Sector Trend Analysis – E-commerce Trends in Italy

Socio-economic profile

Economy

Italy is the 8th largest economy in the world and the 3rd largest economy in the Europe with a GDP of US$2.0 trillion (2019). Italy was the first western country hit by the novel coronavirus pandemic (pandemic). It has recorded approximately 128,000 deaths, the highest in Europe and the fifth highest in the world. According to the Italian National Institute of Statistics (ISTAT), due to the lockdown imposed by the Italian Government, Italy's GDP contracted 9.3% in 2020, representing the steepest annual GDP drop for Italy since World War II. ISTAT estimates Italy's GDP will rebound by 4.0% in 2021.

Italy's economy is concentrated in the north from Turin in the west through Milan to Venice in the east. This is one of the most industrialized and prosperous areas in the EU and accounts for more than 50% of Italy's GDP. Italy's southern region is less developed, highly subsidized, and largely agricultural. Italy also has a large underground economy, which by some estimates accounts for as much as 17% of Italy's GDP. The underground economy most commonly involves the agriculture, construction, and service sectors.

Demographics

Italy has a population of approximately 60 million. Rome (4.3 million), Milan (3.1 million), Naples (2.2 million), Turin (1.8 million), Bergamo (900,000), and Palermo (850,000) are Italy's largest cities. Approximately one third of Italy's population live in rural areas.

Italy is the second oldest country in the world after Japan, with the number of people over the age of 65 at 37% of the population. Working age Italians are seeking more flexibility in their lives so they can meet family obligations. According to a recent University of Bonn report, around 23% of those aged between 30 and 49 live with their parents, leading to many living in multi-generational homes. Technology, is increasingly being adopted to make better use of time and simplify daily tasks, so that time is available for personal activities and interests.

Consumer income and expenditures

The middle class remains the predominant social class and the main expenditure driver in Italy. Italy's high population density and higher incomes in the north largely makes up Italy's overall consumer expenditure.

In 2020, foodstuff and alcoholic beverages recorded the highest growth among expenditure categories. The pandemic has forced Italians to spend more time at home and dedicate more time and effort to cooking. Home cooking is already very common in Italy but keeping people in their homes has renewed interest in traditional recipes, centered around the Mediterranean diet (olive oil, pasta, vegetables, fish), as well as increased interest in the nutritional benefits of food.

Italian consumers have had to embrace shopping online and as a result they have also had to adopt the use of contactless payments to pay for their purchases–something that has been slow to take off in Italy. Normally unpopular in Italy, demand for food delivery or pick-up has surged during the pandemic.

Even as pandemic-related restrictions ease, Italian consumers are expected to continue to access a wide range of digital services in order to better manage their busy lives. A Euromonitor survey found that over 20% of respondents expect more of their activities to shift to online platforms in the future.

Italy's food and beverage trade with the World

Italy is a net exporter of agri-food and seafood. In 2020, the country's agri-food and seafood trade surplus was Can$4.9 billion, with imports valued at Can$66.6 billion and Can$71.5 billion in exports. Italy's agri-food and seafood imports increased at a CAGR of 1.0% from 2016 to 2020. In 2020, Italy had an agri-food and seafood trade surplus of Can$400 million with Canada (exports to Canada were valued at Can$1.1 billion and imports from Canada at Can$1.5 billion).

In 2020, Italy's top agri-food and seafood imports from the world included fresh or frozen pork, wheat and meslin, tobacco products, cheese, and fresh beef. Key supplying countries included France, Germany, Spain, the Netherlands and Poland. Canada ranked 17th among Italy's suppliers of agri-food and seafood.

In 2020, Italy imported Can$43.1 billion in food and beverage. In the past five years from 2016 to 2020, the average annual growth rate of imported food in Italy is 0.8%. Canada is Italy's forty eighth largest supplier of food and beverages, which grew by 22.4% annually between 2016 and 2020.

Italy's packaged food market overview

During the national lockdown periods, home confinement, together with business closures, school closures, the closure of entertainment venues, cafés and restaurants forced Italians to stay and mainly cook at home. This greatly benefitted food and drink categories due to the fact that food and other grocery products were considered essential purchases. With only limited takeout and delivery services available, home cooking was also considered an essential element and enjoyment of consumers' lives during the lockdowns.

The Italian packaged food market saw 2.0% growth between 2016 and 2020, however, lockdown measures caused packaged food sales to soar, as consumers stockpiled in the initial stages of the pandemic to limit the frequency of shop visits. As a result, demand for staple foods, cooking ingredients and dairy products greatly increased as consumers engaged in home-cooking and home-baking. Demand for some snack food also increased as consumers looked to snacking and other indulgences at home.

Consumers also sought out healthier versions of staple foods, for example, alternative proteins due to concerns over meat as a potential vector of the virus, but also as a result of the ongoing vegetarian, vegan and flexitarian trends in Italy. More consumers also chose plant-derived proteins or eggs over meat proteins. This generated higher sales for shelf stable beans and meat substitutes. There was also strong demand for legume-based and rich-in-protein foods, mainly within snacks (legume-based puffed snacks, legume-based "rice" cakes), dairy (enriched with proteins milk and yoghurt) and staple foods (legume-based pasta). There is also a stronger interest in immunity-boosting foods as consumers shy away from unhealthier ingredients. For example, perceived links between meat and viral diseases have accelerated a move away from meat to plant-based proteins. Cooking at home is expected to become a longer-term trend as concerns over safety remain after the pandemic.

E-commerce market overview

Store based grocery retailers, including smaller independent retailers in Italy, represent over 90% of packaged food sales. These retailers responded to the pandemic by creating and expanding their online presence through social media platforms and dedicated ecommerce services. As a result, store based grocery retailers, in addition to online retailers like Amazon, saw their Ecommerce sales surge in 2020.

Prior to the pandemic, Ecommerce in Italy was in its infancy compared to its European neighbours, mainly due to internet infrastructure deficiencies. According to Eurostat, in 2018 only 84% of Italian households had internet access, 5% below the EU29 average of 89%. This means that the widespread shift to Ecommerce in 2020 represented a major change for Italian consumers and a strong motivation to bring Italy up to date in terms of its Ecommerce offerings. Cultural aspects also played a role in hindering the development of Ecommerce in Italy. Shopping is an important social activity in Italian culture, as it is often done with friends and/or family members and/or at local markets, which still take place in most urban centres and represent an important meeting opportunity for local communities. Moreover, Italians are particularly interested in seeing and touching products and in trying things on in the case of apparel and footwear, something which Ecommerce does not offer. The pandemic and the fear of infection, however, superseded these cultural attitudes towards shopping in 2020, and made consumers more willing to try out Ecommerce channels for the first time.

In 2020, online packaged food purchases represented 8.7% of total retailing of packaged food in Italy. The pandemic drove confined consumers online to seek essential supplies such as food, making Ecommerce the fastest growing distribution channel for packaged food products, growing 25.8% annually since 2016. From 2016 to 2020, all packaged food categories experienced strong sales growth that averaged 34.4% annually. Baked goods is the largest category sold through ecommerce, followed by ready meals, processed meat and seafood, and pasta. From 2016 to 2020, all packaged food categories experienced faster sales growth through Ecommerce than in store. On an annualized basis, sales of soup, processed meat, sauces, and processed fruit grew fastest through ecommerce, from 57.8% to 42.8% annually.

E-commerce by Food Sector

Key players

Conad is the leading grocery retailer in Italy, followed by Coop Italia and Selex Gruppo Commerciale SpA. Domestic. During the pandemic, the surge in demand for food and drink products through Ecommerce led to an expansion of the range of products available through retailers integrating Ecommerce into their distribution networks. As well, greater demand for products from local convenience stores and traditional grocery retailers compelled many local businesses to modify their business models to provide food and drink products to consumers' houses through collaborations with food delivery platforms and bigger players in Ecommerce. These existing platforms provided local businesses with a way of adapting relatively swiftly to the lifestyle changes of the pandemic.

Major store based grocery retailers already operate dedicated online portals selling food and beverage products. Amazon, Esselunga, Unieuro, and Carrefour are Italy's largest Ecommerce retailers that carry food and drink products. These retailers, with click and collect services, were well placed to respond to lockdown measures. In July 2018, Coop Italia launched self-service refrigerated lockers in collaboration with Vodafone, which can also store frozen food, where customers can collect their grocery shopped online 24/7. In November 2018 Basko launched its first locker in Genova where customers can shop online and collect their grocery 24/7 at the locker using an access code they receive upon purchase.

As a result of the pandemic, more players are looking to introduce click and collect services to help overcome logistical challenges to the expansion of Ecommerce. For example, logistics start-up Glovo, which delivers products to consumers in European cities in 30 minutes or less, experienced 10-fold growth in Italy during the pandemic. In addition, weekly food subscription services, have sprung up, which enable Italians to access a regular supply of food, in a major shift away from traditional Italian market-based shopping habits. These Ecommerce enhancements made to meet pandemic related demands will likely persist into Italian Ecommerce in the future.

Furthermore, the fact that almost a third of the Italian population lives in rural areas means developing last-mile delivery systems, which reach the customer at the place and time that is most convenient for them, will help Ecommerce develop in the country. Strategic partnerships are being established to facilitate the most convenient and effective possible delivery system. For example, Poste Italiane entered into a three year agreement with Amazon to deliver a greater amount of its shipments in Italy. The agreement is aimed at enhancing customer services by means of an expanded product range, including additional evening and weekend deliveries, exploiting Poste Italiane's extensive presence throughout the country.

Following the pandemic, Ecommerce is expected to increasingly focus on strengthening the role of local communities and stores through online participation. More platforms are expected to focus, for instance, on proximity commerce in the coming years, and consumers can expect to see more partnerships between local stores and global delivery players and services in the coming years. The growth of local networks such as these highlighted the importance of locally based retailers when it comes to serving all consumers around Italy, including those in smaller and rural communities.

Device distribution

Italy's home internet users are forecast to expand to 96.5% of the total population in 2040, up from 85.9% in 2020. The development of 5G will also foster growth of mobile connectivity, as the smartphone is expected to become an integral part of Italian consumers' lives. Italy's adoption of 5G technology is expected to be completed across the country by 2022. The first 5G networks opened in cities such as Rome and Turin in 2019, thanks to TIM and Vodafone, which have agreed to share the cost of introducing 5G infrastructure across the country. With the entry of new low-cost service providers, consumers are also expected to benefit from cheaper rates and increased adoption.

Digital payments are also set to grow, driven by the pandemic and Italy's new cashless legislation introduced at the end of 2019 designed to counteract tax evasion and drastically reduce cash transactions across small independent outlets and help digitalisation within retail and foodservice.

Italians turned more frequently to their mobile devices during the lockdown to maintain their connections with the outside world during the pandemic. As a result, mobile Ecommerce (Mcommerce) recorded some of the strongest retail value growth in retailing in 2020. In 2020, Mcommerce represented a significant proportion of all online sales, which is set to grow strongly over 2021-2025. The trend is supported by the high penetration of smartphones in Italy, which is estimated to be higher than in Germany and France.

Orders placed through Ecommerce for food and drink products in Italy are predominantly made from mobile phones. In response to this, in August 2020, Carrefour revamped its website to be more mobile-friendly, optimizing the experience of the company's website from any device. This meant that Carrefour's Ecommerce platform became faster and more individualised to the screens that Italian consumers use to view the company's platform, which made the process of Mcommerce purchases easier thanks to their user-friendly interface.

Many smaller retailers have collaborated with existing delivery platforms in order to deliver their products to consumers. Other stores were also able to expand into Mcommerce using social media. WhatsApp, for instance, was popular with small retailers in Italy due to its ease of use and are likely to retain these services in coming years.

Despite lagging in Europe in overall internet penetration, the launch of 5G technology across Italy in 2022 is expected to put Italy at the forefront of 5G in Europe and significantly expand the use of Mcommerce in the country. It was the first country in Europe to close the 5G spectrum auction and, in addition, raised a record amount of €6.5 billion (in comparison to €6.2 billion in Germany, for example), well above other markets. It is available so far in major cities (Rome, Milan, Turin, Bologna and Naples, among others) and only from some operators.

Conclusion

The pandemic has had a profound impact on the shopping habits of Italian consumers, who were compelled to shop online for food and drink during the pandemic but continued to predominantly cook and eat at home before and during the pandemic. Even as Italy emerges from the pandemic, this shift is expected to have a lasting effect, as many consumers have become familiar with and are expected to continue buying food and drink via Ecommerce.

In addition to stockpiling and home cooking boosting sales of staple foods and cooking ingredients in Italy, the pandemic accelerated Italy's healthy eating trend, with vegan, vegetarian, and flexitarian alternatives, and "free-from" products (e.g. gluten, lactose, or sugar-free). The pandemic also spurred sales of legume-based snacks and pasta, protein rich foods, and locally sourced food as a gesture of solidarity to local producers. Italy's ageing population and increased health consciousness of consumers is also fueling the country's demand for health and wellness products, and functional food products.

Italy is expected to become a fast growing ecommerce market in the future as Italy's 5G rollout and transitions consumers to digital payments and this new normal of shopping online for food and drink products as the use of Mcommerce is expected to expand across the country.

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Resources

• Euromonitor International:
  • Country report | February 2021. Hypermarkets in Italy.
  • Country report | June 2021. Consumer Lifestyles in Italy.
  • Country report | 2021. Digital Consumer in Italy.
  • Country report | February 2021. Ecommerce in Italy.
  • Country report | February 2021. Food and Drink E-Commerce in Italy.
  • Country report | February 2021. Mobile ecommerce in Italy.
  • Country report | December 2021. Packaged food in Italy.
  • Country report | February 2021. Supermarkets in Italy.
  • Country report | February 2021. Retailing in Italy.
  • Country report | February 2021. Traditional Grocery Retailers in Italy.
  • Country report | April 2021. PEST Analysis Italy.
  • Country report | October 2020. Income and Expenditure: Italy.
  • Country report | March 2021. Economy, Finance and Trade: Italy.
• United States Department of Agriculture (USDA) GAIN: Retail Foods in Italy – June 2021
• JP Morgan: Ecommerce Payment Trends: Italy - 2019
  United States International Trade Administration: Italy – Country Commercial Guide – October 2020
• Santander: Italy – Distributing a Product – July 2021
• Global Trade Tracker, 2021.

Sector Trend Analysis – E-commerce Trends in Italy
Global Analysis Report

Prepared by: Kris Clipsham, Market Analyst

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