Waitrose, Ocado grow sales as online market booms

Supermarket groups Waitrose and Ocado both announced encouraging online sales growth figures today (12 September) as the internet grocery market looks set for another huge period of expansion.

Amid a flurry of retailer financial updates this week, Waitrose said that sales across its business for the six months to 27 July were up 7.8% year on year to £3.02 billion – with its online arm growing at a rapid rate. Waitrose.com saw sales jump up 40.6% compared to the same period last year, thanks in part to a number of strategic investments.

Ocado, meanwhile, reported that sales in the 12 weeks to 11 August were £189.2 million – up 18.8% on the same period in 2012.

These figures were announced as grocery research group IGD predicted that the online grocery market will grow from £6.5 billion this year to £14.6 billion in 2018 – an increase of 123.7%.

Commenting on how the supermarket industry is expected to develop over the next five years, IGD CEO Joanne Denney-Finch said: "Both online and convenience retailing are reaping the rewards of our changing lifestyles. With more of us owning smartphones and tablets, online grocery shopping is becoming more popular.

"Retailers are also introducing more convenient and flexible services, such as temperature controlled click & collect lockers for shoppers to pick up their groceries at a time and place that suits them."

The final point made by Denney-Finch refers to Waitrose, which began testing chilled food lockers in July. When they are rolled out in 2014, as is the plan, shoppers will be able to collect their goods by driving up to lockers and entering a unique PIN on a touch screen.

The upmarket grocer also announced today it will continue to invest in technology and fulfilment, with capacity improvements made in its branches this year to fulfil Waitrose.com orders resulting in a 40% increase in online delivery slots nationwide.

"We plan to open a second dark store to support the London area and we expect this to be up and running by the second half of 2014, more than doubling our capacity to handle online orders in the capital," Waitrose added in today's statement.

IGD's predictions for online supermarket sales growth also come at a time when Morrisons is set to enter the e-tail world for the first time when it launches its transactional website with Ocado in January next year. The Co-operative Group's food arm is also set to start trialling online retail services later in 2013.

It appears that the great grocery space race of recent years, where supermarkets have added hundreds of new stores to their portfolios, is switching to a digital world. As the leading businesses in the sector turn their attention to improving their online and delivery services, there are sure to be plenty of new battlegrounds in the 12 months ahead.

According to the IGD, the overall grocery market – including in-store and multichannel sales – will be worth £205.9 billion in 2018, compared to £169.7 billion today. Retailers that can adapt to the new digital requirements quicker than their rivals will stand a better chance of boosting their share of this lucrative market.

Denney-Finch added: "The hot three areas of online, convenience and food discounters are the ones to watch [in the UK grocery market] – collectively accounting for more than £3 out of every £4 of growth in UK grocery over the next five years."