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The great UK grocery cyberspace race

Some of the UK's leading grocers released trading updates over the last fortnight and although they all currently have their own unique selling points and areas of focus, one similarity among them all is the attention being placed on technology and digital investment.

Sainsbury's recently announced that it has achieved £1 billion in annual sales for its online retail business, while Asda made the bold prediction that online sales at its company will grow to £3 billion by 2018. Meanwhile, Morrisons is finally set to join the online party at the start of 2014 when its partnership with Ocado begins in January.

And on Wednesday Asda detailed new fulfilment plans, which will see click & collect points set up at a number of London Underground station car-parks. A partnership with Transport for London (TfL) will see pick-up facilities installed at East Finchley, Harrow and Wealdstone, High Barnet, Highgate, Stanmore and Epping, allowing shoppers who order their food online before noon to collect their grocery shopping from the station after 4pm.

But what else has been happening at the leading grocers, and who is stealing a march in this competitive sector?

What's the update at Sainsbury's?

In its interim results for the 28 weeks to 28 September 2013, Sainsbury's said that online sales grew at over 15%, driven by a focus on traditional retail values of customer service and product availability.

In September, the supermarket began the roll-out of an enhanced version of its Groceries Online website, which is scheduled to be available nationwide by Easter 2014.

A statement by the retailer said: "It offers customers faster and more intuitive product search and browse features and an improved recipes and ideas section.

"The new website performs well on tablet devices, and has given us a strategic platform on which to build new functionality in future years. We have the ability to deliver to over 96% of UK households, and make over 180,000 deliveries per week."

Plans for a dedicated online fulfilment centre in Bromley-by-Bow were recently unveiled, which will help the business meet demand for its online grocery service in London and the south-east and, ultimately, enable Sainsbury's to serve an additional 20,000 customers each week.

Sainsbury's also indicated that more than half our customers opt to collect their orders via click & collect, which has been made available in more than 1,000 of the grocer's supermarkets and convenience stores.

A Mobile Scan & Go pilot continues in four stores, too, which allows customers to scan their shopping using a smartphone. Feedback has apparently been positive so far.

What's the update at Asda?

Some of the main points to be drawn from Asda's recent third quarter update revolved around investment in new tech systems and fulfilment options.

The supermarket's like-for-like sales were up 0.3% year on year in the 13 weeks to 4 October 2013, and the company committed to widening customer access to Asda from 53% of the UK to 70%. The plan is to achieve this through the physical development of stores and the extension of click & collect to over 1,000 locations by 2018. This week's TfL announcement is an example of this strategy in action.

Such investment in fulfilment capability is expected to contribute to online sales revenues growing to £3 billion over the next five years.

Commenting last week, CEO and president of Asda Andy Clarke said: "We regard ourselves as the UK's leading value retailer and it is against this backdrop that I have today set out our strategic priorities which will improve, extend and expand the business over the next five years.

"There are three major components to this approach which will redefine value. First, we will build on our heritage of low prices by rebasing our pricing to the tune of £1 billion. Secondly, we will make a £250 million investment in quality, style and design and thirdly, we will expand Asda to reach new customers in the UK, particularly London and the south-east."

What's the update at Morrisons?

Morrisons' third quarter to 3 November saw like-for-like sales dip 2.4% (-3%, including fuel), a decline attributed to subdued consumer confidence and heavy promotional activity. Lack of exposure to an online audience due to the absence of an online retail operation was also given as a reason for sluggish trading, but from next year this will have all changed.

A Morrisons online fresh food proposition is now in place, thanks to a £216 million partnership with e-tail-only grocer Ocado. A ranging and marketing plan has reportedly been finalised and the technology platform and integration are nearing completion, according to CEO Dalton Philips.

Online food deliveries in Warwickshire will start direct from Ocado's Dordon CFC in January 2014, followed by an extension to Yorkshire shortly after, using a delivery spoke in Leeds. By the end of 2014 Asda expects to be in reach of more than half of UK homes, including London.

Morrisons CEO Dalton Philips said: "We continue to grow our sales in this tough market whilst making great progress on our strategy to be a multichannel retailer.

"I said at the outset that our online offer would be unmistakably Morrisons and I'm very confident that the service we unveil in January will live up to that promise. Many of our customers will be able to experience our distinctive online food service early in the new year and we expect to be able to serve 50% of UK homes by the end of the year."

In addition, earlier this month the Yorkshire-based supermarket Morrisons announced its first ever affiliate marketing programme. Teaming up with Tradedoubler, the grocer aims to target its online wine cellar platform Morrisons Cellar at consumers, with a range of discounts and offers.

Paul Sanderson, head of GM online content & operations at Morrisons, said that the affiliate marketing arrangement will capitalise on the initial success of the platform, which only launched last year.

What's the update at Tesco?

Tesco has the largest share of the overall UK grocery market and that extends into eCommerce, too.

When the business announced its half-year results at the start of October, it reiterated its ambition to become "the leading multichannel retailer". One move made to help customers shop "whenever, however and wherever they want" was the launch of its own-designed Hudl tablet, which supports the mobilised way consumers now interact with retailers.

Tesco's range of digital services, including the Clubcard loyalty scheme and blinkbox movies, are all available on the tablet, as well as instant access to online operation Tesco Direct.

It was also announced in October that Scan as you Shop has been introduced to the retailer's larger stores, with over 300,000 customers using it each week. Tesco said that in stores where it has been introduced, more than 20% of sales - on average - are made through the technology.

Market share

Kantar Worldpanel data released this week showed that all of the big four supermarkets lost market share in the 12 weeks to 10 November 2013, with Aldi, Lidl and Waitrose all growing their piece of the grocery market pie.

Seemingly, it is becoming even more important for the leading players in the market to offer a differentiated service – and much of this can be achieved through technological investment.

Edward Garner, communications director at Kantar Worldpanel, told Essential Retail that online accounts for around 5% of total supermarket sales in the UK, but it is growing at approximately 18% a year.

"Online can't be ignored and it'll continue growing – I don't see a let-up," he noted, before adding that click & collect "will play a substantial role" in supermarket shopping in the coming years. He also suggested that the Drive concept made popular in France by the likes of Carrefour could be a model to investigate on the other side of the Channel.

He also counts Tesco as the online leader in the UK "by a long way", saying it is making significant progress with mCommerce and combining the consumer channels.

"Tesco's launch of Hudl brings everything together, and it is streets ahead of the other players in this regard," Garner added.

"With larger screen and faster speed technology emerging, I don't see why mCommerce won't continue to grow. Tesco, which is particularly lumbered with big box stores, is investigating new ways to use its stores and it will be important to have a strong mCommerce offering."

Research group Verdict Retail's most recent look into the online supermarket industry found that Tesco's market penetration is almost double that of both Sainsbury's and Asda. According to a Verdict e-Retail survey, over 60% of food and grocery shoppers had visited Tesco's site, compared to 35% and 32.5% who had visited Asda's and Sainsbury's online grocery portals respectively.

Senior retail analyst at Verdict Andrew Stevens said that online is still some way from being the dominant method of grocery shopping, even though the rate of store openings has slowed in recent years.

"People are saying not as many supermarket stores are opening, but they are still opening," he argued.

"It would be easy to say the battle has moved online, but there is also a huge amount of shopping done in-store. It's a case of being agnostic and using each channel to drive traffic across the business."

http://www.kantarworldpanel.com/

http://www.verdictretail.com/

http://www.tradedoubler.com/

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