According to the research company IGD, online grocery sales in the UK will double between now and 2011 to GBP3bn (US$5.7bn), but will still only account for 2% of the total food and grocery market.
The online market for food and grocery is currently worth GBP1.6bn, and represents just over 1% of the total market, according to IGD’s report UK Grocery Retailing 2006.
Tesco remains the only retailer to make online shopping profitable so far, IGD says, adding that it predicts Tesco will retain its leadership in the sector. Sainsbury’s has announced that it is hoping to more than double online sales to GBP500m by 2008, while Asda’s online service will cover half the UK by the end of the year. Ocado, the specialist online retail service run in partnership with Waitrose, continues to make a loss, according to IGD.
“There are many challenges associated with online grocery shopping,” said IGD’s senior business analyst Patrick Mitchell-Fox. “It is a costly service for retailers to provide. Some have experimented with specialist ‘picking depots’, while the more successful have relied on their existing stores to fulfil orders. A retailer’s online service can also eat away at other, more profitable store sales.”
Nearly 14m households in the UK have an internet connection, more than two-thirds of which are broadband, and 60% of adults use the internet regularly. Most consumer purchases made on the internet are for gifts or leisure purposes.
“Despite the fact that many shoppers admit to finding supermarket shopping a burden, and despite internet penetration levels, there remain barriers for people switching to online shopping instead of visiting their local store every week,” Mitchell-Fox said. “The convenience of having your food and groceries delivered to your doorstep does not seem to outweigh the ease and convenience of modern store shopping.”