Food and grocery to take top spot in e-retail

Posted by Daniel Palmer on 4th June 2008

Food and grocery is set to overtake electricals as the number one sector in e-retail in the UK, according to retail experts Verdict Research. The news comes following research, commissioned by Australian consultancy firm Leading Edge, establishing that Australians are particularly concerned about buying fresh produce on-line due to the perception that quality will be compromised.

Online retail in general has been experiencing rapid growth with figures from last year showing a 35% increase in sales and sales figures are now anticipated to triple in the next five years in the UK.

Electricals is currently the most popular sector with a 25% share of the UK e-retail market, however food and grocery was seen to rise at a greater rate last year and is expected to occupy the top spot within five years.

The food and grocery sector was slow to become involved in e-retail but consumers in the US and UK have gradually embraced the concept. In Australia, consumers and retailers have been more reluctant to commit to online grocery retail with consumers citing concerns about delivery costs and difficulty of returning goods as reasons for not shopping on-line.

In the US many companies adopt a ‘no questions asked’ policy when it comes to customer returns, thus quelling consumer worries about returning goods, but such policies are rare in Australia.

The lack of commitment to e-retail by many Australian retailers has limited the potential for success and, with the right strategy, on-line retail could become more popular. The website of Tesco, the UK food and grocery leader, clearly portrays their devotion to e-retail and could serve as a good reference point for retailers seeking to capitalise on the e-retail boom.

Woolworths has recently announced plans to involve the customer more in online shopping but have remained coy on the exact details of the plans. “(Building) a community and trying to connect with your customers has got some real potential,” Woolworths CIO, David Beecham, told the Australian Financial Review last month. “There are a whole lot of different retail opportunities.”

With Woolworths now dedicating $200 million a year to IT system solutions and upgrades it would come as no surprise to see the company derive great benefit from e-retail and it could prove to be the impetus for their expansion over the coming years.