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Online Grocery Retailing - UK - September 2011

“Mintel expects growth in the (online grocery) market to gradually lose momentum further down the line. The demographic outlook, with more small households and an aging population, poses a challenge for the sector, with these groups holding lower than average interest in online grocery shopping, with delivery charges a particular concern given their small basket sizes.”

– Andrew Neary, Retail Analyst

The online grocery market is defined as the online sales of food and drink for in-home consumption, including store-based grocers’ FMCG sales online, food and drink specialist retailers’ online sales, online-based grocers’ sales and online-based food box delivery schemes.

It excludes restaurant food delivery and home delivery of food not ordered online.

It also excludes store-based grocers’ non-FMCG sales online.

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Table of contents

  1. Introduction

      • Definition
        • Abbreviations
        • Executive Summary

            • The sector
              • Sales more than double in the online grocery sector
                • Figure 1: Online grocery sales as proportion of the overall grocery sector, 2006-11
              • Forecast
                • Figure 2: Forecast of value sales in the UK online grocery sector, by value, 2006-16
              • Market factors
                • Non-foods driving e-commerce uptake
                  • Consumers remain under pressure
                    • Demographic changes to pose a challenge to the online channel
                      • Companies, brands and innovation
                        • The big five dominate the online grocery sector
                          • Figure 3: Leading retailers’ estimated shares of online grocery retailing, 2010/11
                        • Tesco leads the way
                          • Ocado: No longer a vanity project?
                            • Embracing new technologies and services
                              • The consumer
                                • Majority still do not shop for groceries online
                                  • Figure 4: Shopping online for groceries, July 2011
                                • Women and young families most inclined to shop for groceries online
                                  • Figure 5: Shopping online for groceries, by gender, age and presence of own children in the household, July 2011
                                • The online channel captures only a small part of overall grocery spend
                                  • Figure 6: Proportion of total monthly grocery spending spent online, July 2011
                                • Wanting to see fresh produce is a key barrier to shopping online
                                  • Figure 7: Attitudes to grocery shopping, July 2011
                                • What we think
                                • Issues in the Market

                                    • What are the main obstacles to online shopping?
                                      • How can online grocers appeal to the growing ageing population?
                                        • How much growth potential does online grocery shopping have?
                                          • What services could offer shoppers greater convenience online?
                                          • Future Opportunities

                                              • Trend: Totophobia
                                                • Trend: Click and Connect
                                                • Internal Market Environment

                                                  • Key points
                                                    • Broadband growth
                                                      • Figure 8: Broadband penetration at home, 2006-10
                                                      • Figure 9: Broadband penetration, by age and socio-economic group, 2010
                                                    • Embracing e-commerce
                                                      • Figure 10: Frequency of purchasing online, 2010
                                                      • Figure 11: Change in frequency of purchasing online, 2006-10
                                                      • Figure 12: Frequency of purchasing online, by age and socio-economic group, 2010
                                                    • Non-food categories drive e-commerce
                                                      • Figure 13: Types of products purchased online regularly, 2010
                                                      • Figure 14: Highest growth rates in products purchased online regularly, percentage point change, 2007-10
                                                    • Convenience and price drive shopping destination
                                                      • Figure 15: Deciding factors when shopping for food, drink and household products, 2010
                                                      • Figure 16: Most important factors when shopping for food, drink and household products, by age and socio-economic group, 2010
                                                  • Broader Market Environment

                                                    • Key points
                                                      • Consumer confidence remains low
                                                          • Figure 17: GfK NOP Consumer confidence index, January 2007-July 2011
                                                        • Inflation taking its toll...
                                                          • Figure 18: Percentage change in Retail Prices Index vs earnings, 2008-11
                                                        • …particularly on food
                                                          • Figure 19: Year-on-year inflation in food and non-alcoholic beverages and all items, 2007-11
                                                          • Figure 20: Year-on-year % change in value retail sales of food vs all retail sales, current prices, July 2009-July 2011
                                                          • Figure 21: Year-on-year % change in retail sales of food vs all retail, constant (2006) prices, July 2009-July 2011
                                                        • Ageing population, new potential for online grocery?
                                                          • Figure 22: UK population projections, by age, % change, 2011-16
                                                        • Number of one-person households set to see rapid growth
                                                          • Figure 23: UK households, by size, 2011
                                                          • Figure 24: Forecast % change in the number of UK households, by size, 2011-16
                                                      • Competitive Context

                                                        • Key points
                                                          • Food grows share in consumer spending
                                                            • Figure 25: Consumer spending, by category, 2010
                                                            • Figure 26: Share of in-home food and non-alcoholic drinks in total consumer spending, 2005-10
                                                          • Eating out feels the effect of consumer cutbacks
                                                            • Figure 27: Growth in consumption of food at home vs eating out and takeaways, 2007-11
                                                          • The big four dominate food retail
                                                            • Figure 28: Leading food retailers’ share of all food retail, 2010/11
                                                        • Strength and Weaknesses in the Market

                                                          • Strengths
                                                            • Weaknesses
                                                            • Who’s Innovating?

                                                              • Key points
                                                                • New services and m-commerce
                                                                  • Bringing the online offline
                                                                    • Click and collect
                                                                      • Idea generation
                                                                        • Embracing the social side of online
                                                                        • Market size and Forecast

                                                                          • Key points
                                                                            • Online grocery slowly gaining share of all grocery sales
                                                                              • Figure 29: Online grocery sales as a proportion of the overall grocery sector, 2007-11
                                                                            • Market size for online grocery
                                                                              • Figure 30: Value sales in the UK online grocery sector, 2006-16
                                                                            • Strong growth in online grocery
                                                                              • Online grocery market forecast
                                                                                • Figure 31: Value sales in the UK online grocery sector, 2006-16
                                                                              • Forecast methodology
                                                                              • Retail Competitor Analysis

                                                                                • Key points
                                                                                  • Tesco retains lead online
                                                                                    • Figure 31: Leading retailers’ estimated share of online grocery retailing, 2010/11
                                                                                    • Figure 32: Leading retailers’ estimated share of online grocery retailing, 2008-10
                                                                                    • Figure 33: Top 15 online food and drink sites, by number of visits, average May-July 2011
                                                                                  • Tesco remains the dominant force
                                                                                    • Sainsbury’s maintains robust growth
                                                                                      • Figure 34: Year-on-year change in total visits to sainsburys.co.uk, monthly visitors, August 2009-July 2011
                                                                                    • Asda’s sales also on the up
                                                                                      • Ocado holds its own
                                                                                          • Figure 35: Year-on-year % change in total visits to Ocado, monthly visitors, August 2009-July 2011
                                                                                        • Waitrose to grow
                                                                                            • Figure 36: Year-on-year change in total visits to waitrose.com, monthly visitors, August 2009-July 2011
                                                                                          • Box schemes
                                                                                            • A long tail of small specialists
                                                                                              • New and future entrants
                                                                                                • Amazon makes first steps in the UK food arena
                                                                                                  • Morrisons to be the next grocer to move online?
                                                                                                    • Online is not on the agenda for the Co-op
                                                                                                      • Can M&S compete in online groceries?
                                                                                                      • Retailer Profiles

                                                                                                          • Figure 37: Leading online food retailers’ comparison data, 2011
                                                                                                        • Amazon
                                                                                                          • Asda
                                                                                                              • Figure 38: Asda’s online grocery product mix, by number of lines, 2011
                                                                                                            • Ocado
                                                                                                                • Figure 39: Ocado product mix, by number of lines, 2011
                                                                                                              • Sainsbury’s
                                                                                                                • Tesco
                                                                                                                    • Figure 40: Tesco’s online grocery product mix, by number of lines, 2011
                                                                                                                  • Waitrose
                                                                                                                      • Figure 41: Waitrose online grocery product mix, by number of lines, 2011
                                                                                                                  • Brand Communication and Promotion

                                                                                                                    • Key points
                                                                                                                      • Adspend recovers in 2010
                                                                                                                        • Figure 42: Topline adspend in the UK online grocery retailing sector, 2008-11*
                                                                                                                      • Direct mail remains the medium of choice
                                                                                                                          • Figure 43: Share of adspend in the UK online grocery retailing sector, by media type, 2008-10
                                                                                                                        • Ocado is the biggest spender
                                                                                                                          • Figure 44: Share of adspend in the UK online grocery retailing sector, by company, 2008-10
                                                                                                                        • Bringing in-store promotions online
                                                                                                                        • Consumer – Shopping Online for Groceries

                                                                                                                          • Key points
                                                                                                                            • Use of the online channel for shopping for groceries
                                                                                                                                • Figure 45: Consumer use of online shopping for groceries, July 2011
                                                                                                                                • Figure 46: Consumer use of online shopping for groceries, July 2011
                                                                                                                              • Only two in five consumers shop online
                                                                                                                                • Women and young families are most inclined to shop online for groceries
                                                                                                                                  • Figure 47: Consumer use of online shopping for groceries, by gender, age and presence of own children in the household, July 2011
                                                                                                                                • Youngest and oldest consumers the least likely to shop online
                                                                                                                                  • Socio-economic profile of uptake is broadening
                                                                                                                                    • Figure 48: Consumer use of online shopping for groceries, by socio-economic status, annual gross household income and household size, July 2011
                                                                                                                                  • 16-24-year-olds are the keenest to shop online
                                                                                                                                    • Figure 49: Agreement with the statement ‘I have never bought groceries online, but would like to’, by age, socio-economic group and household size, July 2011
                                                                                                                                • Consumer – Online Food Shopping Spend

                                                                                                                                  • Key points
                                                                                                                                      • Figure 50: Proportion of total monthly grocery spend online, July 2011
                                                                                                                                  • Consumer – Attitudes towards Online Shopping

                                                                                                                                    • Key points
                                                                                                                                      • Ease of in-store shopping remains a challenge to getting consumers online
                                                                                                                                          • Figure 51: Attitudes towards ease of grocery shopping, July 2011
                                                                                                                                        • Trust remains an issue
                                                                                                                                          • Figure 52: Attitudes towards fresh produce and completeness of online orders, July 2011
                                                                                                                                        • Delivery issues affect half of consumers
                                                                                                                                          • Figure 53: Attitudes towards delivery of online orders, July 2011
                                                                                                                                        • Opportunities remain to cater for those who see grocery shopping as a chore
                                                                                                                                          • Figure 54: Attitudes towards planning grocery shopping, July 2011
                                                                                                                                      • Consumer – Interest in New Services

                                                                                                                                        • Key points
                                                                                                                                          • Verdict on new services
                                                                                                                                              • Figure 55: Usage of and interest in new features, July 2011
                                                                                                                                            • Meal plans and nutrition tracking sparked high minority interest
                                                                                                                                              • Barcodes of interest, mobile shopping less so
                                                                                                                                              • Consumer – Target Groups

                                                                                                                                                • Key points
                                                                                                                                                  • Three target groups
                                                                                                                                                    • Figure 56: Marketing targets based on attitudes towards online food shopping, July 2011
                                                                                                                                                  • Store-centrics
                                                                                                                                                    • Online embracers
                                                                                                                                                      • Online sceptics
                                                                                                                                                      • Appendix – Internal Market Environment

                                                                                                                                                          • Figure 57: Trends in broadband penetration, 2006-10
                                                                                                                                                          • Figure 58: Broadband penetration, by demographics, 2010
                                                                                                                                                          • Figure 59: Trends in frequency of making a purchase online, 2006-10
                                                                                                                                                          • Figure 60: Deciding factors when shopping for food, drink and household products, 2006-10
                                                                                                                                                          • Figure 61: Frequency of making a purchase online, by demographics, 2010
                                                                                                                                                          • Figure 62: Most important factors when shopping for food, drink and household products, by demographics, 2010
                                                                                                                                                          • Figure 63: Most important factors when shopping for food, drink and household products, by demographics, 2010
                                                                                                                                                          • Figure 64: Most important factors when shopping for food, drink and household products, by demographics, 2010
                                                                                                                                                          • Figure 65: Most important factors when shopping for food, drink and household products, by demographics, 2010
                                                                                                                                                      • Appendix - Market Size and Forecast

                                                                                                                                                          • Figure 66: Total value forecast for online grocery, 2006-16
                                                                                                                                                          • Figure 67: Value sales for online grocery, 2006-16
                                                                                                                                                          • Figure 68: Forecast of UK Online grocery sector, best and worst case, 2011-16
                                                                                                                                                      • Appendix – Consumer – Online Food Shopping Patterns

                                                                                                                                                          • Figure 69: Online shopping for groceries, July 2011
                                                                                                                                                          • Figure 70: Most popular online shopping for groceries, by demographics, July 2011
                                                                                                                                                          • Figure 71: Next most popular online shopping for groceries, by demographics, July 2011
                                                                                                                                                      • Appendix – Consumer – Online Food Shopping Spend

                                                                                                                                                          • Figure 72: Share of monthly grocery spend spent online, July 2011
                                                                                                                                                          • Figure 73: Share of monthly grocery spend spent online, by demographics, July 2011
                                                                                                                                                          • Figure 74: Share of monthly grocery spend spent online, by online shopping for groceries, July 2011
                                                                                                                                                      • Appendix – Consumer – Attitudes towards Grocery Shopping

                                                                                                                                                          • Figure 75: Attitudes towards grocery shopping, July 2011
                                                                                                                                                          • Figure 76: Agreement with the statements ‘Grocery shopping in-store is a chore’ and ‘It's easy to pop into the grocery store’, by demographics, July 2011
                                                                                                                                                          • Figure 77: Agreement with the statements ‘I only buy food for a few days at a time, or less’ and ‘I tend to do a big weekly shop, and top up in between’, by demographics, July 2011
                                                                                                                                                          • Figure 78: Agreement with the statements ‘Doing the grocery shopping takes up too much of my evenings/weekends’ and ‘I usually go to the grocery store by car’, by demographics, July 2011
                                                                                                                                                          • Figure 79: Agreement with the statements ‘I make a meal plan for the week and only buy what I need’ and ‘I often choose what food to buy based on what looks good in-store’, by demographics, July 2011
                                                                                                                                                          • Figure 80: Agreement with statement ‘I'm willing to pay more for a more pleasant shopping experience’, by demographics, July 2011
                                                                                                                                                          • Figure 81: Attitudes towards grocery shopping, by most popular online shopping for groceries, July 2011
                                                                                                                                                          • Figure 82: Attitudes towards grocery shopping, by next most popular online shopping for groceries, July 2011
                                                                                                                                                      • Appendix- Consumer – Attitudes towards Shopping Online for Groceries

                                                                                                                                                          • Figure 83: Attitudes towards shopping online for groceries, July 2011
                                                                                                                                                          • Figure 84: Agreement with the statements ‘It’s not worth paying the delivery charge’ and ‘I don't buy enough in one go for an online order’, by demographics, July 2011
                                                                                                                                                          • Figure 85: Agreement with the statements ‘Waiting at home for delivery is inconvenient’ and ‘I prefer not to buy fresh food online because I won’t know the use-by dates’, by demographics, July 2011
                                                                                                                                                          • Figure 86: Agreement with the statements ‘I like to see and touch fresh produce before buying’ and ‘I don't see the point of shopping online for groceries’, by demographics, July 2011
                                                                                                                                                          • Figure 87: Agreement with the statements ‘The websites are slow to use’ and ‘I won't get the same deals as in-store’, by demographics, July 2011
                                                                                                                                                          • Figure 88: Agreement with the statements ‘I'm concerned about not getting everything I ordered’ and ‘I'm concerned about not getting exactly what I ordered’, by demographics, July 2011
                                                                                                                                                          • Figure 89: Agreement with statement ‘If I have to top up on my shopping at the supermarket, I might as well buy everything there’, by demographics, July 2011
                                                                                                                                                          • Figure 90: Attitudes towards shopping online for groceries, by most popular online shopping for groceries, July 2011
                                                                                                                                                          • Figure 91: Attitudes towards shopping online for groceries, by next most popular online shopping for groceries, July 2011
                                                                                                                                                      • Appendix – Consumer – Usage of and Interest in New Features

                                                                                                                                                          • Figure 92: Usage of and interest in new features, July 2011
                                                                                                                                                          • Figure 93: Usage of and interest in shopping online, collecting in-store, by demographics, July 2011
                                                                                                                                                          • Figure 94: Usage of and interest in adding items to online shopping list by scanning barcode, by demographics, July 2011
                                                                                                                                                          • Figure 95: Usage of and interest in adding items to online shopping list by mobile, by demographics, July 2011
                                                                                                                                                          • Figure 96: Usage of and interest in recipes on the online store site, by demographics, July 2011
                                                                                                                                                          • Figure 97: Usage of and interest in weekly menu planners on the online store site, by demographics, July 2011
                                                                                                                                                          • Figure 98: Usage of and interest in nutritional tracking based on my online shopping, by demographics, July 2011
                                                                                                                                                          • Figure 99: Usage of and interest in ordering by mobile, by demographics, July 2011
                                                                                                                                                          • Figure 100: Usage of and interest in adding items to shopping list based on site reminder that I'm running out of something, by demographics, July 2011
                                                                                                                                                          • Figure 101: Usage of and interest in adding items to shopping list based on site suggestion of items that suit together, by demographics, July 2011
                                                                                                                                                          • Figure 102: Usage of and interest in new features, by most popular online shopping for groceries, July 2011
                                                                                                                                                          • Figure 103: Usage of and interest in new features, by next most popular online shopping for groceries, July 2011
                                                                                                                                                      • Appendix – Consumer – Target Groups

                                                                                                                                                          • Figure 104: Online shopping for groceries, by target groups, July 2011
                                                                                                                                                          • Figure 105: Share of monthly grocery spend spent online, by target groups, July 2011
                                                                                                                                                          • Figure 106: Attitudes towards grocery shopping, by target groups, July 2011
                                                                                                                                                          • Figure 107: Attitudes towards shopping online for groceries, by target groups, July 2011
                                                                                                                                                          • Figure 108: Usage of and interest in new features, by target groups, July 2011
                                                                                                                                                          • Figure 109: Target groups, by demographics, July 2011

                                                                                                                                                      Companies Covered

                                                                                                                                                      • Advertising Standards Authority
                                                                                                                                                      • Asda Group Ltd
                                                                                                                                                      • Bank of England
                                                                                                                                                      • Bespoke Foods Ltd
                                                                                                                                                      • Heston Blumenthal
                                                                                                                                                      • J. Sainsbury
                                                                                                                                                      • John Lewis Partnership
                                                                                                                                                      • Kraft Foods UK
                                                                                                                                                      • LOVEFiLM International Ltd
                                                                                                                                                      • Marks & Spencer
                                                                                                                                                      • Nestlé UK Ltd
                                                                                                                                                      • Ocado Ltd
                                                                                                                                                      • Research in Motion Uk Ltd.
                                                                                                                                                      • Tesco Plc
                                                                                                                                                      • Waitrose
                                                                                                                                                      • Weight Watchers Ltd. (UK)
                                                                                                                                                      • Wm Morrison Supermarkets

                                                                                                                                                      Online Grocery Retailing - UK - September 2011

                                                                                                                                                      £1,995.00 (Excl.Tax)