A poll of supermarket users [1] has revealed that as many as 69% of consumers now “shop around” to find the best bargains rather than staying loyal to one supplier.
Fuelled by the economy and a need to be as frugal as possible, this has meant that grocery shoppers are more discerning than ever before. So for an industry that is driven by weekly deals, club card benefits and fierce competition this means that supermarkets need to keep a close eye on the habits of their customers in order to retain their business.
How this relates to online grocery shopping
Supermarkets have an intense rivalry, where they try to outperform each other and market themselves to as many new customers as possible. In such a market, retailers need to make their brand stand out from the competition. One way to do this is through lower prices, another is through advantageous services, such as home delivery. Lowering prices or adding a delivery service to their arsenal is enough of an incentive to make consumers switch from their favourite store to one that gives them a better deal. It’s that simple.
All of this means that the time is ripe for grocery stores and that any company that offers home delivery could dramatically shake up the industry toppling a giant from the market.
Will Asda outperform Tesco online?
Malcolm, aged 67 from Cheshire, said: “We tend to spread our shopping between Tesco and Lidl these days to try to save money. We don’t have an Asda or Morrison’s so we are limited on choice.” [1]
Yet this could all change as location is fast becoming less of an issue for many consumers, as more and more grocery retailers are offering home delivery services.
Tesco is probably the most well-known supermarket to offer delivery of their goods, with the accolade of being Good Housekeeping readers grocery home delivery service of choice[2]. However, this may well be the last year they receive this honour as in 2014 their market share will undoubtedly drop due to other supermarkets matching their services. In fact, Asda has already seen online sales grow by 20%, making them the second biggest online grocer [3] despite Tesco’s 13 year head start in the market.
With such a demand it’s not surprising that online grocery sales are on the increase at a rate of 20% per year. On a weekly basis this is currently 190,000 online orders each week [4].
Shopping basket comparison (our mini casestudy)
In line with the study above we carried out a little study of our own by comparing the cost of an average shopping basket using mysupermarket.co.uk. Here are the results:
Items: Warburtons Bread, Leaf Salad, Deli Wraps, Happy Eggs, Milk, Muller Corners, Cheese, Sausage, Frozen Chicken, Ready Meal, Roast Potatoes, Ice Cream, Pizza, Rice, Cereal, Crisps, Nuts, Biscuits, Drinks, Tea Bags, Water, Bleach, Window Cleaner, Razors, Toothpaste, Shampoo, Conditioner, Body Wash and Deodorant.
So by shopping around and not being loyal to your grocery supplier, you could save £10.53 on your weekly shop. Over the course of a year this equates to a saving of £547.76. With such saving it’s not surprising that people are more frugal than ever before switching between brands as and when it is in their interest to do so.
Morrisons: The best is yet to come?
Yet Asda is just the most recent development, as Morrisons have already announced plans to offer a delivery service that is likely to be up and running by the end of 2013.
Dalton Philips, Morrisons chief executive, said: “From a standing start, Morrisons will be competing in the fast-growing online channel by the end of this year with a really compelling proposition”. [5]
In fact, a recent deal with Ocado reveals that Morrisons are firmly committed to the delivery of their products. Tom Ewing, an Ocado investor, said: “It demonstrates that Morrisons agree with our view that online will be the primary driver of future growth in grocery retail in the UK and around the world.” [5]
Death of the high street or a handy alternative?
Yet the repercussions of online grocery shopping could be quite significant as brands may consolidate their high street presence and limit the number of larger stores in favour of Express stores. That said, there is still a lot of people that are not online and the convenience of going into a store and buying what you like when you like it, is a feature that online shopping cannot replace.
However it is a simple fact that profitability will be a deciding factor in the future of grocery stores. Is it more profitable to have a hybrid model of online and offline stores? Is it more profitable to be completely online and make savings on staff and floor space? Is high street shopping in a better position to encourage shoppers to indulge in more luxury items? These are all questions that will need to be answered.
But what do we think about online grocery shopping?
Our point of view on online grocery shopping is simple: it is an expanding market and retailers can’t rely on high street shopping. People are more tech-savvy than ever so the prevalence of online grocery shopping is only going to increase further. Then when you consider the state of the economy over the last few years it’s not surprising that people are less loyal to one particular brand and instead shop around to get the best deal. As an online grocery store you may be able to catch up to the market leaders like Asda did but you can’t take that as a given. So take steps now to put in place the right infrastructure for home delivery. It may take one year, two years, three years to implement but you need to develop a strategy to ensure your company is moving in the right direction.
Related article: Why Morrisons Needs to Improve Their Online Presence Yesterday