The online grocery market is set to double in size between now and 2020, in the UK and across the world’s top 10 online grocery markets. This shopper-led trend is leading to some rapid and significant change as expectations increase and more competitors want a share of the action. Here we examine five of the latest developments to watch:

1. More and more convenient

The "Amazon effect" often drives our expectations as online shoppers and this is leading to high demands for convenience, including ever-more-rapid delivery.  Amazon PrimeNow's one-hour delivery service for everyday essentials is expanding across urban markets in the US and UK and with cold beer and wine the latest additions, an impromptu party can now be started anytime, anywhere. Meanwhile in the US, 7Eleven teamed up with Doordash to offer convenient 'date night', 'hangover' and 'sniffles' packs bringing ice cream, pizza, energy drinks and condoms to lazy students’ doors.

Autoreplenishment, such as that offered by Amazon Dash buttons, is another convenient trend for some household essentials that is likely to take off, with more planned activity in this space expected from other retailers. As this dull replenishment part of the shopping experience becomes more automated we can expect to see increased loyalty, as well as a welcome freeing of our time to focus on the fun part of grocery shopping, planning meals for today and browsing fresh items.

2. Disrupting the disruptors

We have seen a lot of disruption and new entrants in the major online grocery markets lately, which is no surprise given the growth that is anticipated. However, it is when the smaller start-ups begin competing with one another that things really get interesting. In the US, new online start-up Jet.com has caused a stir by taking on Amazon with a membership proposition that undercuts Amazon on price and offers bigger savings the more shoppers spend. ChannelAdvisor statistics show strong repeat buyer rates by customers of 23% on the site after the first month.

3. Mobile everywhere

Our relationship with mobiles is very intimate and complex and they have been driving growth for some time, but who really does a good job here? Our smartphones can be seen as the glue that holds everything together, whether we are shopping online, researching online and purchasing offline, standing in a store looking for product information, checking social media content or using our devices to pay for goods.

There has been some activity to develop right time, right place messaging and targeting on mobile using geo-fencing trials and more personalised content. Yet there is much more to do to make the experience truly straightforward. We anticipate this will be a key area to continue to develop, with those that do a great job expecting to reap the rewards.

4. Profitability and smarter ways of working

As online becomes a significant share of retailers’ businesses and an even larger percentage of the growth, the question of profitability has come into focus, highlighted by Waitrose managing director Mark Price among others. Slim grocery margins, combined with lower-priced delivery slots and smaller average basket spend, are all putting pressure on the channel, yet we know that multichannel shoppers are more valuable.

Grocery retailers cannot afford not to meet shopper needs and expectations, particularly in light of disruption from Amazon and others. But we do expect an increased focus on profitability in the future, with retailers looking at more ways to lower overheads through efficiencies, automation and integrating online back into the heart of their trading organisations. Many retailers now want to implement a single brand strategy across all channels, even while being willing to tweak the approach slightly to get the best out of online.

5. Collaboration

Key to winning in online in the future will be collaboration: between retailers, between retailers and suppliers and between multiple suppliers. Unilever’s recent strategic partnership with Alibaba in China is a great example of two companies working together to unlock potential within the online market. On a smaller scale, Target has teamed up with Instacart to offer two-hour deliveries in the US.

Within online grocery we are starting to see a trend towards more open data sharing; something which has been challenging in the past, but unlocks the key to understanding both our shoppers and where the big opportunities lie.

You can hear more from IGD and online leaders including Tesco, Sainsbury’s, Asda, Ocado, Google and Twitter at IGD’s Online & Digital Summit, which takes place on 20th -21st October in London.

Lisa Byfield-Green is a senior retail analyst for IGD, specialising in online and digital. She writes a regular column for Essential Retail.

Click below for more information:

IGD