An investigation by UK consumer association Which?, published last week, suggested that online food shoppers are being sold less fresh merchandise than they might hope to find in stores. But, writes Ben Cooper, while such reports could undermine consumer confidence in internet shopping, the strong growth in online food retailing looks set to continue.
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Notwithstanding the suggestion by a consumer group last week that online shoppers may receive less fresh items than those available in-store, the online shopping boom in the UK shows no signs of abating.
The observations by the consumer association, Which?, based on a one-off survey of the sell-by dates on ten identical products bought online and in-store across the five major online food retailers in the UK, will have concerned the supermarket operators, and may sow a seed of doubt in the mind of some consumers. But it seems unlikely to dampen the UK’s increasing enthusiasm for online shopping, or interrupt the strong upward trajectory of the online food market.
According to retail market analyst Verdict Research, the total online food and grocery market grew by 34.6% in 2006 to GBP2.5bn (US$5.16bn), representing its fastest rate of growth for three years.
The rapid market expansion is reflected in the rates of growth being reported by the major players. Even though Tesco was the first to invest heavily in the online arena and leads the market by some distance, its online sales are still expanding rapidly, with growth of 35% reported for the first half of the current fiscal year.
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By GlobalDataGrowth rates are even higher at Sainsbury’s and Asda which are coming from a lower base. Sainsbury’s reports like-for-like growth in online sales of 44% over the past 18 months, while Asda puts its total current year-on-year growth at 60%, as it expands the store coverage of its operation.
Moreover, the continued growth in online food shopping will see it take over from electricals as the largest online sector by 2009. Verdict forecasts that by 2011 online food and grocery sales will have reached GBP8.03bn. However, given the sheer scale of the grocery market, online penetration will still only be 6.7% in 2011, well below the average across the retail spectrum of 8.9%, suggesting potential for further steady growth beyond 2011.
There have been a number of catalysts for growth in online shopping, including increased home computer ownership, faster connection speeds and high broadband penetration, while the UK’s relatively high population density has made the expansion into the online arena a viable and attractive strategic option for Tesco, Sainsbury’s, Asda, Waitrose and its online partner, Ocado.
Analysts and the major operators believe that there is most probably pent-up demand for online food shopping, which will be tapped as more consumers gain confidence in the internet as a sales channel. And it is the effect the Which? findings may have on customer recruitment which may most worry the retailers.
However, it should be borne in mind that the investigation was not a full-scale Which? report but a one-off survey, prompted by the observations of a reader of Which? magazine. All the companies mentioned have strongly refuted any suggestion that online shoppers were deliberately being sent goods with more imminent sell-by dates.
When contacted by just-food, a Which? spokesperson conceded that the findings were the result of a single “snapshot”. But she pointed out that the findings – that on average the best-before dates in the stores were more than a day later than those for the same products bought online – were consistent across all the operators.
This cut little ice with Asda. A spokesperson for the Wal-Mart-owned supermarket chain described the report as “seriously flawed”, adding that the consumer group had “only shopped once in each store and once online, and even then the difference they found was marginal”.
The Asda spokesperson described the idea that supermarket retailers were deliberately giving their online shoppers less fresh merchandise as “daft”. Certainly, any company-wide policy to do so would undermine the strenuous efforts the major retailers are making to grow their online businesses and enhance the scope and quality of their online service.
Like the supermarket sector at large, the online food retail market has become a fiercely competitive arena, as Asda and Sainsbury’s look to claw back some of the initiative that Tesco has gained. While their heightened profile in the online arena will continue to spur market growth, Tesco itself will not be standing still, and has a formidably powerful position on which to build.
just-food has recently published an extensive management briefing on the UK online food market, including analysis, the views of key players, market share and forecast data, and profiles of the major operators. For more information or to download the report, go to https://www.just-food.com/briefings
