E-COMMERCE AND HOME SHOPPING

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The phenomenal growth of the Internet in recent years has opened up alternative patterns of sales and distribution for many businesses.  Whilst the greatest impact has been seen in sectors such as travel, books and music, e-commerce is making inroads into FMCG grocery markets.  The growth both in access to the internet and in supermarket websites have increased the availability of this new way to shop.

INTERNET ACCESS
% of households with access

There are many reasons to make Internet grocery shopping attractive to the consumer.  It is clearly convenient, allowing orders to be placed at any time.  It saves time and also the effort of negotiating a busy store and spending time in the queue.  For retailers, those consumers who shop on the internet are an attractive bunch.  Young and upmarket, they are happy to pay the delivery fee for the extra convenience and thus have a greater propensity to purchase higher margin convenience products.

There are currently many different grocery e-commerce models in the UK.  The UK differs from the USA insofar as the major developments in e-commerce have been driven by the pre-existing supermarket chains.  Tesco is currently the largest player in the market, offering a service based around in-store picking.  Sainsbury’s has favoured the route of building dedicated warehouses to serve its ‘Sainsbury’s to you’ service.  Tesco’s approach has allowed it to move fast to offer wide coverage while the Sainsbury’s approach means that orders can be picked more speedily.  Both stores currently charge for delivery to home.  Iceland does not charge for delivery on larger orders.  Iceland’s offering is available via Digital TV. Digital TV is expected to dramatically increase access to the internet and to the store’s websites.  Other models being offered include ‘Waitrose@work’.  This allows goods to be ordered over the internet and delivered to the customers’ place of work.  Waitrose will only deliver to those those companies that have registered with the scheme.  This allows for efficiency in delivery and the customer benefits as Waitrose does not charge a delivery fee.

So far, usage of the new methods of grocery shopping remains low, with only 1% of households having used the Internet to order groceries and 1.5% using the telephone.  However, it is to be remembered that Internet access in the home is restricted to around a quarter of households.  Equally, the availablity of supermarkets’ delivery services are currently restricted to certain parts of the country.  Not all stores have an offering yet – Asda is currently finalising its internet shopping service.  It is therefore likely that strong growth will continue to be seen in this area.

USAGE OF HOME DELIVERY
% households who recently ordered groceries…

Source: Superpanel Mediaspan

With levels of usage with are currently apparently low and the fact that Somerfield and Budgens have recently signalled withdrawal from the sector, it is often asked whether internet shopping for groceries is a viable proposition.  Initially it might appear that internet shopping will reduce the level of impulse purchasing that takes place.  However, it is equally likely that successful internet offering will actually grow consumer spending by making available the stores’ non-food offerings.  Certainly, it will be possible to offer a wider range than could fit into a store. 

The implications for point-of –purchase decision making are less clear cut.  Within the internet environment, it is possible that brand switching will be reduced as consumers are no longer swayed by impressive in-store displays or aggressive promotional material.  It is even possible with some stores’ offering to order exactly the same good each week.  This is likely to be of good news to the consumer who will save time by not having to make a decision, but will be bad news to the producer of a product not currently on that list.

One possible impact of internet shopping is the development of two stop shopping.  It is possible that consumers will stock up on product categories such as beverages, household goods and pet foods via the internet and home delivery.  They will then continue to visit the stores to buy fresh products where self-selection may be considered to be important.  In this scenario, the space given to those dry goods categories may come under pressure as the offering of fresh foods is increased.  While we don’t currently know how long before we really start to feel the impact of e-commerce, we do know for sure that it will certainly change the way that some consumers shop.

Date article published: 03/11/2000