Online Grocery: Strategies for Growth

October 2014

Internet retailing for grocery products remains underdeveloped compared to other categories less impacted by the challenges linked to selling food and drinks online. However, large grocery retailers have made strong gains in some markets, with the rise of drive-through units in France and home delivery in the UK. This report examines the performance of food and drink internet retailing and the multi-channel strategies of key players, as well as the emergence of pure play internet retailers.

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Online food and drinks sales remain small

Food and drink internet retailing remains relatively underdeveloped globally compared to many other product categories. However, logistics provides a key strong growth and opportunities, with many retailers exploring innovative delivery and automated pick-up solutions.

Variable market maturity in food and drink

Online food and drink sales in France, the UK and some other markets, are relatively mature; showcasing the potential in other developed markets initially, and subsequently in advanced emerging markets, such as China. Pure play internet retailers in these markets are expanding rapidly and innovating to gain market share.

Home delivery: the UK shows the way for global players?

UK home delivery has been refined by retailers over several years and can provide valuable learning for global retailers. Although the combination of high population density, concentration of wealth in the South East of England and higher margins in grocery retailing compared to the European average are unique factors.

Multi-channel developments: click-and-collect models and innovations

Solving the “last-mile” equation (reducing the costs of residential delivery) remains elusive in grocery retailing. However the rapid development of drive-through units in France, shows a click-and-collect model that retailers see as more profitable than home delivery. In Japan and the UK, store-based click-and-collect has made strong inroads, notably with retailers using their convenience store networks.

Pure play retailers are minor players but evolving rapidly

While pure play internet retailers remain relatively niche players in grocery categories, the growth of China’s Yihaodian and the UK’s Ocado highlight the potential rise of these companies, helped by developing partnerships with other grocery retailers.

What this report includes

  • Top-level strategic analysis of how major consumer trends will influence global markets
  • Consumer insight
  • Impact across all relevant consumer markets
  • Unique graphics and case studies
  • Key market snapshots
  • Accompanying presentation to synthesise main findings

Why buy this report

  • Identify factors driving change now and in the future
  • Understand motivation
  • Forward-looking outlook
  • Briefings and presentation should provoke lively discussion at senior level
  • Take a step back from micro trends
  • Get up to date estimates and comment

Scope of the Report

Scope

Introduction

Key findings
Internet retailing sales gain traction for key global grocery retailers

Still at Early Stages of Development

Food and drink internet retailing: Low sales but growth picking up
Food and drink a minor category in internet retailing despite growth
Food and drink’s share in internet retailing; strong global disparities
Developed markets dominate food and drink internet retailing sales
Per capita spending: Significant level in a few developed markets
Case study: UK driven by major players’ multi-channel reach
The UK’s largest grocery retailers: Strong online growth ambitions
Expertise gained in the UK a model for strategies in other markets
Japan and South Korea: Internet retailing versus store-based sales
Variations in levels of maturity linked to prevalent delivery mode

Still at Early Stages of Developmentment

Population density a key factor in making home delivery profitable

Multi-Channel Strategies

Multi-channel: Providing cost-effective and convenient solutions
Click-and-collect versus home delivery: Offering seamless services
Broader reach to cover new cities helped by multi-channel solutions
Japan and UK: Click-and-collect using convenience store network
Case study: Drive-through units a major market driver in France
Rise of drive-through click-and-collect boosts online sales in France
Low-impact units bring wider reach but expose concept limitations
Several types of drive-through exist and is the concept profitable?
Click-and-collect units next to hypermarkets and at transport hubs
Can hard discounters become significant multi-channel retailers?
S oft discounters and low-price supermarkets: tentative steps online
Operational efficiency: In-store pick-up vs centralised distribution

Pure Play Retailers’ Emergence?

Ocado: Can a pure play retailer gain sufficient scale of operation?
Ocado: Private label for core categories complements niche ranges
China’s pure play online retailers: Ambitious growth strategies
AmazonFresh tests show ambitions, but limitations remain potent
Amazon testing delivery solutions shows limits of pure play model
Le Shop and Peapod: pure play retailers tie in with grocery retailers

Conclusion

Future d rivers vs. constrains: Implications for consumers
Future drivers vs. constrains: Implications for suppliers
Strategies to benefit from socio-demographic growth drivers
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