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Online Grocery Retailing - UK - March 2015

“The online sector is starting to mature – this way of shopping for food is not for everyone. That is good news for retailers as they have a vested interest in customers using their physical stores where they can market opportunistic buys more effectively and encourage impulse purchasing. In contrast passing trade is limited online. Customers tend to know what they are looking for and our consumer research shows that one in four agree that it’s easier to stick to a budget online.”
– Hilary Monk, Senior Retail Analyst

This report discusses the following key topics:

  • Where next as the online market matures? 
  • How can grocers improve the shopping experience? 
  • Delivery is a key battleground 
  • Click-and-collect – Integration at its best

Our consumer research this year explored people’s attitudes towards possible innovations and improvement for online grocery shopping. The overarching themes of our findings were control and clarity. Customers want more say in how they like their goods, how and when they are delivered and a better two-way dialogue with retailers regarding their order.

Our other consumer questions this year asked:

  • How much of their grocery shopping do they do online?
  • Which retailers do they use for the majority of their grocery shopping, online or in-store?
  • Where else do they do their grocery shopping, online or in-store?
  • What are the advantages of shopping online for groceries?
  • What are the disadvantages of shopping online for groceries?

Shopping for groceries online doesn’t meet everyone’s needs all of the time and as our consumer research shows people are clear about the disadvantages as well as the advantages. The important thing for retailers is that they continue to improve the online experience for those that choose to shop this way. Delivery, click-and-collect and product substitutions are clearly important areas where there is scope for further innovation and change. We estimate that click-and-collect accounted for 5.2% of all online grocery orders in 2014 and this will continue to rise as all the leading players have committed to further investment.

Online shopping is more complex in food than non-food categories – for instance keeping products at the correct temperature or holding bulky orders in small c-stores for customer collection can be challenging. But as consumers continue to demand greater convenience and more choice to fit with their particular lifestyles, supermarkets must look to meet these needs through further and better integration of their online and offline proposition in both food and non-foods.

 

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Table of contents

  1. Introduction

      • Definitions
        • Market size and market shares
          • Financial definitions
            • VAT
              • Other
                • Abbreviations
                • Executive Summary

                    • The market
                      • Figure 1: Online grocery sales (including VAT), 2009-19
                    • Segment size and forecast
                      • Market drivers
                        • Figure 2: Consumer prices index: Annual % change, January-December 2014
                      • Companies, brands and innovations
                        • Market shares
                          • Figure 3: The leading retailers: Online grocery market shares (%), 2013 and 2014
                        • Groceries/general merchandise split
                          • Figure 4: The leading retailers’ estimated online breakdown, by groceries and general merchandise, 2013 and 2014
                        • The consumer
                          • Consumer usage
                            • Figure 5: Usage of online grocery shopping, November 2014
                          • Where they shop online
                            • Figure 6: Retailers used for the majority of grocery shopping, November 2014
                          • Disadvantages to online grocery shopping
                            • Figure 7: Disadvantages to shopping for groceries online, November 2014
                          • Advantages to online grocery shopping
                            • Figure 8: Advantages to shopping for groceries online, November 2014
                          • Attitudes towards online grocery shopping – Innovations and improvements
                            • Figure 9: Agreement with statements relating to innovations or improvements, November 2014
                          • What we think
                          • Issues and Insights

                              • Where next as the online market matures?
                                • The facts
                                  • The implications
                                    • How can grocers improve the shopping experience?
                                      • The facts
                                        • The implications
                                          • Delivery is a key battleground
                                            • The facts
                                              • The implications
                                                • Click-and-collect – Integration at its best
                                                  • The facts
                                                    • The implications
                                                    • Trend Application

                                                        • Trend: Make it Mine
                                                          • Trend: Help Me Help Myself
                                                            • Mintel futures: Access Anything, Anywhere
                                                            • Market Size and Forecast

                                                              • Key points
                                                                • Growth continues to slow despite Morrisons entering the market
                                                                  • Figure 10: Online grocery sales (including VAT), 2009-19
                                                                • Online sales account for 5% of all grocery retailers’ sales
                                                                  • Figure 11: Online grocery sales as a % of all grocery retailers’ sector sales, 2009-19
                                                                • Looking further ahead
                                                                  • Figure 12: Online grocery sales (including VAT), at current and constant prices, 2009-19
                                                                • Segments
                                                                  • Segment size and forecast: Major online grocers
                                                                    • Figure 13: Online grocery sales by major online grocers (including VAT), 2009-19
                                                                    • Figure 14: Online grocery sales by major online grocers (including VAT), at current and constant prices, 2009-19
                                                                  • Segment size and forecast: Specialist and small online retailers
                                                                    • Figure 15: Online grocery sales by small or specialist online grocery retailers (including VAT), 2009-19
                                                                    • Figure 16: Major online grocers versus small or specialist online grocery retailers’ share of the total online grocery market, 2009-19
                                                                    • Figure 17: Online grocery sales by small or specialist online grocery retailers (including VAT), at current and constant prices, 2009-19
                                                                  • Mintel’s forecast methodology
                                                                  • Market Environment

                                                                    • Key points
                                                                      • Broadband connections
                                                                        • Figure 18: UK household internet access, % of households with broadband access with at least one member aged 16-74, 2007-14
                                                                        • Figure 19: UK household internet access, % of households with broadband access with and without dependent children, 2014
                                                                      • Digital trends – Shopping via device
                                                                        • Figure 20: Percentage of individuals who have shopped online in the last three months, by age, October 2014
                                                                        • Figure 21: Personal ownership of mobile phones, January 2012-October 2014
                                                                      • Click-and-collect market
                                                                        • Figure 22: Last use of click-and-collect: Groceries versus non-groceries, June 2014.
                                                                      • Consumer confidence and inflation
                                                                        • Figure 23: Consumer confidence levels, January 2013-January 2015
                                                                      • CPI
                                                                        • Figure 24: UK: Consumer Prices Index: Annual % change, January-December 2014
                                                                      • Retail prices index and average weekly earnings
                                                                        • Figure 25: Retail prices index and average weekly earnings: Annual % change, January 2009-November 2014
                                                                    • Strengths and Weaknesses

                                                                      • Strengths
                                                                        • Weaknesses
                                                                        • Who’s Innovating?

                                                                          • Key points
                                                                            • Tesco launches shopping app for Google Glass
                                                                              • App for pre-ordering deli, lunchmeats and subs
                                                                                • Online recipe delivery service groceries
                                                                                  • Home delivery recipe boxes
                                                                                    • Sainsbury’s to the rescue
                                                                                      • Amazon’s ‘magic wand’ that automates the task of creating a shopping list
                                                                                        • Ocado’s shopping centre click-and-collect service
                                                                                          • Innovative grocery service at Helsinki Airport
                                                                                          • Leading Retailers and Market Shares

                                                                                            • Key points
                                                                                              • Market shares
                                                                                                • Figure 26: Leading online grocery retailers’ estimated market shares (including VAT), 2012-14
                                                                                              • Online revenues: Strong growth from Waitrose
                                                                                                  • Figure 27: Leading online grocery retailers’ net internet revenues, 2012-14
                                                                                                • Online dominated by groceries
                                                                                                  • Figure 28: Leading online grocery retailers’ estimated total online revenues, by grocery and non-grocery, 2013 and 2014
                                                                                                • Contribution to total sales: Tesco nearing 10%
                                                                                                    • Figure 29: Leading online grocery retailers’ online sales as % of their total UK sales, 2013 and 2014
                                                                                                  • Smaller online retailers: A small proportion of the market
                                                                                                    • Figure 30: Smaller online grocery retailers’ estimated market shares, 2012-14
                                                                                                  • Coverage and fulfilment
                                                                                                    • Figure 31: Selected leading online grocers’ coverage and fulfilment centres, 2014
                                                                                                  • Ramping up capabilities
                                                                                                    • Click-and-collect – A growing concern
                                                                                                      • Figure 32: Major grocery retailers offering grocery click-and-collect services, 2014
                                                                                                    • Tesco attracts the highest number of visitors
                                                                                                      • Figure 33: Leading food retail websites, ranked by total unique visitors, December 2014
                                                                                                  • The Consumer – Profiling Online Grocers’ Shoppers

                                                                                                    • Key points
                                                                                                      • Online more popular with female consumers
                                                                                                          • Figure 34: Customer profiles of leading retailers, online and in-store, by gender, November 2014
                                                                                                        • Younger online shoppers
                                                                                                            • Figure 35: Customer profiles of leading retailers, online and in-store, by age, November 2014
                                                                                                          • Waitrose more popular with affluent consumers
                                                                                                              • Figure 36: Customer profiles of leading retailers, online and in-store, by socio-economic group, November 2014
                                                                                                            • Morrisons and Asda more popular in the North
                                                                                                                • Figure 37: Customer profiles of leading retailers, online and in-store, by geographic region, November 2014
                                                                                                                • Figure 38: Customer profiles of leading retailers, online and in-store, by type of location, November 2014
                                                                                                            • The Consumer – Usage of Online Grocery Shopping

                                                                                                              • Key points
                                                                                                                • What we asked
                                                                                                                  • Over 40% of consumers shop for groceries online
                                                                                                                    • Figure 39: Usage of online grocery shopping, November 2014
                                                                                                                  • Participation dips in 2014
                                                                                                                      • Figure 40: Proportion saying they do most or all of their grocery shopping online, 2011-14
                                                                                                                      • Figure 41: Usage of online grocery shopping, December 2013 and November 2014
                                                                                                                    • Frequency of shopping by retailer used
                                                                                                                        • Figure 42: Usage of online grocery shopping, by retailers used for majority of grocery shopping in-store and online, November 2014
                                                                                                                      • Younger people greatest enthusiasts
                                                                                                                          • Figure 43: Usage of online grocery shopping, by average age and affluence, November 2014
                                                                                                                        • Market skewed to the family shopper
                                                                                                                            • Figure 44: Usage of online grocery shopping, by family type, November 2014
                                                                                                                          • Regional
                                                                                                                            • Figure 45: Usage of online grocery shopping, by region, November 2014
                                                                                                                        • The Consumer – Where They Shop Online

                                                                                                                          • Key points
                                                                                                                            • What we asked
                                                                                                                              • Tesco dominates the online arena
                                                                                                                                  • Figure 46: Retailers used for majority of grocery shopping, in-store versus online, November 2014
                                                                                                                                • Morrisons has a lot of catching up to do
                                                                                                                                  • Trend data
                                                                                                                                      • Figure 47: Retailers used for majority of grocery shopping, online: Selected major retailers, 2012-14
                                                                                                                                    • Online’s contribution to shopper numbers and sales
                                                                                                                                        • Figure 48: Online shopper numbers relative to total shopper numbers, and online grocery sales as % of total UK company sales, selected retailers, November 2014
                                                                                                                                      • Online shoppers are younger
                                                                                                                                          • Figure 49: The consumer: Retailers used for majority of grocery shopping, in-store and online: Selected major retailers, by average age and affluence, November 2014
                                                                                                                                        • Tesco online shoppers are from larger households
                                                                                                                                            • Figure 50: Retailers used for majority of grocery shopping, online: Selected major retailers, by size of household, November 2014
                                                                                                                                          • North West and North East most important region for Asda
                                                                                                                                            • Figure 51: Retailers used for majority of grocery shopping, online: Selected major retailers, by region, November 2014
                                                                                                                                        • The Consumer – Disadvantages of Shopping Online

                                                                                                                                          • Key points
                                                                                                                                            • What we asked
                                                                                                                                              • Not choosing in person the greatest disadvantage
                                                                                                                                                  • Figure 52: Disadvantages to shopping for groceries online, November 2014
                                                                                                                                                • Delivery-related issues another drawback
                                                                                                                                                  • Substitutions
                                                                                                                                                    • Appetite for Aldi and Lidl to sell online
                                                                                                                                                      • Sell-by dates
                                                                                                                                                        • Encouraging more silver surfers to shop online for groceries
                                                                                                                                                            • Figure 53: Disadvantages to shopping for groceries online, by age, November 2014
                                                                                                                                                          • ‘Group buying’ for students?
                                                                                                                                                              • Figure 54: Disadvantages to shopping for groceries online, by employment status of main income earner in household, November 2014
                                                                                                                                                          • The Consumer – Advantages of Shopping Online

                                                                                                                                                            • Key points
                                                                                                                                                              • What we asked
                                                                                                                                                                • Saving effort, time and money seen as greatest benefits
                                                                                                                                                                  • Avoiding the supermarket slog
                                                                                                                                                                      • Figure 55: Advantages to shopping for groceries online, November 2014
                                                                                                                                                                    • Time is precious
                                                                                                                                                                      • Financial benefits
                                                                                                                                                                        • Supporting older people
                                                                                                                                                                            • Figure 56: Selected advantages to shopping for groceries online, by age, November 2014
                                                                                                                                                                            • Figure 57: Selected advantages to shopping for groceries online, by marital status and household size, November 2014
                                                                                                                                                                        • The Consumer – Attitudes towards Innovations and Improvements

                                                                                                                                                                          • Key points
                                                                                                                                                                            • What we asked
                                                                                                                                                                              • Fears over substitutions prevalent
                                                                                                                                                                                  • Figure 58: Agreement with statements relating to innovations or improvements, November 2014
                                                                                                                                                                                  • Figure 59: Agreement with statements relating to innovations or improvements, by retailers used for majority of grocery shopping in-store and online, November 2014
                                                                                                                                                                                  • Figure 60: Attitudes towards innovation and improvements in online grocery retailing, by age and affluence, November 2014
                                                                                                                                                                                • Delivery: Clarity and choice needed
                                                                                                                                                                                    • Figure 61: Attitudes towards innovation and improvements in online grocery delivery, November 2014
                                                                                                                                                                                    • Figure 62: Agreement with innovation and improvements in online grocery delivery, by type of location, November 2014
                                                                                                                                                                                  • Interest in click-and-collect via convenience stores
                                                                                                                                                                                      • Figure 63: Attitudes towards innovation and improvements in online grocery click-and-collect, November 2014
                                                                                                                                                                                      • Figure 64: Agreement with innovation and improvements in online grocery click-and-collect, by type of location, November 2014
                                                                                                                                                                                    • Website improvements: Searching for inspiration
                                                                                                                                                                                        • Figure 65: Attitudes towards innovation and improvements in online grocery websites, November 2014
                                                                                                                                                                                        • Figure 66: Agreement with innovation and improvements in online grocery websites, by age, November 2014
                                                                                                                                                                                      • An ability to dictate how they like their food
                                                                                                                                                                                          • Figure 67: Attitudes towards innovation and improvements in online grocery products/services, November 2014
                                                                                                                                                                                          • Figure 68: Agreement with innovation and improvements in online grocery products/services, by retailers used for the majority of shopping in-store and online, November 2014
                                                                                                                                                                                      • The Consumer – CHAID analysis

                                                                                                                                                                                        • Methodology
                                                                                                                                                                                          • Shoppers want lower delivery charges
                                                                                                                                                                                              • Figure 69: Online grocery retailing – CHAID – Tree output, November 2014
                                                                                                                                                                                              • Figure 70: Online grocery retailing – CHAID – Table output, November 2014
                                                                                                                                                                                          • Amazon.co.uk

                                                                                                                                                                                              • What we think
                                                                                                                                                                                                • UK grocery offer limited
                                                                                                                                                                                                  • A poor start in own-brand grocery lines
                                                                                                                                                                                                    • Company background
                                                                                                                                                                                                      • Company performance
                                                                                                                                                                                                        • Figure 71: Amazon Europe: Group sales performance, excl. sales tax, 2009-14
                                                                                                                                                                                                      • Retail offering
                                                                                                                                                                                                        • Figure 72: Number of products listed in Grocery on amazon.co.uk, by sub-category, February 2014 and February 2015
                                                                                                                                                                                                    • Asda Group

                                                                                                                                                                                                        • What we think
                                                                                                                                                                                                          • Convenient delivery options
                                                                                                                                                                                                            • Innovative solutions for busy shoppers
                                                                                                                                                                                                              • See it, click it, buy it…‘shoppable’ online ads
                                                                                                                                                                                                                • Company background
                                                                                                                                                                                                                  • Company performance
                                                                                                                                                                                                                    • Figure 73: Asda Group Ltd: Group financial performance, 2010-14
                                                                                                                                                                                                                    • Figure 74: Asda Group Ltd: Estimated online grocery revenues, 2012-14
                                                                                                                                                                                                                    • Figure 75: Asda Group Ltd: Outlet data, 2010-14
                                                                                                                                                                                                                  • Retail offering
                                                                                                                                                                                                                  • J. Sainsbury

                                                                                                                                                                                                                      • What we think
                                                                                                                                                                                                                        • Launches its first store click-and-collect service
                                                                                                                                                                                                                          • Rollout of new grocery platform
                                                                                                                                                                                                                            • New shopping app
                                                                                                                                                                                                                              • Click and commute
                                                                                                                                                                                                                                • Launches Tu online
                                                                                                                                                                                                                                  • Company background
                                                                                                                                                                                                                                    • Company performance
                                                                                                                                                                                                                                      • Figure 76: J. Sainsbury: Group financial performance, 2010/11-2014/15
                                                                                                                                                                                                                                      • Figure 77: J. Sainsbury: Estimated online grocery revenues, 2011/12-2014/15
                                                                                                                                                                                                                                      • Figure 78: J. Sainsbury: Outlet data, 2009/10-2014/15
                                                                                                                                                                                                                                    • Retail offering
                                                                                                                                                                                                                                    • Ocado

                                                                                                                                                                                                                                        • What we think
                                                                                                                                                                                                                                          • Leveraging its market-leading IP potential
                                                                                                                                                                                                                                            • Extending its multichannel reach
                                                                                                                                                                                                                                              • Expanding its non-food offer
                                                                                                                                                                                                                                                • Improving the online experience
                                                                                                                                                                                                                                                  • Company background
                                                                                                                                                                                                                                                    • Company performance
                                                                                                                                                                                                                                                      • Figure 79: Ocado Ltd: Group financial performance, 2009/10-2013/14
                                                                                                                                                                                                                                                      • Figure 80: Ocado Ltd: Key customer metrics, 2009/10-2013/14
                                                                                                                                                                                                                                                    • Retail offering
                                                                                                                                                                                                                                                    • Tesco

                                                                                                                                                                                                                                                        • What we think
                                                                                                                                                                                                                                                          • Profits overstatement
                                                                                                                                                                                                                                                            • Lewis’ turnaround
                                                                                                                                                                                                                                                              • Cutting back ranges to simplify shopping
                                                                                                                                                                                                                                                                • Leading the way online
                                                                                                                                                                                                                                                                  • The future
                                                                                                                                                                                                                                                                    • Company background (UK)
                                                                                                                                                                                                                                                                      • Company performance
                                                                                                                                                                                                                                                                          • Figure 81: Tesco UK: Sales growth, 2014/15
                                                                                                                                                                                                                                                                          • Figure 82: Tesco Plc: Group financial performance, 2009/10-2014/15
                                                                                                                                                                                                                                                                        • Online grocery sales
                                                                                                                                                                                                                                                                            • Figure 83: Tesco UK: Estimated online grocery revenues, 2012/13-2014/15
                                                                                                                                                                                                                                                                          • Profitability
                                                                                                                                                                                                                                                                            • Performance by store format and channel
                                                                                                                                                                                                                                                                              • Figure 84: Like-for-like sales growth, by format and channel, Q1-Christmas 2014/15
                                                                                                                                                                                                                                                                            • Outlets
                                                                                                                                                                                                                                                                              • Figure 85: Tesco UK: Outlet data, 2009/10-2013/14
                                                                                                                                                                                                                                                                              • Figure 86: Tesco sales breakdown, 2013/14
                                                                                                                                                                                                                                                                          • Wm Morrison Group

                                                                                                                                                                                                                                                                              • What we think
                                                                                                                                                                                                                                                                                • Freshness and affordability
                                                                                                                                                                                                                                                                                  • Early setback, but company claims the service is ahead of its expectations
                                                                                                                                                                                                                                                                                    • A differentiator to distinguish itself from already-established online rivals
                                                                                                                                                                                                                                                                                      • Delivery coverage weakness
                                                                                                                                                                                                                                                                                        • Online price-checker tool and loyalty card
                                                                                                                                                                                                                                                                                          • Company background
                                                                                                                                                                                                                                                                                            • Company performance
                                                                                                                                                                                                                                                                                              • Figure 87: Wm Morrison Group: Group financial performance, 2010/11-2014/15
                                                                                                                                                                                                                                                                                              • Figure 88: Wm Morrison Group: Outlet data, 2010/11-2013/14
                                                                                                                                                                                                                                                                                            • Retail offering
                                                                                                                                                                                                                                                                                            • Waitrose

                                                                                                                                                                                                                                                                                                • What we think
                                                                                                                                                                                                                                                                                                  • Changing the way people shop online for groceries
                                                                                                                                                                                                                                                                                                    • Market-leading click-and-collect trial
                                                                                                                                                                                                                                                                                                      • Specialist sites
                                                                                                                                                                                                                                                                                                        • Company background
                                                                                                                                                                                                                                                                                                          • Company performance
                                                                                                                                                                                                                                                                                                              • Figure 89: Waitrose Ltd: Group financial performance, 2010/11-2014/15
                                                                                                                                                                                                                                                                                                              • Figure 90: Waitrose: Estimated online grocery revenues, 2011/12-2014/15
                                                                                                                                                                                                                                                                                                              • Figure 91: Waitrose Ltd: Outlet data, 2010/11-2014/15
                                                                                                                                                                                                                                                                                                            • Retail offering

                                                                                                                                                                                                                                                                                                            Companies Covered

                                                                                                                                                                                                                                                                                                            • Abel & Cole
                                                                                                                                                                                                                                                                                                            • Amazon.co.uk
                                                                                                                                                                                                                                                                                                            • Asda Group Ltd
                                                                                                                                                                                                                                                                                                            • Berry Bros and Rudd Ltd
                                                                                                                                                                                                                                                                                                            • Direct Wines Ltd
                                                                                                                                                                                                                                                                                                            • J Sainsbury's Supermarkets
                                                                                                                                                                                                                                                                                                            • Naked Wines
                                                                                                                                                                                                                                                                                                            • Tesco (UK)
                                                                                                                                                                                                                                                                                                            • The Wine Society
                                                                                                                                                                                                                                                                                                            • Waitrose
                                                                                                                                                                                                                                                                                                            • Wm Morrison Supermarkets

                                                                                                                                                                                                                                                                                                            Online Grocery Retailing - UK - March 2015

                                                                                                                                                                                                                                                                                                            £1,995.00 (Excl.Tax)