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.
2 comments:
It's been an interesting evolution when it comes to online shopping of food. I was quite an advocate of the service Peapod in the states, and it was good, but I found that sometimes the selection wasn't up to snuff when it came to specialty items. I was fine with packaged goods, in fact, I still utilize services that deliver non perishables - paper products, cereal, and canned goods. I am nervous about buying meats without looking at them first, so that's clearly where the consumer may need a boost in confidence.
I think you have hit on a big area of concern for potential online customers. Meat is expensive and so the customer risks throwing alot of money away if the meat falls below the required quality.Also, bad meat can be injurious to health,and the customer can never be absolutely confident that the meat has been handled properly prior to delivery, which can add to customer nervousness.
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