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Online Grocery Retailing - UK - March 2017

“Online grocery is the quickest growing grocery channel, but equally the smallest. Once seen as simply a service to replicate the needs of a supermarket shop online, a number of new services came to market in 2016 that have the potential for online grocery to transcend this barrier and adequately serve the more fluid and frequent shopping behaviours seen in the wider market.”
– Nick Carroll, Senior Retail Analyst

This report examines the following:

  • Getting Amazon in perspective
  • Same-day delivery: a necessary evil?
  • What about click-and-collect?

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this report
      • Executive Summary

          • The market
            • Online continues to grow ahead of the wider grocery market
              • Figure 1: Total online grocery market size (including VAT), 2011-21
            • Store-based retailers dominate the market
              • Figure 2: Share of total online grocery market, by type of online grocery operation, 2011-21
            • Online grocery sales peak in the final quarter
              • Figure 3: Average weekly retail sales of all online food retailers, January 2014-January 2017
            • Companies and brands
              • Tesco accounts for a third of the market, but its share is falling
                • Figure 4: Leading online grocery retailer’ estimated market shares (excluding VAT), 2016
              • Speed of delivery the focus of innovation in 2016
                • Consumers have greater trust in the Amazon brand than rival grocers
                  • Figure 5: Attitudes towards and usage of selected brands, October and December 2016
                • The Consumer
                  • Just under half of consumers shop online for groceries
                    • Figure 6: Online grocery usage, December 2016
                  • Younger consumers the target audience
                    • Figure 7: Usage and attitudes to online grocery services, by age, December 2016
                  • Tesco the dominant player online
                    • Figure 8: Where they shop online by Where they do a majority of their shopping and where else they shop, December 2016
                  • Delivery prices and minimum spends the biggest barrier to greater use
                    • Figure 9: What would encourage online grocery use, December 2016
                  • Just under a quarter have a delivery pass
                    • Figure 10: Ownership and interest in delivery passes, December 2016
                  • Same-day delivery: the next evolution for online grocery?
                    • Figure 11: Attitudes to online grocery services, December 2016
                  • What we think
                  • Issues and Insights

                    • Getting Amazon in perspective
                      • The facts
                        • The implications
                          • Same-day delivery: a necessary evil?
                            • The facts
                              • The implications
                                • What about click-and-collect?
                                  • The facts
                                    • The implications
                                    • The Market – What You Need to Know

                                      • Online continues to grow ahead of the wider grocery market
                                        • Store-based retailers dominate the market
                                          • Online grocery sales peak in the final quarter
                                            • Inflation on the rise
                                              • Online access via smartphones on the rise
                                                • The connected home presents an opportunity for online grocery services
                                                • Market Size and Forecast

                                                  • Online continues to outperform the wider grocery market
                                                    • Figure 12: Total online grocery market size (including VAT), 2011-21
                                                    • Figure 13: Total online grocery market size (including VAT), at current and constant prices, 2011-21
                                                  • Despite strong growth, online accounts for just 6% of total sector sales
                                                    • Figure 14: Online grocery sales as a % of all grocery retail sales, 2011-21
                                                  • Store based players fight back in 2016
                                                    • Figure 15: Share of total online grocery market, by type of online grocery operation, 2011-21
                                                  • The usual suspects dominate the store-based segment
                                                    • Figure 16: Online grocery sales by store-based grocery retailers (Including VAT), 2011-21
                                                    • Figure 17: Online grocery sales by store-based grocery retailers (Including VAT), at current and constant prices, 2011-21
                                                  • Innovation is likely to drive the online-only segment
                                                    • Figure 18: Online grocery sales by online-only retailers (including VAT), 2011-21
                                                    • Figure 19: Online grocery sales by online-only retailers (including VAT), at current and constant prices, 2011-21
                                                  • Forecast methodology
                                                  • Market Drivers

                                                    • Online continues to grow ahead of all grocery retail
                                                      • Figure 20: Annual % change in the retail sales of food, by all food sales and online food sales, Jan 2014-Jan 2017
                                                    • Online takes its largest share in November…
                                                      • Figure 21: Online food stores sales as a % of all food stores retail sales, Jan 2014-Jan 2017
                                                    • …but December shows the highest average sales
                                                      • Figure 22: Average weekly retail sales of all online food retailers, Jan 2014-Jan 2017
                                                    • Sterling’s weakness is pushing prices up
                                                      • Figure 23: Annual % change in the price of food and non-alcoholic beverages and alcoholic beverages and tobacco prices, Jan 2015-Jan 2017
                                                    • Core food categories trending upwards
                                                      • Figure 24: Annual % change in the price of core food categories, Jan 2016-Jan 2017
                                                    • Device ownership: more own a smartphone than a laptop
                                                      • Figure 25: Devices used to access the internet in the last three months, June 2013-September 2016
                                                    • Smart home: a big opportunity for online grocers?
                                                      • Figure 26: Interest in making home more connected, March 2016
                                                  • The Consumer – What You Need to Know

                                                    • Just under half of consumers shop online for groceries
                                                      • Younger consumers are the target audience
                                                        • Tesco is the dominant player online
                                                          • Delivery prices and minimum spends the biggest barrier to greater use
                                                            • Just under a quarter have a delivery pass
                                                              • Same-day delivery: the next evolution for online grocery?
                                                              • Online Grocery Usage

                                                                • Just under half of consumers shop online for groceries
                                                                  • Figure 27: Online grocery usage, December 2016
                                                                • Total usage is plateauing but the number only shopping online is growing
                                                                  • Figure 28: Trend in online grocery usage, November 2014-December 2016
                                                                • Online shoppers continue to shift more of their shopping online
                                                                  • Figure 29: Changes in online grocery usage, December 2016
                                                                  • Figure 30: Changes in online grocery usage, by how they shop for groceries online, December 2016
                                                              • Demographics of Online Grocery Use

                                                                  • Younger consumers more likely to shop online for groceries
                                                                    • Figure 31: Usage and attitudes to online grocery services, by age, December 2016
                                                                    • Figure 32: Usage of online grocery services, by age, December 2016
                                                                  • Online far more popular with young families
                                                                    • Figure 33: Usage of online grocery services, by parental status, December 2016
                                                                    • Figure 34: Usage of online grocery services, by age of children in household, December 2016
                                                                  • Online most popular in urban areas, particularly London
                                                                    • Figure 35: Usage of online grocery services, by type of area lived in, December 2016
                                                                    • Figure 36: Usage of online grocery services, by region lived in, December 2016
                                                                  • Usage comes at a cost
                                                                    • Figure 37: Usage of online grocery services, by socio-economic goods, December 2016
                                                                • Where They Buy

                                                                    • Tesco by far the most popular online grocery retailer
                                                                      • Figure 38: Where they shop for groceries online, December 2016
                                                                    • Where they do a majority of their online shopping
                                                                      • Figure 39: Where they shop online by Where they do a majority of their shopping and where else they shop, December 2016
                                                                    • Trend data: smaller players gaining
                                                                      • Figure 40: Where they shop for groceries online, December 2015 and December 2016
                                                                      • Figure 41: Trend data: Primary and secondary retailers used to purchase groceries online, December 2015 and 2016
                                                                    • Online consumer bases skew younger
                                                                      • Figure 42: Where consumers shop for the majority of their groceries, by socio-economic group and age, December 2016
                                                                    • What about the discounters?
                                                                      • Figure 43: Attitudes to a potential online grocery service from the discounters, December 2016
                                                                      • Figure 44: Attitudes to a potential online grocery service from the discounters, by retailer currently used to do the majority of shopping, December 2016
                                                                  • Ownership of and Attitudes to Delivery Passes

                                                                    • Around a quarter of online grocery shoppers have a pass
                                                                      • Figure 45: Ownership and interest in delivery passes, December 2016
                                                                    • Growing number of online shoppers have a delivery pass
                                                                      • Figure 46: Changes in delivery pass ownership and attitudes, December 15 and December 16
                                                                    • Those who shop online-only for groceries most likely to have a pass
                                                                      • Figure 47: Ownership of delivery passes, by how much of grocery shopping is done online, December 2016
                                                                    • Most see delivery passes as good value, but many also acquired them at a discount
                                                                        • Figure 48: Attitudes to delivery passes, December 2016
                                                                    • What Would Encourage More Online Grocery Use

                                                                        • Cost still off putting
                                                                          • Figure 49: What would encourage online grocery use, December 2016
                                                                        • Current shoppers: cost the main barrier to increased use
                                                                          • Figure 50: What would encourage greater online grocery use, December 2016
                                                                          • Figure 51: What would encourage online grocery use, by select age groups, December 2016
                                                                        • Lapsed shoppers: freshness and substitutions key
                                                                          • Figure 52: What would encourage lapsed shoppers to come back to online, December 2016
                                                                        • Non-users: those interested see delivery as the main barrier
                                                                          • Figure 53: What would encourage non-users to begin shopping online for groceries, December 2016
                                                                          • Figure 54: What would encourage non-users to begin shopping online for groceries, by interest levels in shopping online for groceries December 2016
                                                                      • Attitudes to Same-day Delivery, Non-foods, Mobile apps and Hygiene Standards

                                                                        • Same-day delivery: The next step for online grocery?
                                                                          • Figure 55: Attitudes to same-day delivery of online grocery orders, December 2016
                                                                        • Mobile applications: work needed?
                                                                          • Figure 56: Attitudes to mobile applications and voice control, December 2016
                                                                          • Figure 57: Attitudes to mobile applications and voice control, by usage of online grocery services, December 2016
                                                                        • A majority think a non-food range is important when choosing where to shop
                                                                          • Figure 58: Attitudes to online grocery services and non-foods, December 2017
                                                                          • Figure 59: Agreement to Attitudes to online grocery services and non-foods, by age, December 2016
                                                                        • Concerns exist around the hygiene of online grocery services
                                                                            • Figure 60: Attitudes to hygiene standards of online grocery services, December 2016
                                                                        • Leading Retailers – What You Need to Know

                                                                          • Tesco accounts for a third of the market, but its share is falling
                                                                            • Leading players ramp up fulfilment capabilities
                                                                              • Ocado the biggest spender on advertising
                                                                                • Speed of delivery the focus of innovation in 2016
                                                                                  • Consumers have greater trust in the Amazon brand than rival grocers
                                                                                  • Leading Retailers and Market Shares

                                                                                    • Tesco the market leader but facing increased pressure
                                                                                      • Figure 61: Leading online grocery retailer’ estimated market shares (excluding VAT), 2016
                                                                                      • Figure 62: Leading online grocer retailers’ estimated market shares (excluding VAT), 2014-16
                                                                                    • Online revenues
                                                                                        • Figure 63: Leading online grocery retailers’ net internet revenues, 2014-16
                                                                                      • Leading players: breakdown of revenues
                                                                                        • Figure 64: Leading online grocery retailers’ estimated total online revenues, by grocery and non-grocery, 2014-16
                                                                                        • Figure 65: Leading online grocery retailers’ online sales as % of their total UK sales, 2014-16
                                                                                      • Smaller players: market shares
                                                                                        • Figure 66: Smaller online grocery players estimated market shares, 2014-16
                                                                                        • Figure 67: Smaller online grocery players turnover, 2014-16
                                                                                    • Competitive Strategies – Key Metrics

                                                                                      • Coverage and fulfilment
                                                                                          • Figure 68: Selected leading online grocers’ coverage and fulfilment centres, 2017
                                                                                        • Home delivery metrics
                                                                                          • Figure 69: Selected leading online grocers’ delivery metrics, March 2017
                                                                                        • Delivery passes
                                                                                            • Figure 70: Selected leading online grocers’ delivery pass details, March 2017
                                                                                          • Click and collect
                                                                                            • Figure 71: Selected leading online grocers’ click-and-collect details, March 2017
                                                                                          • Amazon
                                                                                              • Figure 72: Amazon: Key online grocery services metrics, March 2017
                                                                                          • Advertising and Marketing Activity

                                                                                            • Total sector advertising spend down 25.4% year-on-year in 2016
                                                                                              • Figure 73: UK online supermarket/grocer/food total recorded above-the-line, online display and direct mail advertising expenditure, 2012-16
                                                                                            • Waitrose the only leading supermarket brand to increase spend year-on-year
                                                                                              • Figure 74: leading UK online supermarket/grocer/food retailers total recorded above-the-line, online display and direct mail advertising expenditure, 2012-16
                                                                                            • Outdoor attracts the biggest percentage of total sector advertising spend
                                                                                              • Figure 75: UK online supermarket/grocer/food total recorded above-the-line, online display and direct mail advertising expenditure, by media type, 2016
                                                                                            • Nielsen Ad Intel coverage
                                                                                            • Innovations and Launch Activity

                                                                                              • Continued emphasis on speed of delivery
                                                                                                • Tesco launches one-hour delivery in London
                                                                                                  • Sainsbury’s weighs in with Chop Chop
                                                                                                    • Amazon raises the bar with AmazonFresh and Morrisons at Amazon
                                                                                                      • In Europe Carrefour and Albert Heijn trial one-hour services
                                                                                                        • Walmart looks at how it can take a different approach to delivery
                                                                                                          • Cornershop app promises 90-minute service in Mexico and Chile
                                                                                                            • Operators look to increase convenience and accessibility
                                                                                                              • Dash buttons allow consumers to order immediately
                                                                                                                • Amazon begins to develop an own label offering
                                                                                                                  • Bus stop ordering
                                                                                                                    • HomeRefill aims to help consumers forget about grocery shopping
                                                                                                                      • Online grocery shopping for the visually impaired
                                                                                                                        • Operators seek to improve user experience and product quality
                                                                                                                          • Ocado invests in interface development
                                                                                                                            • Amazon addresses quality concerns in Italy
                                                                                                                              • Discounters wrestle with online conundrum
                                                                                                                                • Lidl launches Lidl Express click-and-collect store in Germany
                                                                                                                                  • Kaufland first discounter to launch online delivery service
                                                                                                                                  • Brand Research

                                                                                                                                      • What you need to know
                                                                                                                                        • Brand map
                                                                                                                                          • Figure 76: Attitudes towards and usage of selected brands, October and December 2016
                                                                                                                                        • Key brand metrics
                                                                                                                                          • Figure 77: Key metrics for selected brands, October and December 2016
                                                                                                                                        • Brand attitudes: Amazon has a strong platform to develop online grocery business
                                                                                                                                          • Figure 78: Attitudes, by brand, October and December 2016
                                                                                                                                        • Brand personality: ethical concerns only black mark against Amazon
                                                                                                                                          • Figure 79: Brand personality – Macro image, October and December 2016
                                                                                                                                        • Big four lacking the ‘X-factor’
                                                                                                                                          • Figure 80: Brand personality – Micro image, October and December 2016
                                                                                                                                        • Brand analysis
                                                                                                                                          • Amazon has strong platform to develop its grocery business
                                                                                                                                            • Figure 81: User profile of Amazon, December 2016
                                                                                                                                          • Ocado struggles to differentiate itself
                                                                                                                                            • Figure 82: User profile of Ocado, December 2016
                                                                                                                                          • Tesco shows notable improvement
                                                                                                                                            • Figure 83: User profile of Tesco, October 2016
                                                                                                                                          • Sainsbury’s also lifts its game
                                                                                                                                            • Figure 84: User profile of Sainsbury’s, October 2016
                                                                                                                                          • Asda loses ground in key areas
                                                                                                                                            • Figure 85: User profile of Asda, October 2016
                                                                                                                                          • Morrisons regains lost ground
                                                                                                                                            • Figure 86: User profile of Morrisons, October 2016
                                                                                                                                          • Waitrose in danger of losing its way
                                                                                                                                            • Figure 87: User profile of Waitrose, October 2016
                                                                                                                                        • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                          • Data sources
                                                                                                                                            • Financial definitions
                                                                                                                                              • VAT
                                                                                                                                                • Abbreviations
                                                                                                                                                  • Consumer research methodology
                                                                                                                                                  • Appendix – Market Size and Forecast

                                                                                                                                                    • Market size methodology
                                                                                                                                                      • Forecast Methodology

                                                                                                                                                      Companies Covered

                                                                                                                                                      To learn more about the companies covered in this report please contact us.

                                                                                                                                                      Online Grocery Retailing - UK - March 2017

                                                                                                                                                      US $2,570.96 (Excl.Tax)