Specialist online grocer sees record sales – a sign of things to come?

Posted by Daniel Palmer on 12th January 2009

UK upmarket specialist online grocer Ocado last week posted record sales figures in a sign that the online grocery sector is steadily making inroads in Britain.

Online shopping

They saw sales rise 25 per cent above results of the year before in the four weeks to January 3 despite recessionary headwinds, including a staggering 97% rise in Christmas week sales. Tesco, the UK’s largest retailer, also noted that their online grocery business had grown, delivering “very strong sales”.

Ocado, which sells products seen in the stores of upmarket brick-and-mortar retailer Waitrose and has been in operation since 2002, found that the introduction of a value range helped stimulate consumer interest.

The news comes after reports last year suggesting that the online food and grocery sector in the UK had the potential to claim top spot in online retail (excluding travel). Reports in Australia, however, showed consumers were so far reluctant to embrace online food and grocery shopping.

A Deloitte survey of Australians discovered that food and groceries were the least likely of 12 categories to be researched over the internet, with only 6% conducting research online as opposed to 94% in-store. As a means of comparison, the leading category, outings and entertainment, had 73% of people conducting research on-line, highlighting the current major gulf between different product categories when it comes to online shopping and research.

The report noted that about 5 per cent of Australians ‘will purchase food and groceries online’, with only 2 per cent exclusively buying their groceries over the internet. This can be expected to grow steadily over coming years as there are currently many regions in Australia that have precious few options, if any, when it comes to online shopping.

Australia’s major supermarkets have been slower to embrace the internet as a suitable channel in which to sell produce to customers than British supermarkets, though Coles and Woolworths indicated their desire to expand online operations last year. Both have begun to slowly branch out from initial beginnings in Australia’s most populous capitals – Sydney and Melbourne. Aside from Coles and Woolworths, there have been a number of small players in the online grocery scene – mostly focussing on a small region and not operating a brick and mortar store, limiting brand awareness. Other chains, including Franklins and Aldi, are yet to enter the online shopping arena.

In comparison, the UK’s top three supermarkets by market share, and Ocado, offer online grocery purchases in a number of regions.

Sales in the UK are set to almost double from about £3.2 billion last year to around £6.2 billion in 2013, according to an IGD report analysing the online grocery sector. This will ensure online growth outpaces overall growth in the grocery sector, but will mean that online sales will still only command up to four per cent of the market in 2013 (it currently holds just over two per cent). Other market research companies have indicated that the online share could actually be somewhere in the range of 5-10 per cent by 2013.

Either way, it appears online grocery shopping is going to make its mark, albeit slowly, as consumers gradually warm to the notion of purchasing food online.