Monday, 10 May 2021
Online grocery shopping was growing in popularity prior to COVID-19, but the pandemic has brought about a huge acceleration in growth for food and drink online.
With online grocery sales reaching £18bn in 2020, online share of total grocery in 2020 even exceeded IGD’s pre-COVID forecasts for 2024, reaching 8.8% in 2020, when their previous forecasts in 2019 anticipated a 7.7% share by 2024.
The main driver of this has been an influx in new online shoppers. When the pandemic first started in 2020, the proportion of households buying food online immediately jumped up. The proportion of households buying food and drink (excl alcohol) online is now around nine percentage points higher than it was in 2020, averaging out at 29% (Kantar, 12 w/e 21 Feb 21 vs previous year). Meat, fish and poultry (MFP) saw the biggest increase when compared to its pre-Covid trend, reaching 26%.
Due to COVID-19, 2020 saw a very different online shopper profile emerge. Prior to the pandemic, online grocery was especially focussed on families (including those with older dependents) – who accounted for over half (52.8%) of online grocery spend in the year ending Feb 2020.
However, the pandemic has brought about an older online shopper. Kantar data shows that the proportion of retired households buying food and drink online (excluding alcohol) more than doubled between Feb 2020 and Feb 2021, from 17.3% to 35.6% (Kantar, 52 w/e 21 Feb 21).
Online share of volume increases
While sales increased across the board, in both physical and digital stores, online has gained share of sales over this past year. Compared to the year prior to COVID-19, the average category uplift in online share of volume is four percentage points from 8% to 12%.
Still room to grow for some categories online
Despite this, some categories have seen their online growth lag behind that of the total food and drink market average of +77%. Of the key AHDB categories featured, only fresh potatoes and beef burgers have exceeded the market average for both online and physical store sales.
Cheese, pork sausages and frozen potatoes are some of the categories where growth in physical store sales are ahead of the market average, but online is behind. Therefore, an opportunity exists to push these staples in online retailing. This is particularly the case for frozen potato products, as IGD research suggests there is a shopper preference for buying frozen foods online – with 58% saying they prefer to buy frozen foods online, compared to 38% who prefer to buy in-store.
One area performing better online versus the market average is primary lamb. This is a real positive for the lamb category, as previous research has shown that some shoppers are apprehensive about buying meat online. Primary lamb cuts that have done particularly well online are steaks and shoulder roasting joints, both up 125% in volume terms in the 12 w/e 23 Feb 21 and attracting younger shoppers. Online growth for leg roasting joints is one of the slower areas (+53%) so ensuring prominent position on virtual stores is important. However, there are still opportunities to improve the shopping experience for meat online.
Online growth to slow but remain an important channel
As non-essential retail reopens and the vaccine rollout boosts consumer confidence, the question now is will online grocery growth continue.
Some shoppers remain cautious about visiting big supermarkets. The AHDB/YouGov Consumer Tracker shows that, in February 2021, 40% of consumers were still avoiding big supermarkets more than they were prior to the pandemic – although this was down from 49% at its peak in April 2020.
However, others are feeling more confident. Older shoppers, who have been key to online growth over the past year, are some of those who have reverted back to supermarkets, with 143,000 fewer over-65s making digital grocery orders in March when compared to the month prior (Kantar).
A year on from the onset of the pandemic, online grocery growth has started to slow. Despite total grocery online sales still being 89% higher in the four weeks ending 21 March 2021, compared to the same period a year earlier, the channel’s overall share of the market dropped back to 14.5% from the record of 15.4% in February 2021.
Due to the huge growth seen in 2020, further forecasts expect a slowdown in online channel growth as the market rebalances. IGD’s forecast for online grocery sales in 2021 is just 0.8%. However, online grocery is far bigger than it was prior to the pandemic, with new shoppers and increased capacity from the retailers. This means online grocery has gone from an £11.8bn market in 2019, to an anticipated £18.1bn in 2021 (IGD).
It’s therefore still important that the online product offering is right, and that it integrates well with the physical store environment – known as omnichannel shopping. With the IGD reporting that omnichannel shoppers are more loyal, providing incentives for them to use both channels will be important in retaining customers in future.