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E-Commerce: The Internet Grocery Market Assessment 2009
Key Note Publications Ltd, July 2009, Pages: 162
The Internet grocery market is an extension of the home-shopping philosophy. It is a sector that has already demonstrated considerable growth and that promises further substantial increases in the future. Internet sales across many product sectors have achieved — and continue to achieve — high annual growth rates in the UK. Indeed, consumers' passion for and propensity towards purchasing items online show no sign of abating. For consumers, the option of purchasing groceries over the Internet offers a number of advantages: it enables them to view a wide range of products, to compare prices and to arrange delivery at a convenient time. For retailers, the online option provides a new channel through which to sell their products, display a wide range of items to their customers and develop their share of what continues to be one of the fastest-growing sectors of the grocery market.
The Internet or online grocery market in the UK is dominated by four of the UK's major supermarket chains — Tesco, Sainsbury's, ASDA and Waitrose — and by a fifth supplier, Ocado, which is a warehouse-based online operation and a partner distributor to Waitrose. Outside of these five major suppliers, the market is mainly populated by a wide range of niche, specialised retailers, many of which offer products that are not always available in the major supermarkets. Apart from the five leading online suppliers, no other supermarket chains in the UK operate in the online grocery market — not even Morrisons, which is the fourth-largest supermarket chain by market share. The costs and complexity of establishing an online service `from scratch' appear to be a significant obstacle for many of these chains.
The recent focus of the five major online grocers has seen them expand their distribution networks, improve their stock availability levels and enhance the functionality of their websites. However, in the current recession, other factors are now being given more attention — particularly price competition between the sites, which is becoming increasingly important. In addition, environmental issues have become more significant. For example, the leading suppliers have introduced measures to reduce the number of plastic bags used for home-delivered orders and to use more fuel-efficient delivery vehicles.
As at December 2008, the UK had the fifth-highest number of broadband subscriptions among the Organisation for Economic Co-operation and Development (OECD) group of countries (and the third-largest number among the European OECD countries). These high broadband connection rates have enabled the UK to become a leading centre for online sales in general, and for online sales of grocery products in particular. Plans have been outlined to construct a super-fast broadband network across the UK, and this should in turn allow the online grocers to develop new website designs and technologies in order to take advantage of such developments.
Exclusive research commissioned for this report showed that 17.8% of all respondents purchased groceries via the Internet at least once in a year, with 3.8% making online purchases at least once a week and a further 2.4% making them two or three times a month. One in 20 respondents said they purchased groceries online once a month. However, almost a third of those who said they bought groceries via the Internet agreed that, due to the recession, they had reduced the amount they usually spent on online grocery purchases.
This report forecasts that in the 5 years up to 2013, the UK Internet grocery market will continue to demonstrate high annual rates of market expansion and to account for an increasing proportion of grocery sales overall. The value of the Internet grocery market is projected to more than double by 2013, compared with the size of the market in 2008.
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