E-Commerce: The Internet Grocery Market

Published by: Key Note Publications Ltd

Published: Jul. 1, 2009 - 162 Pages

Table of Contents

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 2.1: The Total UK Grocery Market by Share of the Leading Supermarket Chains (%), 12 Weeks Ending 24th February 2008 and 22nd February 2009

Table 2.2: Financial Results for the Leading UK Supermarket Chains (£m and %), Latest Financial Years

The UK Internet Grocery Market

Table 2.3: The Approximate Total UK Internet Grocery Market by Value at Current Prices (£m at rsp), Years Ending December 2004-2008

Figure 2.1: The Approximate Total UK Internet Grocery Market by Value at Current Prices (£m at rsp), Years Ending December 2004-2008

DISTRIBUTION

COMPETITIVE STRUCTURE

The Traditional Grocery Market

The Internet Grocery Market

Capital Costs

ADVERTISING

Table 2.4: Main Media Advertising Expenditure on Online Grocery Shopping (£000), Years Ending December 2004-2008

Table 2.5: Total Main Media Advertising Expenditure by the Supermarket and Grocery Chains (£000), Years Ending December 2004-2008

Table 2.6: Main Media Advertising Expenditure by Tesco on Online Shopping as a Proportion of Tesco's Total Main Media Advertising Expenditure (£000 and %), Years Ending December 2004-2008

THE CONSUMER

Target Group Index Data

Household Ownership of Personal Computers

Table 2.7: Household Ownership of a Personal Computer by Sex, Age, Social Grade, Marital Status, Working Status, Region, Size of Household and Presence of Children (% of respondents), 2008

Household Use of a Personal Computer to Access the Internet

Table 2.8: Household Use of a Personal Computer for Internet Access by Sex, Age, Social Grade, Marital Status, Working Status, Region, Size of Household and Presence of Children (% of respondents), 2008

Amount of Time Spent Using a Personal Computer

Table 2.9: Average Number of Hours Spent Per Week Using a Personal Computer by Sex, Age, Social Grade, Marital Status, Working Status, Region, Size of Household and Presence of Children (% of respondents), 2008

Broadband Internet Access

Number of Broadband Connections

Table 2.10: Number of Residential and Small-Business Broadband Internet Connections in the UK (000), Fourth Quarter 2004-2008

Household Penetration of Broadband Internet Access

Table 2.11: Household Penetration of Broadband Internet Access in the UK (% of adults), Fourth Quarter 2002-2004 and First Quarter 2006-2008

Broadband Internet Access at Home by Age, Social Grade and Income

Table 2.12: Penetration of Broadband Internet Access at Home by Age, Social Grade and Income (% of adults), Second Quarter 2007 and 2008

MARKET FORECASTS

3. Supermarkets Online

BACKGROUND

MARKET SIZE

Table 3.1: The Approximate UK Internet Grocery Market by Supplier by Value at Current Prices (£m at rsp), Years Ending December 2004-2008

Figure 3.1: The Approximate UK Internet Grocery Market by Supplier by Value at Current Prices (£m at rsp), Years Ending December 2004-2008

Table 3.2: The Approximate UK Internet Grocery Market by Supplier by Value at Current Prices (%), Years Ending December 2004-2008

Figure 3.2: The Approximate UK Internet Grocery Market by Supplier by Value at Current Prices (%), Years Ending December 2004-2008

Figure 3.3: The Approximate UK Internet Grocery Market by Supplier by Value at Current Prices (%), Year Ending December 2008

Online and Total Grocery Sales

Table 3.3: The Approximate UK Internet Grocery Market as a Percentage of Retail Sales Through `Predominantly Food Stores' in Great Britain (£m at rsp and %), Years Ending December 2004-2008

CONSUMER TRENDS

Table 3.4: The Impact of the Recession on the Online Purchasing of Groceries by Sex, Age and Social Grade (% of respondents who have used/use the Internet to purchase groceries), February 2009

MARKETING ACTIVITY

ADVERTISING

Table 3.5: Main Media Advertising Expenditure by Online Grocers and by Supermarkets and Grocery Chains (£000 and %), Years Ending December 2004-2008

DISTRIBUTION

4. Niche and Specialist Suppliers

BACKGROUND

MARKET SIZE

Table 4.1: The Approximate UK Internet Grocery Market for Niche and Specialist Suppliers by Value at Current Prices (£m at rsp), 2004-2008

Figure 4.1: The Approximate UK Internet Grocery Market for Niche and Specialist Suppliers by Value at Current Prices (£m at rsp), 2004-2008

CONSUMER TRENDS

MARKETING ACTIVITY

ADVERTISING

Table 4.2: Main Media Advertising Expenditure by Niche and Specialist Grocery Retailers (£000 and number), Years Ending December 2004-2008

DISTRIBUTION

5. An International Perspective

INTRODUCTION

THE US MARKET

FreshDirect

Gopher Grocery

GroceryWorks Holdings

MyWebGrocer.com

Peapod

Other Suppliers

THE EU MARKET

Table 5.1: Percentage of Individuals in the EU-27 Who Ordered Goods or Services Over the Internet for Private Use in the Last Year by Country (%), 2008

Table 5.2: Percentage of Individuals in the EU-27 Who Ordered Goods and Services Over the Internet for Private Use in the Last Year by Category (%), 2008

THE ADOPTION OF BROADBAND

Table 5.3: Total Number of Broadband Subscribers in the OECD by Country, December 2008

Table 5.4: OECD Broadband Penetration Rates by Country (number of broadband subscribers per 100 inhabitants), Fourth Quarter 2004-2008

Table 5.5: Percentage of Households in OECD Countries With Broadband Access, 2007

PAYMENT-CARD USAGE

6. PEST Analysis

POLITICAL FACTORS

Groceries Market Investigation — Final Report

Groceries Supply Code of Practice

Ombudsman For Suppliers

Tesco Wins Competition Appeal

ECONOMIC FACTORS

Impact of the Economic Recession

Table 6.1: Index of Retail Sales Values at Current Prices (index 2000=100 and £m at rsp), 2004-2008

Table 6.2: Percentage Change in Retail Price Index Over 12-Month Period, Year Ending December 2008

Online Grocery Retailers Start to Compete on Price

SOCIAL FACTORS

Food Policy and Food Issues in the UK

Online Retailers Cutting Down on Use of Plastic Bags

Unnecessary Packaging by Supermarkets

Household Ownership of Home Computers and Internet Connections

Table 6.3: UK Household Ownership of Home Computers and Internet Connections (% of households), Years Ending March 2004-2006 and Years Ending December 2006 and 2007

By Income

Table 6.4: UK Household Ownership of Home Computers and Internet Connections by Income Decile Group (% of households), 2007

By Household Composition

Table 6.5: UK Household Ownership of Home Computers and Internet Connections by Household Composition (% of households), 2007

By Region

Table 6.6: UK Household Ownership of Home Computers and Internet Connections by Government Office Region and Country (% of households), 2-Year Averages 2006-2007

TECHNOLOGICAL FACTORS

Ocado Sets up Waste-Reduction Initiative

Online Grocers Use Electric Delivery Vans as Greener Alternative

Tesco's Drivers Receive Road Safety Training

Waitrose Introduces `Eco' Handcarts

Sainsbury's Affected by Website Problems

7. Consumer Dynamics

INTRODUCTION

GROCERY PURCHASING VIA THE INTERNET

Shopping Online for Groceries at Least Once a Year

Table 7.1: Grocery Purchasing Via the Internet at Least Once in a Year (% of respondents), February 2009

Frequency of Online Grocery Purchases

Table 7.2: Grocery Purchasing Via the Internet by Frequency (% of respondents), March 2004, April 2006, May 2007 and February 2009

Table 7.3: Grocery Purchasing Via the Internet by Frequency (% of respondents), February 2009

Average Spend Per Online Shopping Session

Table 7.4: Online Grocery Shopping by Amount Usually Spent (% of respondents who have used/use the Internet to purchase groceries), March 2004, April 2006, May 2007 and February 2009

Table 7.5: Online Grocery Shopping by Amount Usually Spent (% of respondents who have used/use the Internet to purchase groceries), February 2009

Length of Time Respondents Have Been Purchasing Groceries Over the Internet

Table 7.6: Length of Time Respondents Have Been Buying Groceries Online (% of respondents who have used/ use the Internet to purchase groceries), February 2009

Percentage of Monthly Groceries That Are Purchased Via the Internet

Table 7.7: Percentage of Total Monthly Groceries That Are Bought Online (% of respondents who have used/use the Internet to purchase groceries), May 2007 and February 2009

Table 7.8: Percentage of Total Monthly Groceries That Are Bought Online (% of respondents who have used/ use the Internet to purchase groceries), February 2009

Retailers From Which Groceries Are Purchased Online

Table 7.9: Online Grocery Shopping by Source of Purchase (% of respondents who have used/use the Internet to purchase groceries), May 2007 and February 2009

Table 7.10: Online Grocery Shopping by Source of Purchase (% of respondents who have used/use the Internet to purchase groceries), February 2009

Impact of the Recession on Online Grocery Expenditure

Table 7.11: The Impact of the Recession on the Online Purchasing of Groceries (% of respondents who have used/ use the Internet to purchase groceries), February 2009

8. Company Profiles

OVERVIEW

ASDA GROUP LTD

Corporate Strategy

Advertising

Distribution

Profitability

Table 8.1: Financial Results for ASDA Group Ltd (£000 and %), Years Ending 31st December 2005-2007

Future Company Developments

J SAINSBURY PLC

Corporate Strategy

Advertising

Distribution

Profitability

Table 8.2: Financial Results for J Sainsbury PLC (£000 and %), Years Ending 24th March 2007, 22nd March 2008 and 21st March 2009

Future Company Developments

OCADO LTD

Corporate Strategy

Advertising

Distribution

Profitability

Table 8.3: Financial Results for Ocado Ltd (£000 and %), Year Ending 27th November 2005, 53 Weeks Ending 3rd December 2006 and Year Ending 2nd December 2007

Future Company Developments

TESCO PLC

Corporate Strategy

Advertising

Distribution

Profitability

Table 8.4: Financial Results for Tesco PLC (Group Sales) (£000 and %), Years Ending 24th February 2007 and 23rd February 2008, and 53 Weeks Ending 28th February 2009

Table 8.5: Approximate Financial Results for Tesco.com (£000 and %), Years Ending 24th February 2007 and 23rd February 2008, and 53 Weeks Ending 28th February 2009

Future Company Developments

WAITROSE LTD

Corporate Strategy

Advertising

Distribution

Profitability

Table 8.6: Financial Results for Waitrose Ltd (£000 and %), Years Ending 28th January 2006, 27th January 2007 and 26th January 2008

Future Company Developments

OTHER COMPANIES

Specialist Suppliers

Abel & Cole Ltd

Donald Russell Ltd

High-Street Chains

Holland and Barrett Retail Ltd

Marks and Spencer PLC

Thorntons PLC

Department Stores

Fortnum & Mason PLC

Harrods Ltd

9. The Future

ECONOMIC TRENDS

Table 9.1: Forecast UK Growth in Gross Domestic Product in Real Terms (%), 2009-2013

Table 9.2: Forecast Actual Number of Unemployed Persons in the UK (million), 2009-2013

Table 9.3: Forecast UK Rate of Inflation (%), 2009-2013

FURTHER IMPROVEMENTS IN ONLINE GROCERY SERVICES

NEW ENTRANTS TO THE MARKET

FOOD-PRICE INFLATION REMAINS HIGH

INCREASING ENVIRONMENTAL AWARENESS OF THE ONLINE GROCERS

OFCOM GIVES GO-AHEAD FOR SUPER-FAST BROADBAND

FORECASTS 2009 TO 2013

Table 9.4: The Forecast Total UK Internet Grocery Market by Value at Current Prices (£m at rsp), Years Ending December 2009-2013

Figure 9.1: The Forecast Total UK Internet Grocery Market by Value at Current Prices (£m at rsp), Years Ending December 2009-2013

Table 9.5: 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 at rsp and %), Years Ending December 2009-2013

10. Further Sources

General Sources

Government and Official Sources

Other Sources

Key Note Sources

Abstract

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.

Key Note 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.

About MarketResearch.com
MarketResearch.com is an online aggregator selling over 250,000 market research reports, company profiles and country profiles from over 650 research firms. Our reports will provide you with the critical business and competitive intelligence you need for strategic planning and marketing research. Coverage includes the US, UK, Europe, Asia and global markets.