E-Commerce: The Internet Grocery Market

2009 UK - Market Assessment

Publication Date	July 2009
Publisher	Key Note
Product Type	Report
Pages	162
ISBN Number	not applicable
Product Code	KEY00163

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Summary

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.

Content

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
- E-Commerce: The Internet Grocery Market Contents
- 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 ??