Online Grocery Market Analysis

Online Grocery Market Analysis

The fresh produce category in the UK online grocery market is projected to grow at over 32% CAGR through 2026. Around 40% of consumers in the country have tried online shopping with home delivery for fresh groceries. The convenience and easy accessibility to high-quality fresh produce are the key considerations among consumers for choosing online grocery stores. This has encouraged companies to develop differentiated business models to improve customer satisfaction and remain competitive in the market.
 

With the ongoing COVID-19 pandemic, leading grocery retailers in the UK are expanding their delivery capacity to fulfill the growing demand of consumers. For instance, in September 2020, J Sainsbury PLC included 1,000 additional online delivery vans to handle 700,000 online grocery orders in a week. Other retailers, such as Tesco PLC, Asda Stores Ltd., and Morrisons, have expanded delivery times to serve more customers and increase market share in the short-term.

The click & collect model has become a prerequisite for shoppers demanding convenience in picking up their goods. The model involves consumers ordering products online and then picking them up at a pre-determined location. According to Doddle Parcel Services Ltd., in March 2019, out of 2,000 U.S. consumers surveyed, 68% preferred click & collect delivery method due to faster and cheaper access to orders. The click & collect method provides complete control to the consumers over the delivery of their products along with the provision of various options for collection, fulfillment, and eliminating unprofessional delivery services.

Cost-effectiveness is another primary factor for the adoption of the click & collect model among consumers as it offers zero or minimal added delivery costs. It enables consumers to check the quality of the product, pick up orders at their convenience, and save shipping costs. The model has also been beneficial to retailers, helping them to eliminate the need of hiring delivery persons or renting vehicles, and pay a one-time cost to set up the click & collect system.

The subscription-based purchase model segment is poised to register a growth of more than 30% through 2026. Subscription model allows customers to purchase groceries without any interruption and receive a specific product regularly. The benefit of flexibility and anytime cancellation provides easy opt-in and opt-out options to consumers. It also allows consumers to receive home deliveries at a specific period without paying additional delivery charges. Online grocery market participants are increasingly using the subscription-based delivery service model to drive revenue and enable flexible billing options.

 

Europe online grocery market accounted for above 30% share in 2019. The presence of leading retail grocery chains and the growing popularity of online shopping in countries such as the UK, Germany, Spain, France, and Italy are driving the regional market growth. The COVID-19 pandemic is providing a significant short-term boost to the industry. According to Waitrose & Partners, a brand of supermarkets, out of 2,000 consumers in the UK, 60% have shopped online for groceries since the pandemic with 40% citing convenience as the primary reason.
 

Furthermore, the increasing focus of government administrations & financial organizations on promoting the usage of digital payment methods to contain the virus spread is likely to boost the market revenue. In March 2020, the European Banking Authority (EBA) directed payment firms to adopt contactless payments to reduce the risk of spreading the virus.