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Online Grocery Retailing - UK - March 2017

OVERVIEW
What you need to know
Products covered in this report
EXECUTIVE SUMMARY
The market
Online continues to grow ahead of the wider grocery market
Figure 1: Total online grocery market size (including VAT), 2011-21
Store-based retailers dominate the market
Figure 2: Share of total online grocery market, by type of online grocery operation, 2011-21
Online grocery sales peak in the final quarter
Figure 3: Average weekly retail sales of all online food retailers, January 2014-January 2017
Companies and brands
Tesco accounts for a third of the market, but its share is falling
Figure 4: Leading online grocery retailer’ estimated market shares (excluding VAT), 2016
Speed of delivery the focus of innovation in 2016
Consumers have greater trust in the Amazon brand than rival grocers
Figure 5: Attitudes towards and usage of selected brands, October and December 2016
The Consumer
Just under half of consumers shop online for groceries
Figure 6: Online grocery usage, December 2016
Younger consumers the target audience
Figure 7: Usage and attitudes to online grocery services, by age, December 2016
Tesco the dominant player online
Figure 8: Where they shop online by Where they do a majority of their shopping and where else they shop, December 2016
Delivery prices and minimum spends the biggest barrier to greater use
Figure 9: What would encourage online grocery use, December 2016
Just under a quarter have a delivery pass
Figure 10: Ownership and interest in delivery passes, December 2016
Same-day delivery: the next evolution for online grocery?
Figure 11: Attitudes to online grocery services, December 2016
What we think
ISSUES AND INSIGHTS
Getting Amazon in perspective
The facts
The implications
Same-day delivery: a necessary evil?
The facts
The implications
What about click-and-collect?
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Online continues to grow ahead of the wider grocery market
Store-based retailers dominate the market
Online grocery sales peak in the final quarter
Inflation on the rise
Online access via smartphones on the rise
The connected home presents an opportunity for online grocery services
MARKET SIZE AND FORECAST
Online continues to outperform the wider grocery market
Figure 12: Total online grocery market size (including VAT), 2011-21
Figure 13: Total online grocery market size (including VAT), at current and constant prices, 2011-21
Despite strong growth, online accounts for just 6% of total sector sales
Figure 14: Online grocery sales as a % of all grocery retail sales, 2011-21
Store based players fight back in 2016
Figure 15: Share of total online grocery market, by type of online grocery operation, 2011-21
The usual suspects dominate the store-based segment
Figure 16: Online grocery sales by store-based grocery retailers (Including VAT), 2011-21
Figure 17: Online grocery sales by store-based grocery retailers (Including VAT), at current and constant prices, 2011-21
Innovation is likely to drive the online-only segment
Figure 18: Online grocery sales by online-only retailers (including VAT), 2011-21
Figure 19: Online grocery sales by online-only retailers (including VAT), at current and constant prices, 2011-21
Forecast methodology
MARKET DRIVERS
Online continues to grow ahead of all grocery retail
Figure 20: Annual % change in the retail sales of food, by all food sales and online food sales, Jan 2014-Jan 2017
Online takes its largest share in November…
Figure 21: Online food stores sales as a % of all food stores retail sales, Jan 2014-Jan 2017
…but December shows the highest average sales
Figure 22: Average weekly retail sales of all online food retailers, Jan 2014-Jan 2017
Sterling’s weakness is pushing prices up
Figure 23: Annual % change in the price of food and non-alcoholic beverages and alcoholic beverages and tobacco prices, Jan 2015-Jan 2017
Core food categories trending upwards
Figure 24: Annual % change in the price of core food categories, Jan 2016-Jan 2017
Device ownership: more own a smartphone than a laptop
Figure 25: Devices used to access the internet in the last three months, June 2013-September 2016
Smart home: a big opportunity for online grocers?
Figure 26: Interest in making home more connected, March 2016
THE CONSUMER – WHAT YOU NEED TO KNOW
Just under half of consumers shop online for groceries
Younger consumers are the target audience
Tesco is the dominant player online
Delivery prices and minimum spends the biggest barrier to greater use
Just under a quarter have a delivery pass
Same-day delivery: the next evolution for online grocery?
ONLINE GROCERY USAGE
Just under half of consumers shop online for groceries
Figure 27: Online grocery usage, December 2016
Total usage is plateauing but the number only shopping online is growing
Figure 28: Trend in online grocery usage, November 2014-December 2016
Online shoppers continue to shift more of their shopping online
Figure 29: Changes in online grocery usage, December 2016
Figure 30: Changes in online grocery usage, by how they shop for groceries online, December 2016
DEMOGRAPHICS OF ONLINE GROCERY USE
Younger consumers more likely to shop online for groceries
Figure 31: Usage and attitudes to online grocery services, by age, December 2016
Figure 32: Usage of online grocery services, by age, December 2016
Online far more popular with young families
Figure 33: Usage of online grocery services, by parental status, December 2016
Figure 34: Usage of online grocery services, by age of children in household, December 2016
Online most popular in urban areas, particularly London
Figure 35: Usage of online grocery services, by type of area lived in, December 2016
Figure 36: Usage of online grocery services, by region lived in, December 2016
Usage comes at a cost
Figure 37: Usage of online grocery services, by socio-economic goods, December 2016
WHERE THEY BUY 
Tesco by far the most popular online grocery retailer
Figure 38: Where they shop for groceries online, December 2016
Where they do a majority of their online shopping
Figure 39: Where they shop online by Where they do a majority of their shopping and where else they shop, December 2016
Trend data: smaller players gaining
Figure 40: Where they shop for groceries online, December 2015 and December 2016
Figure 41: Trend data: Primary and secondary retailers used to purchase groceries online, December 2015 and 2016
Online consumer bases skew younger
Figure 42: Where consumers shop for the majority of their groceries, by socio-economic group and age, December 2016
What about the discounters?
Figure 43: Attitudes to a potential online grocery service from the discounters, December 2016
Figure 44: Attitudes to a potential online grocery service from the discounters, by retailer currently used to do the majority of shopping, December 2016
OWNERSHIP OF AND ATTITUDES TO DELIVERY PASSES
Around a quarter of online grocery shoppers have a pass
Figure 45: Ownership and interest in delivery passes, December 2016
Growing number of online shoppers have a delivery pass
Figure 46: Changes in delivery pass ownership and attitudes, December 15 and December 16
Those who shop online-only for groceries most likely to have a pass
Figure 47: Ownership of delivery passes, by how much of grocery shopping is done online, December 2016
Most see delivery passes as good value, but many also acquired them at a discount
Figure 48: Attitudes to delivery passes, December 2016
WHAT WOULD ENCOURAGE MORE ONLINE GROCERY USE
Cost still off putting
Figure 49: What would encourage online grocery use, December 2016
Current shoppers: cost the main barrier to increased use
Figure 50: What would encourage greater online grocery use, December 2016
Figure 51: What would encourage online grocery use, by select age groups, December 2016
Lapsed shoppers: freshness and substitutions key
Figure 52: What would encourage lapsed shoppers to come back to online, December 2016
Non-users: those interested see delivery as the main barrier
Figure 53: What would encourage non-users to begin shopping online for groceries, December 2016
Figure 54: What would encourage non-users to begin shopping online for groceries, by interest levels in shopping online for groceries December 2016
ATTITUDES TO SAME-DAY DELIVERY, NON-FOODS, MOBILE APPS AND HYGIENE STANDARDS
Same-day delivery: The next step for online grocery?
Figure 55: Attitudes to same-day delivery of online grocery orders, December 2016
Mobile applications: work needed?
Figure 56: Attitudes to mobile applications and voice control, December 2016
Figure 57: Attitudes to mobile applications and voice control, by usage of online grocery services, December 2016
A majority think a non-food range is important when choosing where to shop
Figure 58: Attitudes to online grocery services and non-foods, December 2017
Figure 59: Agreement to Attitudes to online grocery services and non-foods, by age, December 2016
Concerns exist around the hygiene of online grocery services
Figure 60: Attitudes to hygiene standards of online grocery services, December 2016
LEADING RETAILERS – WHAT YOU NEED TO KNOW
Tesco accounts for a third of the market, but its share is falling
Leading players ramp up fulfilment capabilities
Ocado the biggest spender on advertising
Speed of delivery the focus of innovation in 2016
Consumers have greater trust in the Amazon brand than rival grocers
LEADING RETAILERS AND MARKET SHARES
Tesco the market leader but facing increased pressure
Figure 61: Leading online grocery retailer’ estimated market shares (excluding VAT), 2016
Figure 62: Leading online grocer retailers’ estimated market shares (excluding VAT), 2014-16
Online revenues
Figure 63: Leading online grocery retailers’ net internet revenues, 2014-16
Leading players: breakdown of revenues
Figure 64: Leading online grocery retailers’ estimated total online revenues, by grocery and non-grocery, 2014-16
Figure 65: Leading online grocery retailers’ online sales as % of their total UK sales, 2014-16
Smaller players: market shares
Figure 66: Smaller online grocery players estimated market shares, 2014-16
Figure 67: Smaller online grocery players turnover, 2014-16
COMPETITIVE STRATEGIES – KEY METRICS 
Coverage and fulfilment
Figure 68: Selected leading online grocers’ coverage and fulfilment centres, 2017
Home delivery metrics
Figure 69: Selected leading online grocers’ delivery metrics, March 2017
Delivery passes
Figure 70: Selected leading online grocers’ delivery pass details, March 2017
Click and collect
Figure 71: Selected leading online grocers’ click-and-collect details, March 2017
Amazon
Figure 72: Amazon: Key online grocery services metrics, March 2017
ADVERTISING AND MARKETING ACTIVITY
Total sector advertising spend down 25.4% year-on-year in 2016
Figure 73: UK online supermarket/grocer/food total recorded above-the-line, online display and direct mail advertising expenditure, 2012-16
Waitrose the only leading supermarket brand to increase spend year-on-year
Figure 74: leading UK online supermarket/grocer/food retailers total recorded above-the-line, online display and direct mail advertising expenditure, 2012-16
Outdoor attracts the biggest percentage of total sector advertising spend
Figure 75: UK online supermarket/grocer/food total recorded above-the-line, online display and direct mail advertising expenditure, by media type, 2016
Nielsen Ad Intel coverage
INNOVATIONS AND LAUNCH ACTIVITY
Continued emphasis on speed of delivery
Tesco launches one-hour delivery in London
Sainsbury’s weighs in with Chop Chop
Amazon raises the bar with AmazonFresh and Morrisons at Amazon
In Europe Carrefour and Albert Heijn trial one-hour services
Walmart looks at how it can take a different approach to delivery
Cornershop app promises 90-minute service in Mexico and Chile
Operators look to increase convenience and accessibility
Dash buttons allow consumers to order immediately
Amazon begins to develop an own label offering
Bus stop ordering
HomeRefill aims to help consumers forget about grocery shopping
Online grocery shopping for the visually impaired
Operators seek to improve user experience and product quality
Ocado invests in interface development
Amazon addresses quality concerns in Italy
Discounters wrestle with online conundrum
Lidl launches Lidl Express click-and-collect store in Germany
Kaufland first discounter to launch online delivery service
BRAND RESEARCH
What you need to know
Brand map
Figure 76: Attitudes towards and usage of selected brands, October and December 2016
Key brand metrics
Figure 77: Key metrics for selected brands, October and December 2016
Brand attitudes: Amazon has a strong platform to develop online grocery business
Figure 78: Attitudes, by brand, October and December 2016
Brand personality: ethical concerns only black mark against Amazon
Figure 79: Brand personality – Macro image, October and December 2016
Big four lacking the ‘X-factor’
Figure 80: Brand personality – Micro image, October and December 2016
Brand analysis
Amazon has strong platform to develop its grocery business
Figure 81: User profile of Amazon, December 2016
Ocado struggles to differentiate itself
Figure 82: User profile of Ocado, December 2016
Tesco shows notable improvement
Figure 83: User profile of Tesco, October 2016
Sainsbury’s also lifts its game
Figure 84: User profile of Sainsbury’s, October 2016
Asda loses ground in key areas
Figure 85: User profile of Asda, October 2016
Morrisons regains lost ground
Figure 86: User profile of Morrisons, October 2016
Waitrose in danger of losing its way
Figure 87: User profile of Waitrose, October 2016
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Data sources
Financial definitions
VAT
Abbreviations
Consumer research methodology
APPENDIX – MARKET SIZE AND FORECAST
Market size methodology
Forecast Methodology

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