19 October 2022

Ten years of deliveries: “Our employees are what keep us moving forward”

REWE has been involved in online food retail for ten years. E-Commerce Director Drasko Lazovic takes stock of today’s REWE delivery and collection service.
Reading time: 9 min.

Ten years ago, REWE made its first foray into online food retail. In this interview, E-Commerce Director Drasko Lazovic discusses the sustainability of the COVID effect, synergies with bricks-and-mortar retail, and when he rides his bike to his local shop.

Mr Lazovic, if you were to give a short speech about the REWE delivery service to mark its 10-year anniversary, how would you sum it up and what are your hopes for the future?

Drasko Lazovic: For me, the REWE delivery and collection service is a bit like your first child. You look forward to it, but you don’t know what to expect. You guide it, watch it grow, and do everything you can to make it successful. That’s exactly how it was with the REWE delivery service. At the beginning, it was very hands-on. We tried out a lot of things and quickly learned from our mistakes. Over time, just as it is when you are a parent, you continue to learn. It is now time for the next step. Our child has grown up. We can loosen the apron strings and let it stand on its own two feet more.

I can give you two examples. Initially, we delivered from stores and received a great deal of support within the various REWE regions. This was a good start but, at the end of the day, it was not very practical because in some stores, the share of goods being sold online soon exceeded the 50 per cent mark. That was what prompted us, in 2014, to open our first Food Fulfilment Center, or FFC for short, in Hürth with the active support of Region West. Before opening time, I would put bread on the shelf at four in the morning. At six, the warehouse manager came and took over. That’s how it was back then. We have since become much more professional and our many openings are very structured. Our child grew up and developed well.

Drasko Lazovic

is Managing Director REWE Digital Fulfillmentservices.

You joined REWE Digital in 2014 as Head of Expansion, Networks and Formats. What was your path to becoming Director of Fulfilment Services?

Drasko Lazovic: I still remember my first day. There was no real induction. I was thrown in at the deep end and spoke to the West Region about space for a warehouse. I gradually took on more responsibilities with a particular focus on expansion and different delivery formats. I occasionally also supported my colleagues from BILLA Austria in the planning and construction of a warehouse. I’ve had overall responsibility for more than three years now. The delivery and collection service has grown steadily and so has the team.

Which technical developments would you say were key to success? And which will be important in the future?

Drasko Lazovic: A number of technical improvements were made that significantly improved the service for our customers. These include the launch of live route planning, implementation of the company’s own picking software and also the automation of intralogistics. However, our employees are what have helped us move forward and they will continue to do so. We have site managers, department heads, employees, and colleagues at the Carlswerk collection centre who have been with us from the very beginning. They have a strong identification with the delivery and collection service, and it is their commitment that has brought us to where we are today. When in unfamiliar territory, it is only natural that you also make the odd mistake. And so it was with us in 2014. However, we established a positive error culture, which continues to benefit us today. And we also enjoy support from the experts and colleagues at the REWE stores and regions.

Online food retail is growing, but is not yet profitable. Why is it important to continue investing in a sector that is not yet generating profit?

Drasko Lazovic: In today’s world, food has to be distributed over all available channels in an increasingly differentiated market. In 99 per cent of cases, when you build something new, there’s a cost for the initial investment. We had no infrastructure, no picking software, no warehouse locations. That was the situation when we started. After all, we were the first German retailer to take such a professional approach. We are still in the middle of construction. In the last 18 months alone, we have opened more than seven warehouse locations and 1,000 collection centres. Things have developed very well in recent years and a number of the delivery service locations are already generating a profit. This is slightly easier for the collection service compared to the delivery service because you don’t have the final transportation costs. Leveraging synergies between the collection and delivery service helped us a lot with our expansion to more than 1,600 collection centres during the pandemic.

You mentioned the impact of COVID on accelerating online food retail sales. How sustainable is this increase?

Drasko Lazovic: As a result of the pandemic, online sales now represent around four per cent of our food retail figures. Most of this is generated in the big cities. There is certainly further potential here. Experts currently forecast an online share of eight to twelve per cent by 2030. If you look at the development in other countries, this is not unrealistic. In South Korea, it is already at almost twenty per cent, while in the UK, it comes in at just under ten per cent.

In any case, it is clear that we grew significantly as a result of the pandemic, and online sales remain significantly above pre-COVID levels. And these continue to increase, which shows that online food retail is here to stay. We are also seeing a trend toward personalisation in online food retail. Our online service is perfectly placed to cater to this and can also tie in with bricks-and-mortar retail.

Where is the journey headed in terms of regional expansion? What geographic gaps would you like to fill next?

Drasko Lazovic: We are the only online retailer to cover 90 per cent of the country. No one else can match that. We have expanded a lot and have filled some of the gaps. We are finally in the Ruhr Valley. A logistics centre will soon open there in Bochum. We will also be opening one in Leipzig soon. Nuremberg and Stuttgart are already connected to the network. In addition to the expansion, we will also expand our service in cities where we already have a presence.

In any case, it is clear that we grew significantly as a result of the pandemic, and online sales remain significantly above pre-COVID levels.

Drasko Lazovic
Drasko Lazovic

In recent years, in particular, urban areas have seen a rapid growth of quick commerce, with bicycle couriers, etc. How important is the time factor? How quickly do customers want their purchases delivered?

Drasko Lazovic: The importance of the time factor has changed. Six years ago, customers we surveyed said weekly shopping that was delivered within two days was fine. When we introduced same-day delivery in 2017, this was well received by customers. This illustrates the change in customer behaviour and we are adapting to that. Technically, we can now deliver a shopping order in three hours.

However, it is important to make a distinction here between the delivery service and quick commerce, where deliveries are expected within ten minutes. The REWE delivery and collection services are both geared towards big weekly purchases. Quick commerce, as offered by many delivery services in large cities by bicycle courier, is more geared towards small purchases and thus serves a completely different target audience.

How sustainable is the delivery service today? There are always issues that are also important to customers – be it the delivery vehicles or the packaging material.

Drasko Lazovic: Sustainability is a high priority for us. As part of the REWE Group, we benefit from the many established sustainability projects.  We have already introduced deliveries by bicycle in some cities. We plan to roll this out further.

The use of electric vehicles is somewhat more complicated, as the goods have to be refrigerated, which requires a lot of energy. The refrigeration limits the range of the vehicles, meaning that they cannot deliver to as many customers in one trip. However, we are trialling different options for this and are now ready to buy some electric vehicles. We have already largely changed the refrigeration concept from dry ice to ice packs.

From a sustainability perspective, route planning is key. Orders from the same area are combined in the same delivery run. In larger cities, for example, many customer orders can be shipped over very short distances. We are also committed to reducing food waste. Like the REWE stores, we cooperate with the food banks to avoid food waste. At the moment, we are working intensively on our packaging. A recycling system is already in place with the collection service. In the long term, we would also like to replace paper bags with reusable options for the delivery service.

Finally, a question about your shopping cart: which product do you order most from the delivery service?

Drasko Lazovic: I prefer to order small, lightweight, and premium quality products because that is of course best for the delivery service. But in all seriousness, we place an order once a week with lots of fruits, vegetables, and sweet treats for the whole family. And if ever I forget milk or other essentials, I like to ride my bike to the local shop and grab what I need.