E-Commerce: The Internet Grocery Market Market Assessment 2007
Key Note Publications Ltd, September 2007
The Internet grocery market is an extension of the home-shopping philosophy and a sector with considerable long-term potential. Both retailers and customers derive benefits from the practice. Online shopping enables customers to view a wide range of products, to compare prices and to arrange delivery at a convenient time. It provides retailers with a new channel through which to sell their products, to display a wide range of items to customers, and to develop their share of a fast-growing sector of the market.
The online grocery sector continues to be dominated by the major supermarket chains, namely Tesco, Sainsbury's, ASDA and Waitrose; Tesco (via its Tesco.com service) is the clear market leader. Ocado, a warehouse-based online grocery retailer that is partly owned by the John Lewis Partnership, also has a leading position in the market.
The online grocery market is still very much in its growth phase, and many of the leading suppliers — as well as the niche online grocers — continue to report record sales and orders. The buoyancy of the market has encouraged companies such as Sainsbury's and ASDA to increase the coverage area of their delivery services, as well as the range of products they offer online. The area of geographical coverage provided by Ocado is also steadily increasing.
For major retailers considering becoming involved in the Internet grocery market, there are some formidable barriers to entry. These include high start-up costs, efficient stock-picking and replenishment systems, comprehensive delivery networks and user-friendly website design. The profitability or otherwise of offering an online service is a deciding factor, and even some of the leading food-sector retailers have questioned whether meaningful returns can be made. However, demand for online grocery services is growing at such a pace that the major multiples not involved in the sector may well be at a competitive disadvantage to those that are.
The development of the online grocery market continues to rely on the companies currently involved, as new, major entrants are somewhat of a rarity. For example, Morrisons (the UK's fourth-largest supermarket chain by market share) has yet to develop an online sales presence and so has Somerfield (the UK's fifth-largest supermarket chain). The Co-operative Group, the Musgrave Group (which operates the Budgens and Londis fascias), and leading discount stores such as Aldi and Lidl have also refrained from becoming involved.
Efficient stock control and high product-substitution rates are among the other major issues faced by online grocers. Online customers order from a stock list that is updated periodically, but — as the number of items ordered in an online grocery shop can be high, and as not all products will be in stock — suppliers often include a replacement or `substitute' product rather than leave the customer with no product at all. A high substitution level can mean that the delivered selection looks very different from the ordered basket and, as such, consumers do not welcome high substitution rates. Much of the current emphasis is based on reducing the level of substitutions to a minimum acceptable figure.
The UK has Europe's second-highest and the world's fifth-highest number of broadband subscriptions. These higher consumer usage rates of broadband have enabled the UK to become a leading centre for online sales in general, and for online sales of grocery products in particular. At the present time, the UK is considered to have one of the world's most developed Internet grocery industries.
Exclusive research commissioned for this report showed that 15.9% of respondents purchased groceries via the Internet at least once in a year, with 3.2% making online purchases at least once a week and 2.7% making them two or three times a month. The largest proportion, 4.5%, purchased groceries online one or two times a year. The research findings also suggested that fewer than one in five respondents who purchased groceries online bought at least three-quarters of their monthly groceries in this way.
Key Note forecasts that, over the next 5 years (to 2011), the UK Internet grocery market will continue to show strong growth and will account for an increasing — although still relatively small — share of retail sales through stores that predominantly sell food. Between 2007 and 2011, the value of the Internet grocery market is expected to rise by more than four-fifths compared with the figure for 2006.
Executive Summary
1. Introduction
OVERVIEW
Supermarkets Online
Niche and Specialist Suppliers
Research
DEFINITION
Business-to-Consumer Market Included
Business-to-Business Market Excluded
2. Strategic Overview
MARKET DYNAMICS AND SEGMENTATION
The UK Grocery Market
Table 1: The Total UK Grocery Market by Share of the Leading Supermarket Chains (%), 12 Weeks Ending 20th May 2007
Figure 1: The Total UK Grocery Market by Share of the Leading Supermarket Chains (%), 12 Weeks Ending 20th May 2007
Table 2: Financial Results for the Leading UK Supermarket Chains (£m and %), Latest Financial Year
The UK Internet Grocery Market
DISTRIBUTION
COMPETITIVE STRUCTURE
The Traditional Grocery Market
The Internet Grocery Market
Capital Costs
ADVERTISING
Table 3: Main Media Advertising Expenditure on Online Grocery Shopping (£000), Years Ending December 2004-2006
Table 4: Main Media Advertising Expenditure by the Supermarket and Grocery Chains (£000), Year Ending December 2006
Table 5: Main Media Advertising Expenditure by Tesco on Online Shopping (£000), Years Ending December 2002-2006
THE CONSUMER
Table 6: Household Ownership of a Personal Computer by Sex, Age, Social Grade and Region (% of respondents), 2006
Table 7: Use of a Computer at Place of Work in the Previous 12 Months by Sex, Age, Social Grade and Region (% of respondents), 2006
Table 8: Household Use of a Personal Computer to Access the Internet, and Own Use of a Computer at Work to Access the Internet, by Sex, Age, Social Grade and Region (% of respondents), 2006
Table 9: Length of Time Spent on the Internet Each Month (% of respondents), May 2007
Broadband Usage
Table 10: Number of Broadband Internet Connections in the UK (million), Years Ending December 2002-2006
Figure 2: Number of Broadband Internet Connections in the UK (million), Years Ending December 2002-2006
Use of Broadband by Socio-Economic Groupings
Consumer Irritations Regarding Internet Grocery Shopping
Online Shopping Market Grows
MARKET FORECASTS
3. Supermarkets Online
BACKGROUND
MARKET SIZE
Table 11: The Approximate Total UK Internet Grocery Market by Supplier by Value at Current Prices (£m), Years Ending December 2002-2006
Figure 3: The Approximate Total UK Internet Grocery Market by Supplier by Value at Current Prices (£m), Years Ending December 2002-2006
Table 12: The Approximate Total UK Internet Grocery Market by Supplier by Value at Current Prices (%), Years Ending December 2002-2006
Figure 4: The Approximate Total UK Internet Grocery Market by Supplier by Value at Current Prices (%), Years Ending December 2002-2006
Online and Total Grocery Sales
Table 13: The Approximate UK Internet Grocery Market as a Percentage of Retail Sales Through `Predominantly Food Stores' in Great Britain by Value at Current Prices (£m and %), 2002-2006
CONSUMER TRENDS
MARKETING ACTIVITY
ADVERTISING
Table 14: Main Media Advertising Expenditure by Online Grocers and by Supermarkets and Grocery Chains (£000 and %), Years Ending December 2002-2006
DISTRIBUTION
4. Niche and Specialist Suppliers
BACKGROUND
MARKET SIZE
Table 15: The Approximate UK Internet Grocery Market For Niche and Specialist Suppliers by Value at Current Prices (£m), 2002-2006
Figure 5: The Approximate UK Internet Grocery Market For Niche and Specialist Suppliers by Value at Current Prices (£m), 2002-2006
CONSUMER TRENDS
MARKETING ACTIVITY
ADVERTISING
Table 16: Main Media Advertising Expenditure by Niche and Specialist Online Grocery Retailers (£000 and number), Years Ending December 2002-2006
DISTRIBUTION
5. An International Perspective
INTRODUCTION
THE US ONLINE GROCERY MARKET
THE EU ONLINE GROCERY MARKET
THE ADOPTION OF BROADBAND
Table 17: Number of Broadband Subscribers per 100 Inhabitants by OECD Country, December 2002-2006
Table 18: Number of Broadband Subscribers in OECD Countries (million), Years Ending December 2002-2006
Table 19: Number of Broadband Subscribers by OECD Country (000), Years Ending December 2005 and 2006
Use of the Internet in the EU
Table 20: Household Penetration of Internet Access and Broadband Connection in the EU-25 by Country (% of households), First Quarter 2006
Table 21: Use of the Internet at Least Once a Week by Individuals in the EU-25 by Country by Sex and Age (% of individuals), First Quarter 2006
Credit- and Debit-Card Usage
Table 22: Growth in the Number of Visa Cards in Europe by Country (%), Year Ending September 2006
Table 23: Growth in Point-of-Sale Spending on Visa Cards in Europe by Country (%), Year Ending September 2006
6. PEST Analysis
POLITICAL FACTORS
Office of Fair Trading Proposes to Refer Grocery Market to Competition Commission
Food Safety Act 1990
New Rules For Reporting Card, Cheque and Online Banking Fraud
Guideline Daily Amounts and the `Traffic-Light' System
ECONOMIC FACTORS
Per Capita Household Disposable Income
Table 24: Household Disposable Income Per Capita (£), 2002-2006
Food Price Changes
Table 25: Retail Price Index for All Items, Food, and Alcohol and Tobacco (index 1987=100), 2002-2006
Credit-Card Fraud
SOCIAL FACTORS
Household Ownership of Home Computers and Internet Connections
Table 26: Household Ownership of Home Computers and Internet Connections in the UK (% of households), 2001/2002-2005/2006
By Income
Table 27: Household Ownership of Home Computers and Internet Connections in the UK by Gross Income Decile Group (% of households), 2004/2005 and 2005/2006
By Household Composition
Table 28: Household Ownership of Home Computers and Internet Connections in the UK by Household Composition (% of households), 2004/2005 and 2005/2006
By Region
Table 29: Household Ownership of Home Computers and Internet Connections in the UK by Government Office Region and Country (% of households), 2003/2004-2005/2006
TECHNOLOGICAL FACTORS
More Environmentally Friendly Delivery Vans
Remote Card Authentication
Virtual Pre-Paid Visa Account
7. Consumer Dynamics
INTRODUCTION
GROCERY PURCHASING VIA THE INTERNET
Shopping Online for Groceries at Least Once a Year
Table 30: Grocery Purchasing via the Internet at Least Once in a Year (% of respondents), May 2007
Frequency of Online Grocery Purchases
Table 31: Grocery Purchasing via the Internet by Frequency (% of respondents), 2004, 2006 and 2007
Table 32: Grocery Purchasing via the Internet by Frequency (% of respondents), May 2007
AVERAGE SPEND PER ONLINE SHOPPING SESSION
Table 33: Online Grocery Shopping by Amount Usually Spent (% of respondents who have used/use the Internet to purchase groceries), 2004, 2006 and 2007
Table 34: Online Grocery Shopping by Amount Usually Spent (% of respondents who have used/use the Internet to purchase groceries), May 2007
LENGTH OF TIME RESPONDENTS HAVE BEEN PURCHASING GROCERIES OVER THE INTERNET
Table 35: Length of Time Respondents Have Been Buying Groceries Online (% of respondents who have used/ use the Internet to purchase groceries), May 2007
PERCENTAGE OF MONTHLY GROCERIES THAT ARE PURCHASED VIA THE INTERNET
Table 36: Percentage of Total Monthly Groceries That Are Bought Online (% of respondents who have used/ use the Internet to purchase groceries), May 2007
RETAILERS FROM WHICH GROCERIES ARE PURCHASED ONLINE
Table 37: Online Grocery Shopping by Source of Purchase (% of respondents who have used/use the Internet to purchase groceries), May 2007
8. Company Profiles
OVERVIEW
ASDA GROUP LTD
Corporate Strategy
Advertising
Distribution
Profitability
Table 38: Financial Results for ASDA Group Ltd (£m and %), Years Ending 31st December 2003-2005
Recent Company Developments
J SAINSBURY PLC
Corporate Strategy
Advertising
Distribution
Profitability
Table 39: Financial Results for J Sainsbury PLC (£m and %), Years Ending 26th March 2005, 25th March 2006 and 24th March 2007
Recent Company Developments
OCADO LTD
Corporate Strategy
Advertising
Distribution
Profitability
Table 40: Financial Results for Ocado Ltd (£m and %), Years Ending 30th November 2003, 28th November 2004 and 27th November 2005
Recent Company Developments
TESCO PLC
Corporate Strategy
Advertising
Distribution
Profitability
Table 41: Financial Results for Tesco PLC (£m and %), 53 Weeks Ending 28th February 2004 and Years Ending 26th February 2005, 25th February 2006 and 24th February 2007
Table 42: Financial Results for Tesco.com (£m and %), 53 Weeks Ending 28th February 2004 and Years Ending 26th February 2005 and 25th February 2006
Recent Company Developments
WAITROSE LTD
Corporate Strategy
Advertising
Distribution
Profitability
Table 43: Financial Results for Waitrose Ltd (£m and %), 53 Weeks Ending 31st January 2004 and Years Ending 29th January 2005 and 28th January 2006
Recent Company Developments
OTHER COMPANIES
Organic Foods
Abel & Cole Ltd
Chocolates
Thorntons PLC
Meat
Donald Russell Ltd
Teas & Coffees
Fortnum and Mason PLC
Delicatessen & Gourmet
Real Food Direct
Fruit
First4fruit
Health Foods
Holland & Barrett Retail Ltd
Food Hampers
Harrods Ltd
Alcoholic Drinks
Majestic Wine Warehouses Ltd
Flowers and Wine
Marks and Spencer PLC
Internet Grocery Comparison Sites
MySupermarket.co.uk
9. The Future
ECONOMIC TRENDS
FURTHER UPTAKE OF BROADBAND TECHNOLOGY
AN ONGOING RISE IN ONLINE SALES
NEW ENTRANTS TO THE MARKET
GROWTH RATES STILL HIGH
PERCENTAGE OF ADULTS PURCHASING GROCERIES ONLINE REMAINS LOW
FORECASTS 2007 TO 2011
Table 44: The Forecast Total UK Internet Grocery Market by Value at Current Prices (£m), 2007-2011
Figure 6: The Forecast Total UK Internet Grocery Market by Value at Current Prices (£m), 2007-2011
Table 45: The Forecast UK Internet Grocery Market as a Percentage of Retail Sales Through `Predominantly Food Stores' in Great Britain by Value at Current Prices (£m and %), 2007-2011
10. Consumer Confidence
METHODOLOGY
KEY FINDINGS THIS QUARTER
THE WILLINGNESS TO BORROW
Confidence Improves
Table A: The Average Amount Consumers Are Willing to Borrow in Order to Purchase Expensive Items at Current and Constant November 2004 Prices (£ and £bn), February 2006-2007
Willingness to Borrow Slips Slightly
Table B: The Number of Adults Willing to Borrow in Order to Purchase Expensive Items (000 and %), February 2006-2007
SPENDING FROM SAVINGS
Slight Increase in Spending from Savings
Table C: The Average Amount Consumers Are Willing to Spend from Savings in Order to Purchase Expensive Items at Current and Constant November 2004 Prices (£ and £bn), February 2006-2007
Saving Grows in Relative Importance
Table D: The Average Amounts Adults Are Confident Spending to Purchase Expensive Items (£ and %), February 2006-2007
11. Further Sources
General Sources
Government Publications
Other Sources
Bisnode Sources
-ASDA GROUP LTD
-J SAINSBURY PLC
-OCADO LTD
-TESCO PLC
-WAITROSE LTD
-Abel & Cole Ltd
-Thorntons PLC
-Donald Russell Ltd
-Fortnum and Mason PLC
-Real Food Direct
-First4fruit
-Holland & Barrett Retail Ltd
-Harrods Ltd
-Majestic Wine Warehouses Ltd
-Marks and Spencer PLC
Product Samples
A sample for this product is available. Please Login/Register to download this sample.
Customers who bought this item also bought
All rights reserved. © Copyright 2013 Research and Markets WWW5
Terms and Conditions Privacy Policy Publishers Employment Opportunities Site Map Link to us Webmaster Affiliate Network
