Hardly a day passes without reference to the rise of on line shopping and how it will affect the retail landscape.
Last week we heard that Morrisons supermarket are paying £170m to Ocado for their depot in Warwickshire, a further £30m to license their technology, plus 1% of any Morrisons online sales and 25% of any cash profits. They also threw in £46m to expand the Warwick depot, and a contribution to Research and Development costs.
Whether one thinks that Morrisons are out of their minds to get involved with Ocado, whose business model is far from a successful example of how to compete in online grocery retailing, or whether your view might be that this is an excellent move for all concerned, what is unarguable is that Morrisons felt so pressurised about the adverse impact of not being on line that they were prepared to pay handsomely for a way in.
Today the Centre for Retailing Research heaped on the pressure by publishing a report claiming that the percentage of sales made on line will rise from 12.7% in 2012 to 21.5% sometime between 2018 and the end of the decade.
They make the chilling prediction that the rise will result in a loss of some 316,000 jobs, that total store numbers will fall by 22% from 281,930 today to 220,000, and that a further 164 major or medium sized companies will go into administration.
As ever it is the consumer who is driving the change. Shoppers’ way of buying has changed out of all recognition in just a few years. Nowadays, having read up all the reviews about a potential product on line, they can choose to visit a store and buy then and there, (having just checked on their smartphone that the prices on offer cannot be beaten by a competing store).Or they can use the store to see what a product looks and feels like and then go home and buy online. Even then they have a choice – to have the product delivered to their home or, rather than wait in, to collect at a convenient specified outlet.
As to food, the Centre concedes that purchasing food online has not exploded on the same way as other sectors, but predicts that online food sales will rise from 3.7% today to 9.5% by 2018, largely driven by the supermarkets investing heavily in this way of shopping.
There are substantial obstacles to overcome. There are reasons why shoppers have not enthusiastically embraced the internet to buy food.
The IGD tells us that consumers are still worried about the quality of fresh food bought on line, and that this remains one of the biggest barriers. 2 in 5 shoppers want longer shelf lives on products but this alone will not solve it. The taste and look of fresh products bought online continues to be highly variable.
Reliable delivery times are also critical, as is confidence that what is ordered will be what arrives on the doorstep. 90% of online shoppers report that a reliable delivery service is a major factor in deciding which supermarket to buy from.
And of course, prices and promotions must at least match what is happening in the store itself.
Buying groceries on line is not yet the ingrained behaviour that is evident in other categories. Most people shop online every now and then. Others have a more regular approach. But very few buy weekly, and the number doing so is dropping.
There are many problems to solve, not least that online as a way of retailing groceries is much less profitable than via the store.
It would seem though that all involved in selling food need to factor in the online issues when they review their business strategies.