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Online Grocery
Drivers, Barriers and Opportunities for Online Grocers
Industry Briefs
Online Grocery
Introduction
Almost a decade after the dot.com bubble burst, online grocery is beginning to show a resurgence. While the US online active
universe has roughly doubled (from roughly 100 million to roughly 200 million people) since 2001, the online presence of grocers
has increased more than 13x in the same time frame. More than 13 million US Internet users visited a grocery site in July 2009.
In this industry brief, we will delve into the key drivers behind the revitalized online grocery movement, including the ways
consumers use the Web, social media and other online tools to plan and execute purchases, how retailers and consumer package
goods companies can maximize opportunities and launch themselves into this re-emerging market, as well as what US grocers can
learn from the successful adoption of online grocery shopping in the UK.
Convenience Gen Y
Online
Grocery
Broadband Customization
• Generation Y: Generation Y (generally defined as consumers born between 1983-92) are coming into the grocery-buying age.
• Broadband: As of July 2009, broadband is currently estimated to be at or above 2/3 U.S. penetration.
• Customization: The web platform allows for a consumer-centric grocery browsing and purchasing experience.
In the US, 2008 online food and beverage purchases were estimated to be $3.5 – 4.0B, or less than 1% of the total category.
Although the bulk of grocery purchases take place offline, online grocery transactions tend to be larger than those made offline -
on average, shoppers tend to spend twice as much online as offline. Drivers of this phenomenon include the following:
• No lugging of heavy groceries leads large packages of storable items to thrive online
• Older, affluent and smaller - thus more willing to pay shipping fees in exchange for convenience
• Geographically correlated with the distribution of online grocers (upscale urban/suburban neighborhoods)
Large households represent untapped opportunity – grocers will need to ensure that their online presence is easy to use, customi-
zable and convenient enough to address the hectic lifestyles of large families.
A few core drivers of positive experiences emerge from the survey results:
• Convenience
––Consumers fill up their grocery carts with the click of a button, at any time of the day or night, at work or at home
––Consumers stock up on staples without having to lug heavy packages
––Consumers need never run out - automatic replenishment options make for convenient re-ordering
––Consumers avoid driving to stores or lugging bags on public transit, navigating crowded aisles, hunting down specific prod-
ucts and waiting in line
• Selection and product information
––Virtual shelf space allows for a wide product assortment and in-depth product info
––Especially important for those with special dietary needs
• Pricing
––The online grocery shopping experience facilitates price and product comparisons
––Running shopping-cart tallies help deter impulse buys
16%
12%
10%
8%
As we observed in the US, online grocery shoppers in the UK tend to have higher income levels. However, unlike the US, UK
online grocery buyers tend to have larger, younger households, reinforcing the growth opportunity for US retailers to move
beyond the current niche purchaser profile.
UK online grocery shopper attitudes have also matured in recent years, moving from apprehension about the experience to more
practical concerns. This provides US online grocers with visibility to evolving shopper concerns.
• Almost a quarter of shoppers have “no concerns” related to purchasing groceries online
• Irritation with delivery charges and delivery times is growing over time
• Concerns about purchasing groceries online – and having someone else select produce – have subsided
• Strong retailers and competition require strong marketing - with 4 major players in the UK – strongly led by Tesco which cre-
ated and then drove the market through heavy marketing – others were forced to follow suit, including national TV advertising
• Infrastructure improvements matter – distribution networks, product availability, substitution mechanisms, delivery times,
prices all contribute to customer satisfaction
• Price wars create interest – the battle between Tesco and Asda has driven down consumer price while driving up consumer
interest
• Alternative offers create value – “switch and save” mechanisms for easy substitutions (usually private label) achieve a 40%
click-through rate
• National home delivery is an opportunity – major supermarkets use online to fill-in regions where they are thin on the
ground – where demand existed but supply didn’t, representing an even larger opportunity in the (much larger) US
• Online customer service must be as strong as in-store – free delivery, flexible delivery time slots, fewer bags to be more
green
• Download coupons
These insights provide an interesting context from which to build connection and engagement with online shoppers, in 3 key
ways:
• Inform
• The current US online grocery shopping HH is older, wealthier and smaller. The UK market points to younger, larger families
as a key area of opportunity for the US. Ensuring the shopping process is easy and convenient for larger, time-starved families
will drive growth among this group. Educating shoppers about the benefits of shopping online – saving time and money – will
also be critical.
• Convenience is a key driver of shopper satisfaction, while delivery fees, waiting times and general uncertainty about the
experience are key barriers to purchase. Survey data from the UK illustrates that, over time, shopper attitudes will evolve from
conceptual concerns to pragmatic concerns.
• Online grocery sites must engage shoppers; value is not limited to grocers with transactional sites. Supporting the in-store
experience through digital coupons, shopping lists, store availability and more is part of this evolution.
• Emerging media platforms can inform, inspire and customize the online grocery shopping experience.
learn more
To learn more about the data sets and products referenced in this study, please email:
more.preview@Nielsen.com
This brief was based on a Nielsen Online webinar entitled: Online Grocery: Take Two.
Click here to download and view the complete presentation.
www.nielsen.com
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