IGD’s senior online and digital analyst Lisa Byfield-Green recently co-presented at our webinar “eCommerce Strategies for Winning at the Digital Shelf”. Here we summarise the key takeaways from her presentation, which discusses the main drivers of growth in UK grocery and how suppliers can better maximise this growth.
IGD’s latest report on the top 10 global online grocery markets shows that online grocery shopping in China is growing at a phenomenal rate. Online grocery sales in the world’s fastest growing economy are set to reach $179bn by 2020, with growth being driven by changing consumer behaviour and customers’ willingness to shop online.
Global Top 10 Online Grocery Markets
Source: IGD
However, even in more established online grocery markets such as the UK and France, there is significant growth occurring in the online channel, with online grocery sales set to double in many of these markets by 2020. For retailers, the majority of growth will be driven by online – therefore suppliers need to be working closely with retailers to achieve the same level of growth for their own organisation.
UK online grocery market: positive trends set to continue
Growth within the UK grocery market is coming from convenience, discount and online – with the online channel seeing the fastest growth. IGD estimates that currently, online grocery sales account for 5% of the overall UK grocery market, equating to £8.9bn. However by 2020, IGD predicts online grocery sales will account for 8.6% share of the UK market and represent £17.2bn.
Source: IGD
So what does this mean? A phenomenal £8.3bn opportunity between now and 2020. If you’re not already engaged in the online channel and putting dedicated online resource into it, now is the time to be actively focusing and investing in the channel in order to take advantage of this significant opportunity.
Source: IGD
Three key drivers of growth
The three key drivers of growth within the online channel are convenience, mobile and loyalty.
Source: IGD
- Convenience means making it easier for shoppers to shop the channel. Click and collect has opened up significant opportunities, with 26% of UK online grocery shoppers now using the service according to IGD’s latest ShopperVista data.
Source: IGD
- Mobile is another huge driver of growth, with tech-savvy consumers using their devices in many ways to seek convenience and become better informed and more connected – often using their mobile device to check or amend an existing grocery order;
- Having a multichannel strategy is key to “locking in” the loyalty of a customer as multichannel shoppers are shown to spend more. Shoppers who shop across 3 channels at Tesco spend 3x as much as other shoppers.
However, the real growth driver is when retailers use all three of these components at the same time. Amazon Prime Now which has just launched in London is a great example of this.
Driving growth: priorities for suppliers
Suppliers that prove themselves to fully understand the online channel and have the resource to support innovation can expect to be welcomed by retailers, who are looking for partners to work with in order to drive growth within the channel.
In order to maximise the £8.3bn growth in the online channel between now and 2020, suppliers need to:
- Understand the changes and how these changes impact their category
- Have the right resource in place to take advantage of the growth
- Partner with retailers on new initiatives – dialogue and innovation are both critical to working together in partnership
- Have a multichannel approach, prioritise mobile and better understand the shopper journey
- Innovate, test and learn to get things right
Source: IGD
Click here to view the full recording of Profitero’s webinar “eCommerce Strategies for Winning at the Digital Shelf”. You may also be interested in attending our live webinar on July 15 at 11am ET/4pm BST: “How Brands and Retailers Can Partner More Effectively Online”. Register here.
