By 2008, online sales of groceries, drinks and toiletries will account for about 40% of UK e-tail sales. Total annual retail spend on the Internet will amount to £75bn, rising from the current figure of £2.6bn. The average household will spend some £3 000 on online transactions, says a new report published by Ecom3.

While supermarkets have long endeavoured to make the shopping experience more enjoyable, many consumers still consider food shopping a chore. This is enabling grocery shopping to translate easily to the Internet, where consumers can choose their purchases in the comfort of their own homes.

The report predicts that Tesco, the current leading multiple in the UK, will emerge the online winner with over £8bn of UK online sales by 2008. Indeed, Tesco was the first UK food retailer to get its act together online and quickly took the sector lead. The report puts Tesco's market share at 27% by 2008, generating online sales of £8bn and incremental e-commerce net profits of £500m.

However, the recent UK arrival of Wal-Mart, the US retail giant which has acquired UK number three ASDA, could put pressure on the current leader. In the US, online shopping is streets ahead of Europe and ASDA's new owner will be keen to impart the experience it learned across the pond.

Iceland, the frozen food specialists which recently acquired Booker's cash & carry division, is not predicted to be among the leaders in online shopping, This is arguably because its customer base tends to be drawn from the lower social groupings, which will be slower to gain Internet access and start making online transactions.

Outside influences are also likely to impact the sector. It is thought that several of the European retail clusters, notably Carrefour and Metro, could be considering launching dedicated e-commerce services. Forming strategic alliances will be key to success - exchanges like Transora, GlobalNetXchange and WorldWide Retail Exchange will play a linchpin role in the emerging food e-tail sector.

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