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.
2 comments:
At times I have deeply embraced online shopping for groceries. Living in the suburbs, it was convenient to schedule a delivery time, and checking lists online helped to avoid the unplanned spend. It's great for packaged goods - cereal, detergent, salad dressing, etc. However, I've always been hesitant to order fresh produce and meats. That's something I want to see and select myself. I think in the U.S., these services are quite popular for apartment dwellers who don't always have the resources of large supermarkets.
Thank you for your comment.
I think you have put your finger on a key issue which will limit how big online grocery buying can get.Regardless of the safeguards supermarkets put in place to reassure customers that their fresh food will be top quality, something substandard will slip through the net, and cause alot of annoyance and inconvenience. At least in store shoppers can walk away from a product they do not like the look of.
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