivering to consumers in 2013. Since then, we have secured a solid market share in our home markets and we are now ready to move to the next level. We have experienced significant traction right from the beginning, and we can present excellent development in:
- Growth from 2013-2015: 148% annual revenue growth
- Conversion: Average conversion rate of 1.98%
- Basket size: Average basket size of EUR 148 (from EUR 100 to currently EUR 200)
- Loyalty: 65% of our customers are re-buying customers
The online revolution has transformed the way consumers shop. Consumers now routinely buy digitized items such as music, books and other media online. Non-digitized items like apparel, footwear and electronics are also experiencing a growing online penetration.
Groceries is one of the segments with the lowest levels of online penetration, but it is the second fastest growing category in the USA. According to a Bain research of 2015, the penetration of e-commerce is expected to form three trends that will continue in the future and reshape the retail landscape:
- Continued growth of everyday value
- Big box buying
- Continued e-commerce growth.
Features that enables e-commerce:
- Steady consumption rate and long shelf life (toothpaste and cosmetics)
- High price-to-weight ratio, potentially lower shipping costs and high profit margins that allow for discounting schemes
The consumers are ready for a change, and they need a company to deliver a great value-for-money and convenient online grocery shopping experience.
The world’s most developed online grocery market is found in South Korea with a 13.2% online penetration, which essentially means that 13.2% of the population are buying their groceries online.
The online non-fresh grocery markets in Denmark, Sweden and Finland alone would constitute EUR 2.92 billion if it had a 10% penetration rate. Not accounting for the realistic assumption that internet users would likely have higher consumption levels than unconnected consumers.
Netpris will initially expand in Denmark, Sweden and Finland based on the VAT structure, market maturity and market size.
Where we are now
Netpris is a big box online retailer that focuses on stock-up products and shopping missions that occurs up to 4 times per year per customer. Prices are kept competitive due to the high volume intake on low involvement products in regards to non-perishable and durable goods.
We aim at servicing families for their following buying occasions:
- Big box buying
- Routine replenishment
The buying occasions will expand as Shippii starts to offer new distribution services such as buy today and have it delivered tomorrow and instant delivery as the assortment expands.
Netpris operates via a single highly cost effective warehouse in Germany. By centralizing logistics in one country instead of using the traditional retail infrastructure, Netpris’ business model allows for lower prices. The traditional Danish grocery infrastructure has one physical shop for every 600 households. Netpris has one location serving the 10 million Scandinavian households.
How sales taxes work
Netpris will mimic Amazon’s initial approach in regards to the roll-out. Amazon started out by utilizing the variation in sales tax across states, thus greatly diminishing or eliminating collection of sales tax, providing with Amazon a cost advantage over its competitors.
Netpris works proactively in reporting taxes and fees as well as ensuring efficient deposit-refunds in close collaboration with local authorities and EU. This is only carried out as long as the terms are equal for all retailers, as this approach would otherwise eliminate the competitiveness of Netpris. Netpris aims to eliminate price discrepancies in the European region by offering the same prices for the same products across regions. This is enabled by:
- Utilizing the differences in VAT imposed on products in various European countries. For instance, the VAT can range from 0-25% on food, OTC, goods for children, etc.
- Current tax regulations: online retailers are not obligated to collect sales tax, if they are not physically present in the country, where the goods have been purchased.
Where we are going
We have validated our market after some years of sustainable revenue growth, and the first step in moving on to the next level will be to rebrand of our service: Netpris will become “Savr.Club”.
The change is needed in our internationalization process. We believe Savr.Club is a more appealing name when entering the international markets and it is easier to understand for the customers.
The launch of the Savr.Club brand during the first half of 2017 will also bring an additional innovation of our service.
We will offer two different “customer packages”:
- Savr.Club Basic: Where customers can buy our products as they do now on Netpris however with a significantly larger grocery assortment.
- Savr.Club Member: Where customers will have access to premium discounts. The goal of the membership package is to increase user loyalty and thereby increase future revenues. The concept is very similar US-based Costco.
Our aim is to become one of the leading grocery suppliers in Scandinavia and to list the company in 2017 on one of the Scandinavian stock exchanges in order to offer our consumers the opportunity to buy shares and benefit from the company’s value creation.
Our operational team has strong expertises in the industry and a proven track record in managing different companies. Together with the operative team, we have a strong board that will assist the company in the growth path.
- Chairman of the board
- Chairman at CA Best ApS, DermaPharm A/S, Legro A/S, Living Mart Copenhagen A/S
- Former CEO at on the largest Danish retailers, Dagrofa SuperBest and SPAR DanmarkA/S. Former chairman at Spar International.
- Linkedin Profile
Lars Munch Johansen
- Board member – Main shareholder and founder
- CEO and Founder of Shopall24 Group ApS, Co-founder of Swedish-based boozt.com and Chairman and Founder of Faszion, online clothing retailer.
- Linkedin Profile
- Board member and shareholder
- CEO of GoBike and former chairman of NASDAQ listed Copenhagen Networks A/S
- Linkedin Profile
- Partner and lawyer at LETT
- Specializes in M&A, corporate and commercial law
- Linkedin Profile
CEO and COO
Former Head of Logistics at DTK, Dansk Transport Kompagni A/S
Extensive background with B2B and B2C warehousing and logistics in the Flensburg area.
Head of Consumer Sales and Marketing
Bachelor in Production Engineering and Master in Organization and Strategy from Copenhagen Business School.
Involved in setting up Boozt platform and owned and operated own e-commerce Company with jewelry, SMYQS.https://dk.linkedin.com/in/liselotte-munch-johansen-9a25187
B.Sc. in Business Economics and Auditing
Has been employed at Deloitte for over 21 years, most recent job as Manager with responsibility for Danish and international management exposureshttps://dk.linkedin.com/in/rené-christiansen-3306713a
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