Online Grocery Shopping - Some Facts and Figures

My search for hard data about trends in food buying continues with a look this week at online grocery shopping.

This is another topic receiving considerable media coverage, and attracting massive financial investment.
Morrisons supermarket paid £32million for a 10% stake in Fresh Direct, a new York based company, in return for detailed information about what makes their business successful. Ocado, which only sells on line, floated on the stock market to mixed reviews, but it is valued by some investors despite not having made a profit in the 10 years they have been going.

The optimism stems from huge growth in online sales. Recently Tesco said they were experiencing "double digit" growth (corporate speak for just above 10%). Sainsbury said they grew by "over 20%" in the last year, and Ocado reported sales up 21% in the last quarter.

So, how big is online now, and how big might it get?

The Institute of Grocery Distribution estimates that online grocery sales amounted to £4.8 billion in 2010, which sounds massive, but is just 3.2% of the total grocery market. As the IGD says, online is a small and infrequently used way of shopping, with just 6% of shoppers using online as their main way to buy groceries. Those that do use place an order less than once a month. Younger people with children are most likely to be online shoppers, and usage tails off with age.

With growth of 21% in 2010, and a predicted growth of 15% per year, online shopping is is indeed increasing at a  faster rate than that for the market as a whole, and by 2015 will be bigger than the discount channel (Aldi and Lidl).

But, despite being relatively small, there is considerable optimism about the future for online. Mark Price of Waitrose reckons their online sales will grow by "40%, 50%, 60%" per annum. Certainly the rate of investment is not slowing down, as supermarkets address the issues which are getting in the way of growth like inflexible delivery times, high delivery costs, products with insufficient shelf life left, and frequently bizarre substitutes if a first choice item is not available.

Basically the big grocery chains will invest in any emerging trend which might give them the edge over competitors. They have decided that online is here to stay because it fits the needs of some people for convenient shopping any time and anywhere the shopping urge strikes. Not only are some shoppers this way inclined, but Smartphone technology provides the means of fulfilling the need. Consumers can now order their groceries in the middle of the night, in the office, on the sofa, and even, as a recent Tesco advert showed, emerging from the shower.

Consumer Purchases of "Ethical" Foods - Some Data from DEFRA

It is difficult to get a factual grip on the difference between what consumers say they will do and what they actually do when buying food. DEFRA has had a stab at this as part of their effort to build a sustainable food chain.

Their research confirms that consumers are interested in the issues surrounding sustainable food production, but that actual purchase of some foods generally defined as ethical remains fairly low.

Free range eggs

This is the animal welfare issue that has gained most support. 50% of those who think animal welfare is important buy free range eggs - but only a third of them buy free range all the time, and at the other end of the spectrum, 31% buy free range less than 10% of the time.

Free range chicken

88% of households buy free range chicken less than 10% of the time, and 75% never buy free range at all. DEFRA does not report purchase of higher welfare chicken where sales have grown rapidly, and so the numbers may underplay consumer committment to welfare.

Fair Trade tea and coffee

This is another sector which has received wide publicity, but 93% of households buy fair trade coffee less than 10% of the time, with the equivalent figure for tea being 85%.

British apples in season

Despite growing enthusiasm for local produce, 62% of households buy British apples in season less than 10% of the time.

Green issues

The DEFRA research does not give buying figures for environmentally friendly products, but does give clues about peoples' feelings on the subject. In general, people are aware of the issues but stop short of agreeing with inconvenient or financially disadvantageous measures to limit environmental damage. So, whilst 82% agree that people have a duty to recycle, only 13% feel car owners should pay higher taxes to offset the environmental damage they do, and just 8% strongly agree that people who fly should bear the cost of environmental damage.

The DEFRA research paints a picture of informed consumers, who say they are actively seeking sustainable or ethical foods, but who are not yet wholly committed to buying them.

It serves as a timely reminder that, for most people, making the leap from being informed and interested to embracing a wholesale change in buying behaviour takes a very long time.