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Online Grocery Retailing - UK - September 2009

The UK online grocery market is estimated at £4.4 billion (including sales tax and delivery charges) in 2009, having more than doubled (134% growth) in value over 2005-09. Rapidly rising food inflation, particularly in 2008, has contributed to high value growth in the sector, while dampening demand in volume terms.

However, even the underlying growth has been explosive. On the consumer side, rising broadband penetration and higher connection speeds, together with the steady expansion of the online grocers’ geographical coverage, has made the service accessible to more people. Meanwhile, the improvements to the online grocers’ services and rising web fluency have encouraged usage.

Despite its impressive growth, online retailing still accounts for only 3% of sales of the total grocery sector, making it a niche channel in the broader context. The sector is dominated by store-based grocers, Tesco alone generating more than two fifths of total sector sales. Ocado is the odd one out as the only pure-play internet grocer, capturing 12% of the sector to rub shoulders with the second- and third-largest UK food retailers, Asda and Sainsbury’s.

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Table of contents

  1. Issues in the Market

      • Key themes
        • Definitions
          • Abbreviations
          • Future Opportunities

            • Making it mycybermarket.com
              • Providing inspiration
                • Simplifying healthy choices
                  • Broadening access
                    • Online top-ups
                    • Market in Brief

                      • Robust growth ahead to £6.9 billion
                        • Figure 1: Consumer spending on online purchasing of food and drink*, 2004-14
                      • Tesco leads but losing ground
                        • Figure 2: Leading retailers’ estimated shares of online food retailing, 2008/09
                      • One in three buys food online, 7% would like to do so
                        • Top-up in-store makes e-groceries pointless?
                          • Themes of 2008/09
                          • Internal Market Environment

                            • Key points
                              • The rise of broadband
                                • Figure 3: Broadband penetration at home, 2004-08
                                • Figure 4: Broadband penetration at home, by detailed age and socio-economic group, 2004 and 2008
                              • Online shopping still gaining
                                • Figure 5: Purchasing from any websites in the last three months, 2002-08
                                • Figure 6: Purchasing from any websites in the last three months, by age group and gender, October 2008
                              • Fashion and books lead e-shopping
                                  • Figure 7: Type of websites purchased from in the last three months, April 2009
                                  • Figure 8: Selected websites purchased from in the last three months, Oct 2002-Oct 2009
                                • Security concerns remain a challenge
                                  • Figure 9: Extent to which security concerns affect purchasing on the web, by age, April 2008
                                  • Figure 10: Extent to which security concerns affect purchasing on the web, by socio-economic group, April 2008
                              • Broader Market Environment

                                • Key points
                                  • Disposable incomes stagnate
                                    • Figure 11: UK PDI and consumer expenditure, current and constant 2009 prices, index, 2004-14
                                    • Figure 12: Ways in which grocery shopping habits have changed in the last 12 months, July 2009
                                  • The retail sector hit by downturn
                                    • Figure 13: UK: Year-on-year retail sales value growth, monthly, January 2008-June 2009
                                    • Figure 14: UK: Year-on-year retail sales volume growth (excluding inflation), monthly, January 2008-June 2009
                                  • Food price inflation leaped ahead in 2008
                                    • Figure 15: Food and overall Consumer Price Inflation, 2004-09
                                  • An ageing population
                                    • Figure 16: UK: forecast change in population, by age group, 2009-14
                                • Market in Context

                                  • Key points
                                    • The big four take two thirds of food sales
                                      • Figure 17: Leading UK food retailers’ shares of all food retail, 2008/09
                                    • Food and drink is the top category by spend, after housing
                                      • Figure 18: Consumer expenditure, by category, 2009 (est)
                                      • Figure 19: Year-on-year growth in spending on in-home food and eating out, 2005-09
                                  • Strengths and Weaknesses

                                    • Strengths
                                      • Weaknesses
                                      • Who’s Innovating?

                                        • Key points
                                          • The established level
                                            • Mobile shopping
                                              • Better communication
                                                • Providing inspiration
                                                  • Ease of use and information
                                                    • Health help
                                                      • Offering value – virtually
                                                      • Market Size and Forecast

                                                        • Key points
                                                          • Is online growth in the grocers' interest?
                                                            • Figure 20: Share of online in total grocery sales*, 2005-09
                                                          • Rising access drives recent growth
                                                            • Figure 21: Consumer spending on online purchasing of food and drink*, at current and constant 2009 prices, 2005-14
                                                          • Young families to remain key group
                                                            • Non-food to grow
                                                              • Factors used in the forecast
                                                              • Retail Competitor Analysis

                                                                • Key points
                                                                  • Figure 22: Leading retailers’ estimated shares of online food retailing, 2008/09
                                                                  • Figure 23: Supermarket usage, online and in-store, leading online grocers, July 2009
                                                                • Tesco's lead unchallenged
                                                                  • Sainsbury's breaks £0.5 billion mark
                                                                    • Asda lags behind despite expansion
                                                                      • Ocado regains steam in 2008
                                                                        • Waitrose remains in the minor league
                                                                          • Organic box schemes still niche
                                                                            • The milkman goes online too
                                                                              • Figure 24: Leading retailers’ estimated sales and shares of online food retailing, 2006-08
                                                                            • Who’s missing (out)?
                                                                              • Morrisons a maybe
                                                                                • No plans announced by M&S
                                                                                  • The Co-op has its hands full
                                                                                    • Amazon entry rumoured
                                                                                    • Retailer Profiles

                                                                                        • Figure 25: Leading online food retailers’ comparison data, 2009
                                                                                      • Asda
                                                                                        • Ocado
                                                                                            • Figure 26: Ocado product mix, by number of lines, 2008/09
                                                                                          • Sainsbury’s
                                                                                            • Tesco
                                                                                              • Waitrose
                                                                                                • Abel & Cole
                                                                                                  • Riverford
                                                                                                  • Brand Communication and Promotion

                                                                                                    • Key points
                                                                                                      • Adspend dips in 2008
                                                                                                        • Figure 27: Main monitored media advertising expenditure on online grocery shopping*, 2005-08
                                                                                                      • Direct mail loses out to TV
                                                                                                          • Figure 28: Main monitored media advertising spend on online grocery shopping, percentage by media type, 2006-08
                                                                                                        • Tesco becomes top spender as Ocado cuts back
                                                                                                            • Figure 29: Main monitored media advertising spend on online grocery shopping, percentage by advertiser, 2006-08
                                                                                                          • The channel makes a difference for brand promotion
                                                                                                            • No more passing traffic
                                                                                                              • New opportunities online
                                                                                                              • The Consumer – Online Food Shopping Patterns

                                                                                                                • Key points
                                                                                                                    • Figure 30: Online shopping for groceries, July 2009
                                                                                                                  • Changes to grocery shopping habits
                                                                                                                    • Attitudes towards grocery shopping
                                                                                                                    • The Consumer – Attitudes Towards Online Food Shopping

                                                                                                                      • Key points
                                                                                                                          • Figure 31: Attitudes towards shopping online for groceries (% agreeing), July 2009
                                                                                                                        • One-stop-shoppers
                                                                                                                          • Focus on fresh
                                                                                                                            • Delivery issues
                                                                                                                              • Attitudes by age
                                                                                                                                • The divided young
                                                                                                                                  • Positive 35-44s
                                                                                                                                    • Older consumers come across negative
                                                                                                                                      • Attitudes towards grocery shopping online – the positives
                                                                                                                                        • Figure 32: Attitudes towards shopping online for groceries among regular and occasional online shoppers, (% agreeing) July 2009
                                                                                                                                      • Barriers to online shopping
                                                                                                                                        • Figure 33: Attitudes towards shopping online for groceries among non-online shoppers, (% agreeing) July 2009
                                                                                                                                    • The Consumer – Target Groups

                                                                                                                                      • Key points
                                                                                                                                          • Figure 34: Marketing targets based on attitudes towards online food shopping, July 2009
                                                                                                                                        • Online positives (41%)
                                                                                                                                          • Unconvinced (21%)
                                                                                                                                            • Store-engaged (38%)
                                                                                                                                            • Appendix – Internal Market Environment

                                                                                                                                                • Figure 35: Broadband penetration at home, by detailed demographics, 2004 and 2008
                                                                                                                                                • Figure 36: Purchasing from any websites in the last three months, by detailed demographics, October 2008
                                                                                                                                                • Figure 37: Type of websites purchased from in the last three months, November 2002-April 2009
                                                                                                                                                • Figure 38: Extent to which security concerns affect purchasing on the web, by detailed demographics, April 2008
                                                                                                                                            • Appendix – Broader Market Environment

                                                                                                                                                • Figure 39: UK adult population aged 15+, by age group, 2004-14
                                                                                                                                                • Figure 40: PDI, at current and constant 2009 prices, 2004-14
                                                                                                                                                • Figure 41: Consumer expenditure, at current and constant 2009 prices, 2004-14
                                                                                                                                                • Figure 42: Monthly year-on-year retail sales value growth, food, non-food and all retail stores, January 2007-June 2009
                                                                                                                                                • Figure 43: Monthly year-on-year retail sales volume growth, food, non-food and all retail stores, January 2007-June 2009
                                                                                                                                            • Appendix – Market in Context

                                                                                                                                                • Figure 44: Spending on in-home food and eating out, 2004-09
                                                                                                                                            • Appendix – The Consumer – Online Food Shopping Patterns

                                                                                                                                                • Figure 45: Statements on shopping for groceries at the supermarket, July 2009
                                                                                                                                                • Figure 46: Usage of online shopping for groceries, July 2009
                                                                                                                                                • Figure 47: Usage of online shopping for groceries, by demographics, July 2009
                                                                                                                                            • Appendix – The Consumer – Attitudes Towards Online Food Shopping

                                                                                                                                                • Figure 48: Attitudes towards shopping online for groceries, July 2009
                                                                                                                                                • Figure 49: Attitudes towards shopping online for groceries (agree), by demographics, July 2009
                                                                                                                                                • Figure 50: Attitudes towards shopping online for groceries (agree), by demographics, July 2009 (continued)
                                                                                                                                                • Figure 51: Changes to grocery shopping habits in the last 12 months, by usage of online shopping for groceries, July 2009
                                                                                                                                                • Figure 52: Attitudes towards shopping for groceries at the supermarket (agree), by usage of online shopping for groceries, July 2009
                                                                                                                                                • Figure 53: Attitudes towards shopping online for groceries (agree), by usage of online shopping for groceries (continued), July 2009
                                                                                                                                            • Appendix – The Consumer – Target Groups

                                                                                                                                                • Figure 54: Attitudes towards shopping online for groceries, by target groups, July 2009
                                                                                                                                                • Figure 55: Target groups, by demographics, July 2009
                                                                                                                                                • Figure 56: Changes in grocery shopping habits in the last 12 months, by target groups, July 2009
                                                                                                                                                • Figure 57: Attitudes towards shopping for groceries at the supermarket (agree), by target groups, July 2009

                                                                                                                                            Companies Covered

                                                                                                                                            • Abel & Cole Limited
                                                                                                                                            • Advertising Standards Authority
                                                                                                                                            • Aldi Stores Ltd (UK & Ireland)
                                                                                                                                            • Asda Group Ltd
                                                                                                                                            • British Market Research Bureau (BMRB)
                                                                                                                                            • British Sky Broadcasting Group plc (BSkyB)
                                                                                                                                            • Co-operative Group
                                                                                                                                            • Dairy Crest Group plc
                                                                                                                                            • Facebook, Inc.
                                                                                                                                            • J. Sainsbury
                                                                                                                                            • John Lewis Partnership
                                                                                                                                            • Lidl (UK)
                                                                                                                                            • Marks & Spencer
                                                                                                                                            • Ocado Ltd
                                                                                                                                            • Phoenix Equity Partners
                                                                                                                                            • Procter & Gamble UK & Ireland
                                                                                                                                            • Somerfield
                                                                                                                                            • Tesco Plc
                                                                                                                                            • Virgin Media Ltd
                                                                                                                                            • Waitrose
                                                                                                                                            • Wm Morrison Supermarkets
                                                                                                                                            • YouTube, Inc.

                                                                                                                                            Online Grocery Retailing - UK - September 2009

                                                                                                                                            £1,995.00 (Excl.Tax)