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Wednesday October 17th 2007

Retail Viewpoint - Online grocery is not a basket case

Archived article dated Wednesday October 17th 2007

Market research company Key Note last week revealed that over 70 per cent of consumers never use the internet to purchase groceries.

by Glynn Davis

What struck me about this statistic is that it means almost 30 per cent of consumers do in fact use the internet to buy groceries!

This looks pretty good to me - even if many of them don't do it very often and that their purchases account for less than 10 per cent of their total monthly grocery shopping bill. Agreed, this does mean that there is a lot to go for in this part of the online market, but it does also show that growing numbers of people are starting to experiment with undertaking their supermarket shopping over the internet.

It is not surprisingly that this activity is most prevalent among the AB social grouping and then falls away to a very small number of shoppers among the E grouping where Key Note admitted that the sub-sample for this social group was relatively small.

At least there was a sample because the problem with many surveys today is that they are undertaken using online panels, which means that anybody without a PC and an internet connection is unlikely to ever be questioned by a market research company. This clearly makes the results unrepresentative and when the subject being researched is related to the internet then it makes the findings absolutely meaningless.

This issue aside, what has undoubtedly held back online grocery shopping is the time and effort it requires - and of course the issue over delivery times. And on top of this the significant barriers to entry mean that it is up to the existing operators (plus Ocado) to grow the market and for each of these (minus Ocado) they can still rely on their massive store estates to drive growth in the UK.

Borders UK looks to book more online sales

While we are on the subject of online sales I was taken aback to find that Borders UK derives only one per cent of its sales from the internet. For a category that helped define online shopping (through Amazon) this is a sorry figure.

What makes it almost ironic too is that its website is hosted by Amazon of all people. Now we know that Amazon derives 100 per cent of its book sales online so it certainly knows how this job is done so how can the Borders site only account for such a paltry figure?

It is therefore little surprise that one of the first things that its new owners, Luke Johnson's Risk Capital Partners, has done is to scrap this arrangement and announce that it will be replaced in the spring with Borders' own transactional website.

Although this new online store represents one area of potential growth for Borders this won't address the key issue facing the company - the need to drive extra revenue through its stores in order to service their hefty leases. But it is at least a positive first step from Johnson and Risk Capital Partners in their strategy of turning around the fortunes of the business.

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