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Delivery costs slow UK online grocery growth


Online grocery companies will have to overcome consumer concerns around freshness and the cost of delivery to prevent a decline in the market, says new research.
A report from Mintel found that the proportion of customers shopping online for groceries had fallen from 48% to 45% between 2015 and 2018, even as sales had risen 9% year-on-year to £12.3 billion in 2018. Mintel forecast that online grocery would account for 10% of all grocery shopping by 2023.

The most popular reason for customers not shopping online was that they preferred to choose fresh products themselves, cited by 73%.

However, 24% cited concerns about high delivery charges and 18% around minimum spend. 63% of online shoppers said they had experience an issue with their order in their past year.

Nick Carroll, associate director of retail research at Mintel, said there were several reasons why growth was slowing: customers being reluctant to buy fresh products online, concerns about substitutions and delivery charges.

However, Carroll said the more important problem was that online services were better suited to traditional “big-basket weekly shops” whereas consumer taste was moving towards shopping on a “top-up or when-needed basis”.

Carroll said accordingly that same-day delivery coming to the mass market, including immediate meal solutions “could be the next driver of growth for the sector.”

However, consumers were unwilling to pay significantly more for same-day delivery. 24% said they would not be willing to pay anything at all, while 30% said they would pay between £1 and £2.99 and a further 27% said they would pay between £3 and £4.99. Only 19% would pay more than £5.

Co-op has been looking to overcome some of these limitations with its delivery robot service in Milton Keynes.

The automated delivery method has a flat delivery charge of £1 and as senior strategy manager of food digital Jason Perry says, the robots mostly ship orders sized within the retailer’s top-up vision of convenience shopping rather than being used for large weekly shops.

“[We] are seeing more retailers launch trial services designed to tap into the potential market for same-day or small-basket online grocery delivery,” said Carroll of Mintel. “The difficulty is such services, at present, are costly to both the customer and the retailer, limiting their appeal and potential geographic roll-out.”

Image credit: Fotolia

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