2023
9
UK Online Grocery Retailing Market Report 2023
2023-06-07T04:04:59+01:00
OX1157497
2195
163945
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Report
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“As expected, sales within the online grocery channel were in consistent decline in 2022 as the market rebalanced post the peak use of the channel in 2020-21, with further declines…

UK Online Grocery Retailing Market Report 2023

£ 2,195 (Excl.Tax)

Description

Stay ahead of the curve and future-proof your business with Mintel’s UK Online Grocery Retailing Market Report 2023. Our full report is packed with consumer-led market intelligence, the latest trends and consumer behaviours affecting your industry. Get a 360° view of the UK online grocery market including market size, share and forecasted growth to help you align your business strategy with the needs of your audience.

Below, we’ve handpicked the key insights analysed in the full report and summarised the core topics.

Our Report Delivers Key Insights On

  • The impact of the cost of living crisis on use and reliance on the online grocery channel.
  • Number of consumers shopping online, including demographic breakdown, and how this has shifted over the past three years.
  • Products typically purchased as part of an online grocery shop, reasons for shopping online for groceries from users, and barriers to shopping online for groceries from non-users.
  • Attitudes to savvy shopping (eg flexible payment terms, loyalty schemes), sustainability and hygiene when shopping online for groceries.
  • Use of and attitudes towards alternative online food and drink retailers, such as rapid delivery retailers (eg Getir), food box retailers (HelloFresh) and alcohol specialists (eg Naked Wines).

Current UK Online Grocery Market Landscape

As expected, the market has declined following the extraordinary growth driven by the COVID-19 pandemic and enforced lockdowns. However, even with this decline, the online channel remains far larger than it had been pre-pandemic. The number of consumers moving entirely away from online grocery retail was small, falling from 58% to 55%, highlighting that the sector can be resilient during the cost-of-living crisis.

  • Online grocery market share UK: Tesco accounts for a quarter of the market, and almost a third of online grocery shoppers use Tesco most often.
  • Online grocery market trends: One in 10 consumers who no longer shop for groceries online said this was because they now shop with a retailer that doesn’t offer an online service, primarily discounters like Aldi or Lidl.

UK Online Grocery Shopping Trends and Opportunities

Convenience the main driver

The leading reasons as to why consumers use online grocery shopping are all convenience-driven, 40% of consumers use it to avoid shopping in-store, and a third find it easily fits into their schedule. Looking longer term, there is a clear opportunity for online grocery retailers to tap into subscription, particularly within frequent but less aspirational product categories such as household cleaning. With convenience a key driver of online grocery use, the ability to ‘automate’ elements of online grocery demand is a clear opportunity particularly when this is tied to value.

Spending tracking underpins value credentials

In the current climate the perception of online grocery as being less value-focused is a major barrier to attracting new consumers. Around a third of consumers believe that they can find better prices or promotions in-store. Nevertheless, a fifth of consumers use online shopping to keep better track of spending, so retailers should draw attention to spending tracking to demonstrate the value of shopping for groceries online.

Leading Brands Covered in this Report

This report covers major grocers’ online sales, online-only grocers’ sales, specialist food and drink retailers’ online sales, and online-based food box and recipe box delivery schemes. The leading players in the sector covered in this report include Tesco, Sainsbury’s, Asda, Ocado, Amazon Fresh, Iceland, Deliveroo, Uber Eats, Just Eat, and HelloFresh.

Additional Features Included with Your Purchase

  • Interactive Data Book: This gives you unlimited access to a consumer confidence tracker that is segmented into 25 different demographic categories.
  • Different Digital Formats: PDF for conveniently sharing with your team, PowerPoint for quickly including in your presentation, as well as Word and Excel.
  • Mintel’s Clients Portal: Our portal offers instant access to actionable analysis and trend pieces relevant to your industry that are published almost daily. You can also browse for more market research reports.

To learn how to connect with your audience, purchase our full UK Online Grocery Retailing Market Report 2023. Discover lucrative innovation opportunities to help your business grow during times of financial uncertainty.

Expert Insights from a Retail Specialist

This report, written by Nick Carroll, a leading analyst in the retail sector, delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

As expected, sales within the online grocery channel were in consistent decline in 2022 as the market rebalanced post the peak use of the channel in 2020-21, with further declines forecast for 2023 before longer-term growth returns. Pressure on finances has added to this, with some moving away from the channel to more value-led options, and for premium elements of the online grocery sector, particularly rapid delivery, at present there is a need to simply maintain before greater opportunity for growth returns in 2024.

Nick Carroll - Research Analyst

Nick Carroll
Category Director, Retail Insights

Table of Contents

  1. Overview

    • Key issues covered in this Report
    • Products covered in this Report
  2. Executive Summary

    • Following a further rebalance in 2023 online grocery sector set to return to growth
      • Figure 1: Category outlook, 2023-28
    • The market
    • Market rebalances in 2022 from record highs in 2021
      • Figure 2: All online grocery retail sales (including VAT), 2017-22
    • Market expected to grow by a fifth between 2024 and 2027
      • Figure 3: Market forecast for all online grocery retail sales, 2017-27
    • Online unlikely to pass peak-pandemic levels in the next five years
      • Figure 4: Online grocery as a % of all grocery sales, 2017-27
    • Leading retailers
    • Tesco the dominant player in the online grocery space
      • Figure 5: Leading online grocery retailers’ estimated market shares (excluding VAT), 2022
    • Key delivery partners score well on brand metrics
      • Figure 6: Key metrics for selected brands, 2022-23
    • Rapid delivery a small proportion of the overall market value
      • Figure 7: Estimated composition of the online grocery sector, by type of service, 2019-22
    • Motatos launches in the UK and raises £33m in funding
      • Figure 8: Motatos UK Launch, 2022
    • Asda experiments with driverless delivery
      • Figure 9: Asda/Wayve self-driving delivery vehicle, 2023
    • Co-op expands autonomous delivery
      • Figure 10: Co-op and Starship Technologies autonomous grocery delivery, Sale, Greater Manchester, 2023
    • The consumer
    • Number shopping online for groceries falls
      • Figure 11: Online grocery use, 2022
    • Overall reliance on online grocery services eases
      • Figure 12: Types of online grocery users as a proportion of all online grocery users, 2022
    • Home delivery remains dominant as rapid delivery demand eases
      • Figure 13: How groceries are typically delivered, 2020-22
    • Fresh purchasing declines as reliance on the online channel eases
      • Figure 14: Products typically purchased in online grocery orders, 2021-22
    • Almost a third of online grocery shoppers use Tesco most often
      • Figure 15: Online grocery retailer shopped with and shopped with most often, 2022
    • Rapid delivery retailer use falls
      • Figure 16: Alternative food and drink retailers shopped with online, 2021-22
    • Convenience the main driver, but value credentials show opportunity
      • Figure 17: Reasons for shopping online for groceries, 2022
    • Fresh and cost expectations the major barriers to online use
      • Figure 18: Reasons for not shopping online for groceries, 2022
    • Half would be happy to offset the emissions of their deliveries
      • Figure 19: Online grocery-shopping behaviours, 2023
  3. Issues and Insights

    • The impact of the cost of living crisis on online grocery use
    • Rapid delivery: a health check
  4. Market Drivers

    • Inflation will continue to eat into consumer spending power over the course of 2023
      • Figure 20: Inflation, overall index (CPI) and core categories, 2022-23
    • All grocery sales value and volume
      • Figure 21: All grocery retail sales, non-seasonally adjusted sales performance, in value and volume terms, 2022-23
    • Pressure on middle incomes leaves online grocery exposed
    • Real incomes remain in decline
      • Figure 22: Real income growth: CPIH versus average weekly earnings growth, 2016-23
    • Consumer spending power will be curbed
    • Consumers’ financial wellbeing has fallen from the highs of 2021…
      • Figure 23: Household financial wellbeing index, 2016-23
    • …and most people are feeling the effects of price rises
  5. Market Size and Performance

    • Online grocery sales turn negative in 2022 as market rebalances
      • Figure 24: All online grocery retail sales (including VAT), 2017-22
      • Figure 25: All online grocery retail sales (including VAT), at current and constant prices, 2017-22
    • Rebalancing has continued into 2023 but is easing…
      • Figure 26: Store-based online grocery retail sales, non-seasonally adjusted year-on-year growth, 2020-23
    • …and average weekly sales in the sector are still 59.8% higher than pre-pandemic
      • Figure 27: Store-based online grocery, average weekly sales, non-seasonally adjusted (including VAT), 2020-23
  6. Market Forecast

    • Following a further rebalance in 2023 the online grocery sector is set to return to growth
      • Figure 28: Category outlook, 2023-28
    • Long term there are still strong growth opportunities for online grocery
      • Figure 29: Market forecast for all online grocery retail sales, 2017-27
      • Figure 30: Detailed market forecast for all online grocery retail sales, 2017-27
    • Online unlikely to pass peak-pandemic levels in the next five years
      • Figure 31: Online grocery as a percentage of all grocery sales, 2017-27
    • Learnings from the last income squeeze
      • Figure 32: All online grocery retail sales (including VAT), 2011-16
    • Forecast methodology
  7. Market Segmentation

    • Store-based retailers dominate the online grocery market
    • Store-based online grocery forecast to grow by a fifth between 2023 and 2027
      • Figure 33: Online grocery sales by store-based grocery retailers (inc. VAT), 2017-27
    • Online-only market also set to see consistent growth from 2024
      • Figure 34: Online grocery sales by online-only retailers (inc. VAT), 2017-27
    • Rapid delivery a small proportion of the overall market value
      • Figure 35: Estimated composition of the online grocery sector, by type of service, 2019-22
  8. Online Grocery Use

    • Number shopping online for groceries falls
      • Figure 36: Online grocery use, 2022
    • Overall reliance on online grocery services eases
      • Figure 37: Types of online grocery users as a proportion of all online grocery users, 2022
    • Despite total users falling, the online channel is still attracting new customers
      • Figure 38: When users began shopping online for groceries, 2022
  9. Demographics of Online Grocery Shoppers

    • Core demographics remain consistent but the pandemic has diversified the market
    • Those aged 25-44 remain the core audience, but some have moved away
      • Figure 39: Any online grocery use, by age group, 2019-22
      • Figure 40: Level of online grocery shopping, by age, 2019-22
    • Parental use eases back to pre-pandemic levels
      • Figure 41: Online grocery use, by parental status, 2019-22
    • Still a sector with a more affluent audience
      • Figure 42: Total online grocery use, by household income, 2019-22
    • Online grocery use continues to peak in urban areas
      • Figure 43: Any online grocery use, by type of location lived in and region, 2019-22
  10. How Groceries Are Delivered

    • Home delivery remains dominant as rapid delivery demand eases
      • Figure 44: How groceries are typically delivered, 2020-22
    • Younger shoppers leaning more on courier delivery
      • Figure 45: How groceries are typically delivered, by level of online grocery use, 2022
    • Linking the channels brings additional opportunities
      • Figure 46: Additional behaviours when collecting online grocery orders, 2022
  11. Products Purchased Online

    • Fresh purchasing declines as reliance on the online channel eases
      • Figure 47: Products typically purchased in online grocery orders, 2021-22
    • Barriers to fresh directly tied to access
      • Figure 48: Products typically purchased in online grocery orders, by area lived in, 2022
    • More immediacy-based need in rapid delivery
      • Figure 49: Products typically purchased in online grocery orders, by type of delivery service/retailer used, 2022
  12. Leading Retailers Used

    • Almost a third of online grocery shoppers use Tesco most often
      • Figure 50: Online grocery retailer shopped with and shopped with most often, 2022
    • Secondary destinations see a greater decline in shopper numbers
      • Figure 51: Online grocery retailer shopped with online, 2019-22
  13. Alternative Retailers Used

    • Rapid delivery use falls but recipe box maintains despite cost of living crisis
      • Figure 52: Alternative food and drink retailers shopped with online, 2021-22
    • Rapid delivery: serving a magnified version of the core online grocery shopper
      • Figure 53: Demographic profile of online grocery retailers used and alternative food and drink retailers used, by age and household income, 2022
  14. Reasons for Shopping Online for Groceries

    • Convenience the main driver, but value credentials show opportunity
      • Figure 54: Reasons for shopping online for groceries, 2022
    • For younger shoppers the ability to control spending is key to online grocery use
      • Figure 55: Reasons for shopping online for groceries, by age, 2022
  15. Reasons for Not Shopping Online for Groceries

    • Barriers to fresh and cost expectations the major barriers
      • Figure 56: Reasons for not shopping online for groceries, 2022
    • Promote spending tracking online to underpin value credentials
      • Figure 57: Reasons for not shopping online for groceries, by level of previous use/future interest, 2022
  16. Attitudes towards Online Grocery Shopping

    • Four fifths use loyalty schemes when shopping online
      • Figure 58: Use and attitudes towards value-added benefits and shopping online for groceries, 2022
    • Half would be happy to offset the emissions of their deliveries
      • Figure 59: Use and attitudes towards value-added benefits and shopping online for groceries, 2022
    • Stronger interest from younger and time-pressed consumers in in-home delivery
      • Figure 60: Attitudes to in-home grocery delivery, 2022
  17. Leading Retailers and Market Share

    • Tesco estimated to account for a quarter of the market
      • Figure 61: Leading online grocery retailers’ estimated market shares (excluding VAT), 2022
      • Figure 62: Leading online grocery retailers, estimated market shares, 2019-22
    • Leading players: a note on revenues
    • Leading players: revenues
      • Figure 63: Leading retailers’ net online grocery revenues, 2019-23
    • Leading players: revenue breakdown
      • Figure 64: Leading online grocery retailers’ estimated total online revenues, by grocery and non-grocery, 2019-22
    • Smaller players: market share and revenue
      • Figure 65: Smaller online food and drink retailers, estimated market shares, 2019-22
      • Figure 66: Smaller online food and drink retailers, revenues, 2019-22
  18. Brand Research

    • Key findings
    • Brand map
      • Figure 67: Attitudes towards and usage of selected brands, 2022-23
    • Key brand metrics
      • Figure 68: Key metrics for selected brands, 2022-23
    • Brand attitudes: Delivery partners stand out for online credentials
      • Figure 69: Attitudes, by brand, 2022-23
    • Brand personality: Youth focus of delivery partners give their brands a ‘fun’ image
      • Figure 70: Brand personality – macro image, 2022-23
    • Delivery partners have a premium brand association
      • Figure 71: Brand personality – micro image, 2022-23
    • Brand analysis
    • Leading retailers
    • Tesco: valued-led initiatives cutting through
    • Sainsbury’s: Nectar Prices could further the improvement in value perception
    • Asda: strong online and value perception
    • Ocado: premium perceptions still a barrier to use
    • Amazon Fresh: low trust in the food and drink space needs to be addressed
    • Iceland: greater awareness of online offering would allow brand to capitalise on favourable market conditions
    • Waitrose: extreme premium perception a barrier in the current climate
    • Co-op: lack of awareness in the online space can be overcome through partners
    • Leading delivery partners
    • Just Eat: strongest value credentials within the market
    • Deliveroo: more aspirational brand elements, but more premium price associations a barrier
    • Uber Eats: outpacing rivals in experience and intention to recommend
  19. Launch Activity and Innovation

    • Rapid delivery expands and evolves
    • Deliveroo expands Hop both for partners and shoppers
    • Rapid delivery tie-ups continue
    • New launches
    • Motatos launches in the UK and raises £33m in funding
      • Figure 72: Motatos UK Launch, 2022
    • Fulfilment
    • Tesco and Ikea partner for car-park collection
    • Walmart unveils drone delivery in the US
      • Figure 73: Walmart Farmington drone delivery hub, 2022
    • Asda experiments with driverless delivery
      • Figure 74: Asda/Wayve self-driving delivery vehicle, 2023
    • Co-op expands autonomous delivery
      • Figure 75: Co-op and Starship Technologies’ autonomous grocery delivery, Sale, Greater Manchester, 2023
    • Online grocers price-matching Tesco
  20. Advertising and Marketing Activity

    • Above the line spending drops year-on-year but remains elevated against pre-pandemic
      • Figure 76: UK online supermarket/grocery/food retailers and delivery partners’ total above-the line, online display and direct mail advertising expenditure, 2018-22
    • Rapid delivery retailers continue to invest in above-the-line to build awareness
      • Figure 77: Leading Online supermarket/grocery/food retailers and delivery partners’ total recorded above-the-line, online display and direct mail advertising expenditure, 2018-22
    • Cinema fastest growing above-the-line spending category in 2022
      • Figure 78: UK Online supermarket/grocery/food retailers and delivery partners’ total recorded above-the-line, online display and direct mail advertising expenditure, by media type, 2018-22
    • Nielsen Ad Intel coverage
  21. Appendix – Data Sources, Abbreviations and Supporting Information

    • Data sources
    • Financial definitions
    • Abbreviations
    • Consumer research methodology
  22. Appendix – Forecast Methodology

    • Market forecast and prediction intervals: total online grocery retail sales (including VAT)
      • Figure 79: All online grocery retail sales (including VAT) market size and forecast, at current and constant prices, 2017-27
      • Figure 80: All online grocery retail sales (including VAT), current price prediction intervals, 2022-27
    • Market forecast and prediction intervals: store-based online grocery retail sales (including VAT)
      • Figure 81: Online grocery sales by store-based grocery retailers (including VAT) market size and forecast, at current and constant prices, 2017-27
      • Figure 82: Online grocery sales by store-based grocery retailers (including VAT), current price prediction intervals, 2022-27
    • Market forecast and prediction intervals: online-only grocery retail sales (including VAT)
      • Figure 83: Online grocery sales by online-only retailers (including VAT) market size and forecast, current and constant prices, 2017-27
      • Figure 84: Online grocery sales by online-only retailers (including VAT), current price prediction intervals, 2022-27
    • Market drivers and assumptions
    • Forecast methodology

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