Internet Grocery Shopping - How Big Will it Get?

This week saw another salvo in the internet grocery shopping war with Waitrose scrapping its delivery fee on orders over £50. MD of Waitrose Mark Price, interviewed on Sky News, reckons that online grocery shopping it could be worth £13bn, or 10% of food bought, and he is planning to grow Waitrose’s online sales from a current £70m to £300m in the next 4 years.

Mr. Price is not alone in planning a big future for online. Sainsbury’s delivers 90,000 online orders per week , has seen sales grow by 40% year on year, and has marked the area out as a development priority. Tesco in their 2008 annual report said sales had grown by 31%. ASDA recently revamped their website. Ocado, who are an online venture only, part owned by Waitrose, have committed to matching Tesco on the price of its prepacked products, meaning it often undercuts Waitrose in store prices. The bullish views about the future are supported by the IGD, who estimate that the market was worth £3.5bn in 2008 and will double in size to £7.1bn by 2013.

So what do we know about online grocery shopping now, and why might it grow?

At £3.5bn the market is still small, despite being available for at least 8 years. According to TNS the market research company, speaking at a recent Meat Outlook conference, online sales account for 2% of Tesco’s till roll, about 0.6% of ASDA’s, and about 0.5% of Sainsbury and Ocado.

TNS also tells us that the heaviest on line shoppers are those with children 0-4 years old, 6.5% of this age group shop online. The lightest shoppers are retirees, of whom just over 1% shop online. High earners, of whom 7% shop online, are over 4 times more likely to shop this way than lower income groups.

Again, these are small numbers, so in an age of increasing technological savvy, the presence in other sectors of tried and tested models such as Amazon, and the faster times that broadband presents, what might be stopping people from using the internet to grocery shop?

Well, its got a bit of a bad reputation for reliability of delivery service, and quality of products delivered. Consumer magazine “Which” did a small but widely reported survey at the end of 2007 which said that online groceries arrived with very short shelf lives, less than those to be found in store. More recently, Mumsnet, the social site for mothers with young children, gives real life examples of the issues, showing a thread from last month where mums talked about banana yoghurts being substituted for bananas, wilting fruit and veg, and deliveries not turning up when promised. These mums concluded that the quality of experience varied a lot not just between different supermarkets, but from different stores within the same supermarket.


At the other end of the scale, IGD did some research with over 60’s and found that they would use the internet more if the sites were easier to navigate around, security could be guaranteed, quality would be consistent, prices were equal to those in store, delivery charges reduced, and the sites made easier to navigate around.

On the subject of growth potential, it is clear that supermarkets are working to address the issues, particularly making the sites more user friendly. Tesco’s idea of drawing attention to a cheaper version of what might first be selected is a great one, and far easier than walking up and down the shelves looking for the best buy. Sainsbury’s offers hundreds of recipes and allows you to buy all the necessary ingredients with just a click. The supermarkets are also making sure that there is no price disadvantage to shopping on line.

One key challenge for them all is to communicate more clearly and consistently the benefits of online shopping, particularly to key target groups such as mothers who must find it a struggle to organise all the paraphernalia needed to go shopping with a young child, and to older groups who may welcome the benefits such as having heavy shopping delivered to the door. Interestingly many of the Mumsnet mums were so committed to the benefits of online that they were prepared to shop around until they found a store they could rely on. But not everybody will be prepared to do this, so the other key challenge for supermarkets is to ensure total consistency, making every online shopping experience a good one.

Solve both of these and online could easily achieve 10% of all food buying.