Insight Reports

UK Internet Grocery 2005

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UK Internet Grocery 2005

Online shopping growth is outperforming the high street. What does this mean for grocery? Insight's 2500 interview UK Internet Usership Survey shows that 5% of AB's now regularly buy grocery on line. Tesco still lead the world in this channel. But Ocado's warehouse operation delivering the Waitrose range is rapidly catching up and now claims to have knocked Sainsbury's into third place. This report analyses changing consumer behaviour and motivation showing much improved levels of shopper satisfaction.

UK internet shopping is increasingly important. Online shopping sales out-performed disappointing high street results this Christmas. More than 34 million adults in the UK are now connected to the internet (Nielsen) and 4 million homes and businesses have broadband (Ofcom). Dominated by Tesco, the UK internet grocery market continues to expand.

Insight have covered internet grocery in a series of reports since 1997. In previous years consumer research indicated that potential demand for service was strong but actual performance was weak. Website function, substitutions and deliveries all caused dissatisfaction. Many shoppers became disillusioned after initial trial. Our current report shows higher levels of shopper satisfaction. Many earlier shoppers who had discontinued the service have been recaptured and there is no longer heavy dropout after the first few orders. But not all problems have been solved.

Tesco have 60% of the UK Internet grocery market and have successfully used Internet grocery as a way of increasing local market shares and expanding the catchment areas of their stores. Tesco’s example has been widely copied, not only in the UK but internationally. Tesco has expanded even faster than the market, taking users from Sainsbury. But now Tesco is facing increasing competition from specialist warehouse operator Ocado. Ocado have attracted additional investment and have recently extended deliveries to the North West. Their delivery range now covers one in three of UK households.

Delivering the Waitrose product range, Ocado’s successful growth has paralleled the current growth of the Waitrose supermarket chain. With 15% of the internet grocery market, Ocado now claims to have pushed Sainsbury into third place. The up-market Waitrose range is particularly suitable for Internet grocery shopping, which has much higher penetration among the AB top social class bracket. Around 5% of AB households use the system, and ABs account for about half (56%) of all current internet grocery users.

This report is the first of a new series of Insight reports on all categories of on-line shopping. It is based on the Insight internet usership survey, carried out in November 2004. Starting with an initial sample of 2500 UK households, the survey isolated a sample of Internet shoppers and within these of Internet grocery shoppers. Statistical data from our survey has been reconciled with turnover data from trade sources to produce up-to-date estimates of market size, market shares and the extent of consumer penetration. These are presented in chart format as part of our report.

Survey data is presented in charts of demographic profiles. Internet grocery shoppers’ behaviour and levels of satisfaction are analysed on the basis of taped in-depth interviews with shoppers, analysed qualitatively and ilustrated with many verbatim quotes.

Published: March 2005

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