Online Grocery Sales Will Keep Growing
Online retailers are currently seeing their fastest growth in the UK in over a decade, according to the e- Retail Sales Index. About one fifth of families in the UK shop online for their food and groceries, compared to less than 10% in Europe and the rest of the world, and all signs point to e-commerce gaining market share against traditional grocery shopping.
In the last year, Ocado has seen its share price rise by over 600%. Ocado is different in the sense that it has no physical stores, but sells branded products and some Waitrose own-brand items. In its most recent results, Ocado recorded sales growth of 15.2% y-o-y for H113, representing GBP383mn, and increased its average orders per week by 13.4% y-o-y to 139,000. Its number of active customers also rose, and with 360,000 users, representing 0.6% of the UK population, the firm has plenty of room and ability to grow.
Though Ocado has no physical stores, the company has recently signed an agreement with the fourth largest supermarket in the UK, Morrisons, to deliver its food. But the big players of Tesco, Asda and Sainsbury's all have their own online business, with their online grocery sales growing fast. More firms are jumping onto the bandwagon, with Marks & Spencer launching a new online butcher and fishmonger last week. In FY2013, Tesco recorded online grocery sales growth of 12.8%, a faster pace than its in-store sales. The company has attributed much of this growth to its Click & Collect scheme, where customers can order what they want online, and then go into the store to collect their groceries. Indeed, Tesco is one of the driving forces behind the online grocery sector, largely down to its iconic Clubcard initiative. Andrew Miles, Tesco's online food marketing director, believes that the Clubcard is 'the key thing' for the supermarket's online shopping evolution, as it allowed the company to 'understand how customers are shopping through the channels and how customers are evolving.' By monitoring customers' purchases through Clubcard, Tesco now believes that the 'shopper journey is not linear or predictive, it's iterative.' This understanding has given Tesco customers the option of saving their regular weekly shop on their computer, so that time is saved and consumers are more likely to return to Tesco.com. Figures from IGD ShopperVista, a specialist retail market research firm, suggest that this is the main reason people do their grocery shop online.
|Rebased Share Price (23/10/2013=100)|