Online grocery is now settling into its long‑term role within Europe’s retail ecosystem; its share of food sales is expected to level out at around 4.8% by 2028, while the UK will remain an outlier at roughly 12.5%. What’s increasingly clear is that online works best when anchored to efficient, well‑run store networks that can absorb fulfilment costs and support profitable last‑mile delivery. By the end of the decade, the relationship between channels is likely to stabilise into a mutually reinforcing equilibrium: physical stores as the backbone, online as an extension rather than a replacement.

Omnichannel has been a key growth area for retailers, with success shaped by cultural habits, operator capability and the centrality of fresh food in national shopping routines. Southern European consumers in particular are store‑loyal, driven by trust, habitual purchasing and a strong domestic supply base. Lidl Italia, for instance, sources more than 80% of products for its urban formats locally, as shoppers show preference for short supply chains supportive of local agriculture.

Where retailers push the omnichannel model, results tend to follow, though progress remains uneven. The UK leads (for instance, as of 2023, more than 93% of the Supermarket Income REIT portfolio was omni‑enabled), Germany’s offer is limited to Rewe’s click‑and‑collect model and partnerships such as Edeka–Picnic, while Sweden illustrates the dangers of over-forecasting: ICA’s purpose‑built online fulfilment centre near Gothenburg remains vacant due to insufficient demand.

For many shoppers, the assumption still holds that the best prices are found in store, in part due to significant discounts on products damaged or nearing expiry that would otherwise be wasted. This belief, combined with the cost and complexity of fulfilment, means online grocery is only profitable when anchored to the physical store estate. As a result, only fully invested operators such as Tesco, Co-op and Carrefour have built mature online offers, increasingly integrating delivery platforms into larger hypermarket stores to drive efficiency. Omnichannel models are further supported by third-party last-mile operators such as Deliveroo, Uber Eats and Just Eat, although stock-outs and unwanted substitutions continue to undermine trust and sustain appetite for brick‑and‑mortar visits.

Pure plays under pressure

Without store networks to offset fulfilment costs or support customer acquisition, pure plays have struggled to maintain margins. Ocado is still Europe’s strongest operator through its JV with M&S, but even its model is facing slower growth and profitability pressure. The exception is Picnic, whose full‑basket, “milkman‑style” model works at scale but requires heavy capital. In 2025, it raised €430 million to fund German expansion and opened a 50,000 sq m Oberhausen fulfilment centre capable of 33,000 daily orders using 1,500 robots. The model works, but only at high volume and capital intensity.

Amazon’s retreat from its Fresh and Go formats tells a different story: the limits of online grocery economics without a supporting store network and the failure of checkout-free retail at scale. By early 2026, Amazon had exited every Fresh and Go format globally and the company has since rotated toward last‑mile strength and partnerships: Amazon Now, launching in London in 2026, expands its same‑day fresh offer, while its partnerships with Co-op, Morrisons and Monoprix allow access to dense urban grocery networks in the UK and France. We expect Amazon’s grocery presence will grow, but through delivery‑led and partnership‑based models rather than standalone physical retail.

Ultimately, online grocery is tethered to physical assets, with retailers that have strong supermarket footprints best able to deliver viable omnichannel economics — a key reason investors continue to favour omnichannel store formats.

_{Read the articles within Spotlight: European Grocery Report – Q4 2025 below.}