These are exciting times for the fastest-growing channel on the UK grocery retail market, but can retailers do more to convince cautious shoppers to buy fresh produce online?
By 2030 online grocery shopping is tipped to account for 25% of the UK retail market, and 15-25% of the market across Europe as a whole.
However, one of the biggest obstacles to further growth will be overcoming the consumer perception that fruit and vegetables bought online are not as fresh as those picked in store.
John David Roeg, a senior analyst for consumer foods at Rabobank International in the Netherlands, says online grocery retailing has taken off across the continent.
“The growth of online grocery shopping is unstoppable,” he explains. “Europe, including the UK, is very far advanced and it’s being driven by consumer demand.”
According to data provided to Produce Business UK by retail analyst IGD, the grocery retail market in the UK grew by around 16% last year, with online grocery accounting for around 4.4% of the market’s total grocery sales.
“According to IGD’s UK grocery channel forecasts, we estimate online grocery retail will make up 8.3% of total UK grocery sales by 2019; making it the fastest-growing of all the channels over the five-year period,” reveals Lisa Byfield-Green, IGD’s senior retail analyst for online and digital UK research.
Online is also set to see its value more than double from £7.7 billion in the year to April 2014 to some £16.9 billion in the year to April 2019.
The growth drivers
At present, IGD claims the biggest driver of online growth is click and collect, both from stores and remote locations such as tube stations, lockers and business parks, among others.
“Click and collect adds more choice for customers shopping online and offers them the convenience of being able to pick groceries up at a time and place to suit them,” says Byfield-Green.
IGD’s ShopperVista data shows that 93% of those shopping online use home delivery services, while 26% now use click and collect and 20% use both.
“Many customers collecting from stores will also go in to pick up additional items, in categories such as fresh and non-food,” Byfield-Green adds.
Other trends driving growth last year include new apps for mobile and tablet devices and loyalty initiatives such as delivery pass schemes for home delivery of groceries.
With so much consumer interest, online is making up the majority of growth for many of the UK’s largest grocery retailers, according to IGD.
Tesco, Asda and Sainsbury’s already occupy a significant share of the online grocery market, together with Ocado.
Ocado leads the way in the UK; offering approximately 5,000 SKUs, according to Roeg.
“Ocado sells 300 fruit items online – a range that you won’t find in any supermarket – and 491 vegetables,” he states.
Morrisons, meanwhile, launched a home delivery service at the beginning of 2014 and IGD claims the retailer is aiming to grow rapidly online.
Other initiatives that stood out last year included Waitrose investing in new apps and new digital in-store initiatives, and Asda, which grew ahead of the market by investing in click and collect, mobile and its own delivery pass scheme.
“We have seen a lot of recent innovation in the market to drive growth and retailers are beginning to differentiate themselves from one another online,” Byfield-Green notes.
As competition rises and retailers switch their store models and thereby reduce costs, delivery costs for online shopping will also disappear, according to Roeg.
Improving the fresh perception
Despite its popularity, however, IGD’s ShopperVista data shows consumers remain cautious about buying fresh ranges online, although they are particularly open to buying ambient, non-food grocery and frozen categories.
Nearly half (47%) of online shoppers say they prefer to buy fresh foods in store rather than buying online.
Only a fifth (18%) say they prefer to buy these products online, while 35% say they have no preference, according to data from February to April 2014.
In the coming year, however, a fifth (19%) of online grocery shoppers say they will buy more fresh food online instead of shopping more in-store, according to data compiled between August and October 2014.
“It’s important for both retailers and suppliers to convince shoppers that they will get the same quality fresh products online as they pick themselves in store,” stresses Byfield-Green.
In Europe, Roeg says the online retailers have confirmed that the fruit and vegetables that they pick for online shoppers are in fact fresher when they arrive home.
Indeed, with many professional online grocery retailers using “dark stores” – facilities with no consumers – he points out that produce is picked right before delivery.
“It is people’s mindset that has to change,” Roeg states.
To that end, Byfield-Green says retailers must step up the game with their fresh produce offer online.
“Ensuring picking staff are fully trained on fresh food requirements, investing in website technology which allows shoppers to specify particular cuts or weights of meat or the ripeness of fruit and vegetables or adding shopper testimonials to sites could help to improve shopper perceptions,” she suggests.
Changing the face of retailing
With significant growth predicted, Roeg believes online shopping will have a significant impact on the retail scene in Europe in the years to come.
“Expect fewer and smaller stores with less stock assortment and more fulfilment centres,” Roeg forecasts.
However, although sales in superstores and hypermarkets are set to decrease over the next five years, IGD claims they will remain the largest channel.
“IGD expects online, discount and convenience to drive growth over the next five years,” explains Byfield-Green.
“Together these three channels will grow by £31.3 billion between 2014 and 2019 and account for 110% of all growth.”
Even so, IGD estimates superstores and hypermarkets will still account for a over a third (34.9%) of UK grocery retail sales by 2019, compared with 8.3% for online.
“The majority of food and groceries will still be bought in these types of stores,” points out Byfield-Green.
“The superstores and hypermarkets are also important in supporting online grocery. They will increasingly be used as pick-up points for click and collect orders and to service online home delivery orders, which are largely picked from within these stores.”