Online Grocery Shopping: A Recipe for Success

While online grocery retailing may still be in its relative infancy, the rapid growth of this sales channel in the UK is undeniable. Improved broadband internet penetration, new, easier to use online platforms and better awareness among time pressured consumers of its convenience, seems certain to make the internet an important outlet for grocery retail.

Amazon.co.uk recently announced the launch of an online grocery store in a bid to appeal to all palates through its offer of 22,000 products, which will include ready meals and popular household brands as well as ethnic, kosher and international goods. Customers will also have the option of bulk-buying items such as diapers, pasta, rice and cooking oils [1].

Marks and Spencer is also expected to indicate as early as this autumn whether it is going to start selling food online [2], while Ocado, another pureplay grocery retailer, has also attracted interest during the past few weeks as it floated with an IPO price of 180 pence [3]. Although this fell below initial targets, it showed that selling food from the web is a lucrative market to be a part of.

Verdict estimates that that the UK online food and grocery market experienced growth of 409% between 2003 and 2009, with total spend reaching £5.3bn [4].

Evidence of this can be seen in recent grocer results - Sainsbury’s online food and grocery sales reportedly increased by over 20% during the 28 weeks to October 3 2009, with a more than 15% increase in sales during the 13 weeks to January 2 2010. Ocado’s sales have increased by 21% a year since 2007.

Growing interest in online food shopping is also evident in the number of people searching for Food and Drink online. Searches through Google.co.uk are up 122% so far this year when compared to the same time period in 2008, with the most popular category being Cooking and Recipes, up 158%. This growth outperforms other key sectors, such as Apparel, Home & Garden and Consumer Electricals.



An increasing number of people have also been searching for Food and Drink through their mobile devices – these searches were up a massive 274% in June when compared to the same time last year.



So what’s next?

Verdict forecasts that the UK online food and grocery market is set to grow by a further 24.9% to £6.7bn between 2009 and 2013 [4] .

Although the year-on-year growth % will slow, this reflects the consolidation of the market as competition intensifies and more subdued food inflation over the next few years. Full coverage of the UK is also now offered by the leading players, so geographic expansion will no longer generate significant growth.

Despite this, grocery has still been predicted to be the next category benefiting from today’s booming online environment, and the UK is the most developed online grocery market globally - when comparing overall market value and per capita spending, consumers in the UK were the biggest online spenders in 2009 [4].

Due to the fierce competition between grocers, which looks set to continue, the market has recently been boosted by heavy investment, which has made significant enhancements to the usability and functionality of websites and raised the bar in terms of the value and service propositions that retailers are now offering.

The price of getting groceries delivered has dropped notably, as major online players continue to compete fiercely on price and value. This makes the service a more cost-effective option to a wider customer base and with independent sites such as mysupermarket.com comparing prices, online grocery shopping is also becoming an increasingly attractive channel for cash-strapped customers [4].

Key focus for the future ...

Barriers to purchase
A key concern that remains is around tactility, so the customer’s inability to see/touch items before purchase, particularly with perishables and fresh foods. There is also the issue of trust in others picking items on a customer’s behalf and selecting product substitutes (though this has become less of a concern over time) [4]. Freshness and long sell by dates – the same as are available in-store – will remain a major concern for many and, until resolved, is likely to impede the pace of expansion of online grocery shopping.

However, positive strides are being made in this area: some retailers now provide use by dates and guarantee delivery freshness. Ocado has introduced a fresh meat and fish counter – exactly like delis in supermarkets – to 80% of its customer base, allowing the purchase of fresh meat and fish to a customer’s specification [6].

Ocado’s unique and efficient order picking operation is also something other retailers are looking to learn from [5]; this will allow for speedier and ‘fresher’ deliveries, bringing saving benefits to retailers and providing a much improved service to shoppers.


Mobile and Multichannel
As more people use their mobile devices to search and shop, there is the potential for supermarkets to enhance the functionality, usability and convenience of buying groceries online by providing consumers with the facility to do so anytime, anywhere.

The ‘Ocado on the Go’ iPhone app launched in July 2009 and it now contributes almost 3.0% of the retailer’s sales – approximately £12m – with 5% of Ocado customers using it at some point during the order process [6]. It provides a seamless service by letting customers organise their shopping and fill their basket offline, with the order processed automatically the next time an internet connection is made, thus making it accessible at any point in time. Ocado was also the first grocery retailer to have a mobile-optimised website.

Recently, Sainsbury’s also launched a new app for the iPad and iPhone, which gives customers access to exclusive and personalised offers, whilst also allowing them to collect Nectar points. Waitrose also now has a free iPhone app, which provides users with recipes and lets them search the store for the required ingredients.

More retailers will no doubt be focusing on their own m-commerce sites in the near future and ensuring they are all transactional. As more shoppers use multiple channels to buy their groceries, with many opting to buy larger, infrequently purchased core essentials online and fresh produce from their local convenience store, these demands will need to be catered for appropriately and seamlessly by removing the barriers between order channels.

Recent examples of this can be seen through the drive concepts recently developed by grocery retailers in France [7]. These provide additional convenience to shoppers visiting their larger stores, with shoppers able place their order online and pick it up at the back of the store at a specified time. For now the focus of this initiative is on heavy item categories for easy and fast shopping, but this could be extended to entire product ranges.

Tesco announced earlier yesterday their own similar initiative in the UK, trialing the first ‘drive-through supermarket’ [8]. This will allow time poor online customers to "click and collect" by choosing their groceries online and booking a two-hour collection slot for collection.

In the US, Target has launched its first scannable mobile coupon programme as of March. This opt-in programme provides Target shoppers with a customised webpage on their mobile phones, with all offers scannable at checkout using a single barcode.


Website usability
Further improving usability and functionality of websites will continue to enhance customer service credentials and the end to end online shopping experience of the future.

Developments such as the addition of virtual assistants on groceries websites, who can understand typed queries and help customers find their way around grocery sites are already being used by retailers such as Asda, who also allow online shoppers to create a shopping list simply by typing in key details from a previous store visit receipt (such as store or transaction number). The items can then be added to an online favourites list ready to be added easily to an online shopping basket in the future.

Personalising the customer experience is also a prevalent trend, where retailers will use previous purchase history to create a basket of similar goods for customers and make suggestions on products they might like to try. Initiatives such as this have to potential to add substantial value and cater for time poor shoppers, as well as instill loyalty in what has is set to become an even fiercer competitive market.

[1] Amazon: biting off more than it can chew? Verdict Research, Ovum Knowledge Centre
[2] Ocado: should I buy the shares?
[3] Ocado shares trade 10 percent below IPO price
[4] How Britain Shops 2010, Food & Grocery, Verdict Research
[5] Keep on trucking Economist
[6] Verdict e-Retail 2010: Retailers need to think more strategically to ensure long term growth
[7] IGD RetailAnalysis, Store Visit Reports
[8] Tesco trials UK's first drive-through supermarket


Posted by Lili Papadimitriou, UK Retail Team

Retail: Weathering the Storm

“The coldest winter I ever spent was a summer in San Francisco" ~Mark Twain

Although the nuances of the British weather system have the ability to befuddle even the smartest meteorologist, one can usually expect a colder climate from October to March and hotter weather from May to September.

In the same way, as a retailer, it’s pretty safe to assume that during the winter months more heaters, raincoats and winter boots will be bought, whilst in summer it would be sensible to stock up on air coolers, barbecues and beachwear. In the past month alone, as the mercury rises, Waitrose has reported a 6.1% rise in sales with traditional picnic fare like salads up nearly 30%: great results, but hardly unprecedented. These assumptions are part of staple planning for all retailers, and shape the buying patterns for such seasonal products.

However, as the weather seems to be becoming increasingly unreliable, retailers often have to act fast to climate changes. For example, in 2007 freak stormy weather in June – usually a quiet month for online retailers - saw shoppers buy from the comfort of their homes, rather than brave the appalling weather. Play saw a 33% increase in sales compared the the year before. Stuart Rowe, spokesperson for Play.com said "every year we see a decrease in sales during the summer months as consumers spend their time in their garden, the parks or high street but this year has been a monumental exception"[1].

Likewise, severe snow in January 2010 resulted in pubs and restaurants reporting a like-for-like sales drop of 5% as people stayed at home rather than braving the snow[2]. "With so many city centres feeling more like ghost towns it is perhaps surprising that the figures weren't worse,” said Peter Martin of Peach Factory, which produced the research[3]. At the same time, Pets at Home reported a 70% rise in dog coats, at a time when the product would usually have been on its way out until next Winter. In the same period, John Lewis saw a 1.4% sales drop as snow kept shoppers off the high street. Importantly, online sales rocketed by 56% with comfort food such as frozen chops and tinned beans performing well[4].

Optimisation & SEO Ideas:

• Change your ad text. Signal your customers to the urgency of buying at this time of increased demand with messages like, “While Stocks Last” or “Stock Just in” if you have a plentiful supply.

• Make sure you can fill any holes in your offline product offering online. If you can’t get paddling pools in your store in time, but think you could ship online orders to coincide with a bout of hot weather, make sure you have ads showing. Give realistic delivery times too, or you could be facing returns.

• Prepare your paid search campaigns far in advance wherever possible, to make sure you have established some history and a good quality score on your seasonal product keywords by the time they come into fashion.

• Your ability to restock according to freak weather conditions is crucial, and depends a lot on the quality of your supply chain. Either way, prepare your online campaigns to reflect the situation: if you have something or can get something in stock, prepare the necessary ad text and keywords. In the same way, make sure you’re keeping an eye on products that may have gone out of stock. For example, you don’t want to be paying for clicks on “desk fan” during a heat wave if you have none in stock!

• It sounds ridiculous, but watch the weather forecast! A 10-day one if you can. If sun is predicted, make sure your bbqs, garden furniture and toys, summer apparel is all in stock and well presented on your site and in your advertising campaigns. If it’s set to rain or be very cold (which, let’s face it, is much more common in the UK!), remember that people will be less likely to leave the house, so products like DVDs, Books, CDs and Homeware may be more in demand, especially if long periods of bad weather are predicted.

• Remember, freak weather conditions trigger unusual buying patterns, which may skew your ordinary sales figures. People buying paddling pools in a sudden April heat wave, for example, are simply moving their usual “June purchase” a few months forward. Don’t be alarmed then, if your usual peak seasons for particular products are not as great. As the Greenlight white paper on weather and retail says, “All these purchases would have still been made, but were brought forward or postponed due to weather abnormalities”[5].

[1]Fashion United, 4th July 2007
[2]“Like-for-like sales sink 5% under January snow”, Peach Report, 14 Feb 2010
[3]“Coffer Peach Business Tracker January 2010 figures - Pub and restaurant groups count cost of January blizzards”, KPMG, Jan 2010
[4]“Pets at Home enjoys winter sales boost with dog coats”, Guardian 15th January 2010
[5]Greenlight White Paper:”The effects of weather on Internet retail sales”

Posted by Emily Whitchurch, UK Retail Team

The World Cup: Latest Retail Match Report ...

Images courtesy of PhotoXpress.com

As the Group stages of the World Cup prove to be nothing if not unpredictable, with many of Europe’s most highly acclaimed national teams suffering underwhelming results against previously underestimated opposition, the tournament’s impact on retailers has also delivered its fair share of surprises.

The expectancy for surging pre-tournament search interest in electricals and LCD TVs to turn into strong sales was largely realised by retailers DSGi, Comet and John Lewis; reporting increases of 140%, 73% [1] and 42% [2] respectively. For the Home Retail Group, however, Britain’s biggest retailer of TVs by volume, sales were down 10% YoY with Terry Duddy CEO of HRG lamenting the lack of the same “perfect storm” they had witnessed in sales of televisions and barbecues during the 2006 competition [3].

Industry analysts have posited that Argos may have suffered from reduced demand for entry-level priced models in favour of higher price and larger screen size variants. Certainly Insights for Search would give some credence to the idea, with breakout rising searches for “50 inch TVs”, “Sony Bravia40” and “3D tvs”

As the tournament enters the knock-out stages, the categories anticipated to experience the highest continued growth in search interest include sportswear and groceries. Certainly supermarket retailers have already acted fast to capitalise on these developing trends. ASDA undercut traditional sports retailers with their heavily discounted, “grey market” sourced England Shirts [4], currently the breakout rising search for the category in Insights for Search.

World cup beer promotions within the grocery sector also remain extremely popular. Hitwise recently reported that four out of five of their top performing brands in the Experian Hitwise World Cup Brands Index for w/e June 12th were beers [5] (and World Cup sponsors no less).

Perhaps the biggest surprise of the tournament period to date, and not an item that readily fits into any of the categories mentioned above, has been the unprecedented demand for vuvuzela horns. In their coverage of Sainsbury’s first quarter trading statement - which saw a staggering rise in online sales just shy of 20% - Internet Retailing cited some of their drivers for growth including clothing, dvds and the ubiquitous vuvuzela horns [6]. The Daily Mail also reported that in the 12 hours prior to the first England match 22,000 red vuvuzelas were sold by Sainsbury's - one every two seconds [7].

Insights for Search would seemingly confirm that the vuvuzela is not just an instrument of aural punishment. Interest is higher than other perennial World Cup stalwarts “England Shirts” and “Beer”. With related top searches and rising searches like “buy vuvuzela” and “buy vuvuzela uk” it would seem that search interest continues to be driven mainly by consumer demand, rather than those desperately looking for respite in their TV coverage.





Overall it’s been a positive story so far for online retail during the 2010 World Cup. If further confirmation were needed IMRG Capgemini figures reveal that total online sales were up 22 per cent in May compared to the same time last year – the highest growth since June 2008 [8]. Now all that remains to be seen is what happens when England inevitably crash out on penalties ... again ... or loose to Slovenia later today. Come on England!

[1] "Home Retail fails to Score TV sales growth from World Cup", Retail Week, June 18 2010
[2] John Lewis Partnership 18 June 2010
[3] "Argos falls flat as World Cup fever fails to lift TV sales", The Guardian, 10 June 2010
[4] "ASDA offers half-price England Shirts", This is Money, 20 May 2010
[5] "South African Airways and beer companies biggest beneficiaries of World Cup sponsorship so far" , Hitwise, June 15 2010
[6] "Sainsbury's hits record online orders" , Internet retailing, 18 June 2010
[7] "Peace at last? Quite possibly on the BBC, but not on your iPhone (thanks to the vuvuzela apps)", Daily Mail, 15 June 2010
[8] "World Cup provides boost to growth in online shopping", The Independent, 21 June 2010

Posted by Brendan Patterson, UK Retail Team