The pandemic has accelerated the shift to online shopping with Britain’s big four supermarkets expanding their capacity during the crisis.
The online share of grocery sales hit 16 per cent in January, according to data from Nielsen, as consumers ate more at home as cafes, restaurants and pubs were forced to close.
Britain’s multi-billion pound supermarket industry is placing its bets on whether big-spending older shoppers will stick with buying their groceries online when months of lockdown end.
Having more than doubled during the COVID-19 pandemic to represent 16% of Britain’s roughly 200 billion pound ($281 billion) food retail market, the country has one of the world’s highest take-ups of online grocery.
Ocado boss Tim Steiner says it’s here to stay and will carry on growing quickly.
Not so fast, say bosses of some established rivals.
“A lot of people are talking about the new normal, I’m absolutely convinced that we are not in this new normal right now, we are in the temporary normal, we are in an extraordinary time,” Christian Härtnagel, CEO of Lidl GB,
Previous Kantar data showed shoppers spent £1bn more on supermarket groceries compared with the same four-week period last year. The average family has spent £50 or more on groceries.
Tesco enjoyed online sales growth of 80 per cent year-on-year, equivalent to £1bn in extra sales, over the 19 weeks to 9 January. The supermarket said it broke its record for home deliveries and click-and-collect at the start of the year as the demand for online shopping failed to slow down.
Sainsbury’s has seen online sales rise 128 per cent over the year, with delivery splots jumping from 340,000 a week last March to around 850,000 currently.
Asda has also increased its capacity to 850,000 weekly slots and is looking to deliver 1m this year. Sales jumped 76 per cent in the fourth quarter year-on-year.
Morrisons has also had a stellar year, trebling sales in the nine weeks to 3 January across all of its channels, including food boxes, “Morrisons on Amazon” and Deliveroo.
Lidl does not offer home delivery and for many the jury is out on whether online sales can ever be as profitable as instore purchasing, where shoppers make more impulse buys and extra transport and logistic costs are avoided.
Sales for the supermarket ticked up at the start of the second lockdown, rising further over the festive period as shoppers stocked up on booze and food.
In any case, some in the industry say it would be wrong to see the shift to online grocery shopping as being as decisive as for newspapers and video and music streaming.
“Anyone who’s saying this is a permanent change in the grocery sector, there’s no evidence to back that up,” said one executive of a major British grocer who declined to be named.
Much will depend on the investment strategies of Britain’s major supermarket groups – market leader Tesco, Sainsbury’s, Asda and Morrisons – as well as Amazon, which has a less than 1% share of the UK grocery market.
Some critics draw parallels with the space race of the nineties and first decade of this century, when Tesco and Asda in particular built ever bigger superstores.
That fizzled out as shoppers fell out of love with massive out-of-town stores and supermarkets realised they could not make much profit from selling large items, such as furniture.
Some say it is symptomatic of people’s attachment to stores that the supermarkets’ heavy investment in digital capacity had led to only a small proportion of shoppers opting for online purchases until the pandemic struck.
For the big four supermarkets, increased take-up has improved the economics of online, but it still dilutes profits.
Kantar’s McKevitt said he expected online grocery demand to taper, at least in the short term.
The supermarket groups are in a quandary, he said.
“They’re between the devil and the deep blue sea,” he said.
