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  1. Analysis
July 27, 2011

Online food retail – mobile commerce key to future growth

The fourth and final part of just-food's briefing on online food retail looks at the impact that mobile commerce is having on the sector. As Glynn Davis argues, shopping via a consumer's handset will only grow in popularity will be a significant factor in the sector's development.

The fourth and final part of just-food’s briefing on online food retail looks at the impact that mobile commerce is having on the sector. As Glynn Davis argues, shopping via a consumer’s handset will only grow in popularity will be a significant factor in the sector’s development.

Mobile commerce is where the action will be at over the next few years will be a big driver of online grocery sales. It is a phenomenon that is being seen around the globe.

Within the EU, mobile commerce will reach EUR300m (US$431m) by the end of the year. According to analysts at Research Farm, by just 2015, sales made through m-commerce, are set to climb to EUR1.6bn to account for up to 3.9% of the total online grocery spend. 

Will Treasure, director of operations and technology consulting at Javelin Group, says: “The big thing is Android and iPhone and being able to build up your order by scanning barcodes. This is the biggest innovation.”

There is already evidence, from Tesco, that this will have a significant impact on online food shopping as the adoption of smart-phones continues to climb rapidly.

Janet Smith, director of the UK retailer’s Clubcard loyalty scheme, says: “We believe phones will be crucial to multi-channel. We launched a few apps that include the scanning of products to add items to shopping lists and we’ve seen a significant number of transactions – between 30% and 50% – on our dotcom [home delivery service] that have been scanned.”  

However, this is not just about mature markets like Europe. In fact, Asia is where the use of mobile devices is most advanced.

“Whereas there is an emphasis on the web in Europe and the US, it is more about mobile in the Asian markets. It goes well beyond an online infrastructure,” says Jake Hird, senior analyst at Ecoconsultancy, referring to the ground-breaking virtual supermarkets that Tesco has created in South Korea.   

The retailer plastered the walls of subway stations in Seoul, the country’s capital city, with pictures of its products displayed similarly to a store and shelves featuring QR code that could be scanned by mobile phone. A basket of goods is built up and delivery to the home is then arranged for that evening.

Jamie Trust, senior business analyst at IGD, says the results from Tesco’s virtual supermarkets have been very impressive. The number of people registering for online shopping in Seoul has increased by 76% and transactions have more than doubled during the three months of the trial. 

Such initiatives look set to take off around the world, according to Hird, who says that, as smart-phone and tablet penetration levels increase around the globe, Tesco is seeing “a massive use of technology for shopping”. In South Korea, there are 10m smart-phone users in a population of 50m. 

This is leading grocers to decide whether to take the app route or go for a mobile-optimised website. “You need to look at your target demographic so, in the UK, Ocado has gone for an app as it has more customers with iPhones than cheaper HTC devices, and Sainsbury’s has chosen a mobile optimised site,” suggests Hird. 

This was the case with upmarket Brazil-based supermarket chain Pão de Açúcar, which developed a multi-platform app in 2010 – the first such mobile supermarket shopping service in the country. During its first two months of operation, 25,000 downloads were made.

With mobile becoming more prevalent in online grocery shopping, Hird believes that social media – chiefly Facebook – will likely be the next technological frontier for retailers and play an increasingly powerful role in internet shopping.

“Everyone says it [Facebook] is about fashion retailers but in the US there are many FMCG companies – from Coke to Johnson & Johnson and Unilever with a presence. The key is to look at your resources and your target audience and have as many touch-points with them as possible.”

For more of this just-food management briefing, click here.

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