Online trade with food and beverages - Success factors for greater quality and safety

The food trade in e-commerce has become just as much a part of our everyday lives as online shopping for other consumer goods too. There are hardly any products anymore that cannot be ordered by a mouse click and delivered directly to your front door. However online sales are a fast and constantly growing market not only in the B2C sector, but also in the B2B sector, e.g. raw materials, ingredients and animal feeds. 

The following Expert report is to describe the critical success factors about online trading of food, beverages and their ingredients. It is intended to give specialists and management staff from the food and beverage industry in general  as well as from medium-sized businesses in particular a “guide” with practical suggestions for building up their own digital distribution channels and inspiration for improving existing online shops. 

2.1 Advantages and disadvantages of online food trade

Ever more people are shopping online; the upward trend in digital shopping cannot be stopped. No wonder, on the web everything can be found simply via a mouse click. Given today’s working hours, which repeatedly extend into the evening, and the weekends filled with hobbies, there is often not enough time for relaxed shopping in local shops. It is precisely in connection with this point, as well as with a few others, that online shopping offers immense advantages. There are no opening hours restricting shopping times, no long drives to the shops if one wishes to shop supra-regionally for a change instead of regionally, no searching for parking spaces, and no long waiting times at the check-out. The giant international online shop is open 24 hours a day and 365 days a year, and alongside the time benefits, it also allows simple price comparisons and a comfortable delivery service, if desired even right up to the front door. The right of revocation strengthens and protects consumer rights and it is not necessary to bother with cash either, because payment can also be carried out digitally. So many advantages, but what about the customary shopping experience? What about creative rummaging along the shelves and examining the product quality with one’s own senses? What about the personal advisory services by expert staff? Furthermore, there are price surcharges due to the resulting and transferred shipping costs, and delivery times have to be taken into account, because it is not possible to take the goods with you straight away. Another prospective off-putting factor is the possibility of minimum order quantities. Online trade must counter these aspects, reserved for shopping in stationary trade, with correspondingly attractive concepts and offers in order to win and sustainably maintain the trust and confidence of consumers. 

A number of different studies were considered in order to gain an overview of the current situation in online trade with food and beverages. For example, the DIN (German Standards Institute)-Consumer Council complained that there are currently no standardised and uniform quality criteria for assessing the food online trade that cover above all the field of e-commerce with fresh products too. Yet the focus lies in particular on the field of product quality as well as beyond this on the process quality too, where aspects of hygiene, cooling and consumer information are to be taken into account. Defining the special demands for the food online trade, at present specifications and recommendations are being developed in a DIN-Working Group.

A study conducted by the company THIMM Consulting GmbH + Co. KG, Northeim, provided a specific insight into the current situation. Within the framework of a practical test “Foods in online trade” it was found in spring 2019 that there are “conspicuously few fault-free concepts in online shipping of foods”. In altogether 24 online shops (regional and supra-regional) the packaging concepts in particular alongside the general ordering and delivery process were examined. For this foods from four categories were ordered online:

• Foods representing daily necessities (simulated shopping basket with fresh meat/sausage, fruit/vegetables, dairy products, frozen products)
• Frozen products
• Fresh fish
• Fresh minced meat

The results showed that 27 per cent of deliveries took place outside the agreed delivery times; in nearly half the cases (43 per cent) the foods ordered reached the consumer a day later, in other words on the next day. A comparison of the online shops showed that the delivery costs, consisting of additional and dispatch costs, accounted for over a quarter (on average 26 per cent) of the total costs. Some suppliers charged additional costs above all for refrigerating of the products. When it came to types of dispatch, where offered, express dispatch up to 12 noon was selected.

A further particular difficulty for online vendors lies in the correct selection of packaging, because it is necessary  to comply with the respective product requirements. Crushed corners, holes and cracks, or damp/soggy dispatch packaging were established in 14 out of altogether 29 cases, even though notes concerning delivery date, refrigeration or danger of breakage were printed on the packages. 

Of all the foods ordered, 78 per cent appeared to be in a good condition optically. However, half of the lettuces were limp, two of eight yoghurt cups were burst and there were broken eggs in every second moulded pulp packaging. The test also showed that the share and recycling capacity of the packaging materials were not optimal and – especially against the background of sustainability – offer potential for improvements. The same applies for temperature observance. The results of the tests conducted directly after receipt of the order showed the worst values for core and surface temperatures above all for frozen products. A good 44 per cent of the foodstuffs were not sufficiently refrigerated. Only five of the 24 orders were delivered within the legally admissible temperature range. It is only possible to deliver food and beverages with the quality and shelf-life promised to the consumers by the vendors if the refrigeration chain is uninterrupted and the packaging is correct. These test results provide an insight into the complexity and show that there is still potential for improvement in current practice. 

In the opinion of the authors, further important current problems in relation to online food trade are:

Ordering process on the website:

• conspicuously frequent one-sided product photos and incorrect, incomplete product information,
• lack of feedback about product availability and stocks during the ordering process. The customer is often only informed during the payment procedure that the desired article is no longer available.

Delivery service:

• inflexible, frequently unfriendly delivery service – announcements of “same day delivery” are then mostly not realisable.
• alongside heavily damaged products, faulty deliveries are also conspicuous.
• enormous amounts of shipping packaging waste also lead to annoyance on the part of customers.

The above aspects can frequently be traced back to a lack of product knowledge on the part of the online vendors and insufficiently trained staff, resulting in, for instance, incorrect product handling and leading to a loss of customer trust and confidence.

What are the critical success factors and what must be considered explicitly in e-commerce with food and beverages? The following section contains answers to these questions.

Product quality, information management & traceability

As in stationary trade too, a maximum of transparency forms the first step towards building consumer trust and confidence. Professional information management is the basis for this and thus also represents the crucial argument for selecting a particular online shop in the e-commerce sector. The description of the products offered and their quality aims to ensure that all the product information and labelling elements specified by the Food Information Regulation (LIMV) are made available. This provides the consumer with ideal support in the product selection and ordering process and the complete process is subject to legal security. The allocation of customer data to corresponding order numbers and the linking with product information ensures the transparency required for traceability. Through-going process transparency (product tracking) along the complete ordering and transport path (Supply Chain) is ideal. This provides customers with logistics information on product availability (stocks in storage), the current order status and whereabouts of the product up to the time slot of package delivery for customers. If customers are also given an opportunity to provide feedback and their assessments publicly so that they can be viewed online, a high degree of informational transparency is ensured.

Process management: safety, hygiene, refrigerating temperature & logistics

Further essential critical success factors relate to the process management before and after the ordering process. Key aspects here are an appropriate and professional product storage, proper commissioning and packaging, as well as the selection of appropriate types of shipping and delivery that match the product. A well-thought out process management concept that matches the products offered and their quality observance, as well as fixed and defined written standards concerning the company’s in-house logistics and a HACCP concept are elementary. Furthermore, concrete contractual rules in this respect should be agreed and fixed with a possible external logistics service provider in order to handle the tight time frames, especially for perishable products. The same applies for further possible partners in the process chain, possibly in the field of storage or commissioning. In addition to the appropriate timing, the valid hygiene standards and hygiene laws as well as the defined refrigerating temperatures (cooling chain and temperature checks) are to be maintained throughout the process and the selection of an appropriate product packaging (where necessary both primary and secondary packaging, insulating material, refrigerating elements) including a note on the packaging for the deliverer and the end customer should be taken into account. A further aspect to be considered in the process management is the establishing of a standardised and clearly communicated complaint management system, including contact information and a transparent invoicing method, as well as a safe and reliable digital payment process.  

Staff qualification

In order to ensure reliable process management and a proper logistic system, it is necessary to ensure appropriate staff qualification. This relates not only to basic knowledge concerning food science and knowledge of the merchandise, but above all also to regular teaching of the legal requirements regarding product and personnel hygiene in the context of food safety. It also includes aspects of product refrigeration and the demonstrable adherence to the cooling chain right through the complete process. Staff qualification is not only to be ensured within the company, but in this connection rules must also be agreed with possible external service providers (e.g. logistics, storage, commissioning) who are ultimately also co-responsible for the observance of the product quality after the product has left the production chain, and for safe product transport through to the consumer.

Packaging & sustainability

Packaging is one of the key elements in online trade with food and beverages. Both the packaging material and its form must satisfy a number of requirements at the same time. These arise in connection with product protection and breakage resistance and involve consideration of the food safety, hygiene and corresponding uninterrupted product cooling and must also satisfy the legal requirements of the applicable packaging guidelines. Corresponding packaging concepts should be worked out and appropriate packaging materials be selected where appropriate both for the primary packaging and for the secondary or transport packaging. In addition to appropriate marking/labelling, it is necessary here to ensure the desired information transparency, as well as to take waste disposal and recycling concepts into account in order to meet the growing demands regarding sustainability. 

Special features in online trade with alcoholic beverages

When shipping alcohol, it is important to comply sufficiently with the associated legal framework (above all protection of minors) for producers of alcoholic beverages (including wine, champagne, spirits) with their own online shop, as well as for vendors. After all, as in stationary retail trade, it must be ensured in mail order business too that alcoholic beverages are not handed out to minors. The best practice approach to “shipping alcohol and protection of minors” of the German Federal Association of E-Commerce and Mail Order Business (BEVH) includes for instance the following points:

(A) Established customers can continue to be supplied without any separate examination and where appropriate documentation of their age. The necessary minimum age is considered to be known.

(B) Deliveries to new customers can only be carried out when the deliverer conducts an age check. Such an age check is considered to be conducted if the deliverer can assume on the basis of the overall circumstances that the recipient clearly has the minimum age. In cases of doubt, evidence of the required minimum age is to be submitted by presenting an official document containing a photo. Documentation of the age is not carried out at any time.

(C) In all cases the shipping packaging is to be provided with a clearly visible printed warning message pointing out that the package may not be handed out to minors. E.g.: “Alcoholic beverages – may not be handed out to children and young people under the age of 18.”

(D) In all cases notification of the possibility of conducting a visual check of the age must be provided at the latest at the time of completing the order. Such a notification has a deterrent potential and once again reduces the danger of minors ordering alcohol.

To summarise, when building up and successfully conducting e-commerce with food and beverages, it must be ensured that – as in stationary trade – correct and appropriate handling of the food and beverages is ensured along the complete supply chain, observing the legal regulations and quality standards. One essential component for building consumer trust and confidence is a customer-friendly process design that comprises an appropriate measure of information transparency and safety in the online payment process as well as ensuring reliable transport and delivery sequences matching the product.

Various studies have shown that online trade with food and beverages is considered to be one of the most strongly growing areas in e-commerce in Germany and beyond. Even if the current share is at a relatively low level by comparison with total sales of food in Germany, the advancing digitisation and in particular the demographic change will push ahead developments and growth in this sector.

What is essential and thus characteristic for success here is that online vendors establish well-thought through and extremely standardised logistic and transport processes adjusted technically to online sales and dispatch of the food and beverages offered, that guarantee legal certainty and ensure a maximum of transparency for consumers. Only then can sustainable trust and confidence be built up and a successful online distribution service be established, that either supplements existing traditional stationary sales or allows a completely new service sector to be built up. Food and beverage producers should look into this topic in order not to lose out on the valuable competitive benefits resulting.