Grocers fail to deliver online

As the Office of Fair Trading confirms it is to refer the UK’s £125bn grocery sector to the Competition Commission, we take a look at grocery shopping online – an area that is dominated by Tesco, the UK’s biggest supermarket.

If supermarkets are to expand their limited number of online customers and match the growth seen by other online retailers, they must offer ‘convenience’ and choice to time-poor, cash-rich consumers

As the Office of Fair Trading confirms it is to refer the UK’s &£125bn grocery sector to the Competition Commission, we take a look at grocery shopping online – an area that is dominated by Tesco, the UK’s biggest supermarket.

More consumers are turning to the Web for quicker solutions to everyday chores such as paying bills, and it is easy to see how pushing grocery shopping trolleys could be replaced by the click of a mouse. Yet, in reality, despite a steady increase in the number of UK adults buying products or services online, research by Ipsos MORI Retail shows that the proportion of online grocery shoppers has remained static since 2003.

The percentage of adults claiming access to the internet and the number buying online have both risen by five points since 2003, to 59% and 26% respectively. Over the same period, the online grocery population has remained steady at just 5%.

The research shows that, generally, UK shoppers are more likely to buy online the longer they have been online. While general online shopping increases steadily as length of usage increases, grocery shopping doesn’t see a significant rise until shoppers have been online for more than six years. Three times as many adults have bought groceries online after six years’ access compared to up to one year – 16% versus 5% – while the numbers buying anything online in that period increases from 21% to 52%.

People need a lot of time to feel comfortable online before breaking basic shopping habits. But with more consumers buying other products and services online, there is more to this reluctance than the security concerns that initially hampered online shopping. The static market to date points to more specific barriers to the online grocery shopping experience.

Grocery shopping is not only a relatively complicated buying decision, it is also an habitual activity. Going to the supermarket is a way of life for many people; some like any excuse to go to a store; it’s easier to browse; you can give in to impulse buys and supermarkets offer points of interest to break up the experience.

The challenge for retailers is to convey the specific benefits of online, and offer potential customers more reasons to use the channel. In particular, they should be looking to improve ordering processes and delivery mechanisms, building on the loyalty of existing in-store customers by replicating the brand experience online.

Retailers also need to recognise people’s supermarket “pressure points”, and take greater steps online to anticipate customer needs and facilitate ease of choice, even allowing impulse buying by highlighting deals or popular purchases.

With a static market, retailers need to work hard to build their customer base online, and an obvious starting point is to expand by looking at which consumers have a propensity to shop online. The image of a young city dweller without a car is, perhaps, the typical view of the online shopper. However, research suggests that a lack of transport is often not the primary driver for online grocery shopping.

In fact, 81% of online grocery shoppers have their own car, compared to just 63% of other shoppers. Instead, it seems busy parents are taking up the service to avoid taking children to the supermarket. Nearly half of online grocery shoppers (48%) have children aged under 14 at home, compared to just under a third (30%) of other household shoppers, and twice as many (29% compared to 14%) live in four-person households.

If retailers are to overcome the delayed interest in shopping online, it’s important they understand what it means to busy parents and two-career households. Delivery charges and broad delivery times offered by online grocery sites are geared towards people doing one main grocery shop. Yet, this jars with the lifestyle of all those time-poor professionals and families it promises to suit.

These people’s grocery shopping patterns are much more ad hoc, buying regular top-up items and food for that evening. To suit this market, retailers need to think of different ways to appeal to them – whether it’s reviewing delivery charges or offering an online convenience store.

With the right approach, there’s no reason grocery shopping should not see the same steady growth as other online commerce, particularly as broadband penetration rises. Where it does happen online, grocery shopping already tends to be the preserve of those most familiar with the Web and with fastest access – 84% of online grocery shoppers have broadband access, compared to only 32% of other household shoppers.

As these figures increase, retailers will benefit. However, they must be careful to ensure it’s a service that complements the in-store experience.

Natalie Berg, retail analyst at Plant Retail

Online grocery shopping is based on the notion of convenience, albeit at a potentially higher price. The biggest challenge for online grocers is conveying the benefits. Convenience is the primary driver for online grocery shopping. Yet, convenience can take different forms and it might be easier to pop down to the store rather than wait for a delivery with two-hour time slots. Broad delivery times are not the only downfall to online shopping – there is also the constraint of minimum orders. These conditions, along with delivery charges, restrict shoppers from placing small orders and consequently cater primarily for the monthly trip.

Online grocery shopping will gain momentum in the future. But growth will only occur if grocers ensure that convenience is at the top of their list.

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