New research from Mintel shows that sales of online groceries in the UK rose 9% to £12.3bn last year. However, the data suggests that the market is set to grow more slowly amid customer concerns about order problems and delivery charges.
Alongside the discounters, online shopping remains one of the fastest-growing segments within the wider grocery sector. Its share of total grocery retail sales was up from 6.1% in 2016 to 7% in 2018, with sales next year expected to reach £13.6bn. Over the next five years, Mintel is forecasting that online grocery will account for 10% of all grocery shopping, with sales growing by 60% to reach £19.8bn in 2023.
However, it seems that retailers are struggling to entice new shoppers to the world of online grocery retailing. Indeed, Mintel found that the number of customers shopping online for groceries has dropped from 48% to 45% between 2015 and 2018.
The research revealed younger shoppers are still enthusiastic about the convenience of having groceries delivered, particularly those aged 25-34, with 61% of this group doing some online grocery shopping and 27% saying they do all or most of their grocery shopping online. However, it seems that middle aged and older shoppers are more reluctant to join the online shopping revolution, and their reluctance is growing.
Whilst 35% of those aged over 45 report buying some groceries online, the number of people in this group who have “never bought groceries online and have no interest in doing so” has grown from 34% in 2015 to 42% in 2018.
Nick Carroll, Associate Director of Retail Research at Mintel, said: “Growth is slowing and the number of users is plateauing as retailers struggle to encourage new customers to try their services. Many consumers remain reluctant to buy fresh products online, concerns around substitutions persist and delivery charges are still off-putting, particularly in a market where value is key.
“However, most importantly, online services are still best suited to the traditional big-basket weekly shop, at a time when consumers are increasingly shopping on a top-up or when-needed basis. That is why we are seeing more retailers launch trial services designed to tap into the potential market for same-day or small-basket online grocery delivery. The difficulty is such services, at present, are costly to both the customer and the retailer, limiting their appeal and potential geographic rollout.”
Mintel’s research showed that the most common reason why consumers do not shop online is that they prefer to choose fresh products themselves (73%). There are also concerns around high delivery charges (24%) and minimum spend (18%).
With the number of consumers shopping online for groceries stalling, many retailers have looked to introduce same-day delivery services as a way to grow appeal. However, such services often come with an increased delivery charge.
When asked how much consumers would be willing to pay for same-day delivery, 30% of online grocery shoppers say they would pay £1-£2.99; whilst a further 27% say £3-£4.99. Just 19% of these consumers would be willing to pay over £5 and 24% say they would not be willing to pay anything for same-day delivery, highlighting the need for costs to be kept in line, where possible, should same-day delivery become mainstream.
Carroll commented: “For some consumers, the larger basket-style shopping that online grocery best supports does not fit with their current habits, indicating that, should same-day delivery come to the mass market, with services targeted towards immediate meal solutions, it could be the next driver of growth for the sector.”
Finally, Mintel research reveals that almost two thirds (63%) of online shoppers have experienced an issue with their order in the past year.
Top of the complaints are missing products, with just over a quarter (26%) of online grocery shoppers experiencing this frustration. This issue is closely followed by incorrect product substitutions (25%) and out of date/short shelf life items (24%). A further one in five has received damaged goods (20%) and been inconvenienced with late deliveries (20%).
“The fact that nearly two thirds of online shoppers have experienced problems with orders in the past year should be worrying for the sector”, said Carroll.
“For those retailers with bricks & mortar stores, this may not be as great of a concern given that groceries are, to a degree, non-discretionary and, therefore, consumers who experience issues online ordering do not simply stop buying groceries altogether; they just go back into the store. However, this is playing dice with customers given the level of promiscuity in-store and, despite the thin margins, how relatively loyal online shoppers can be to a business.”
