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Ocado and Morrisons main beneficiaries as online grocery grows 117%

18 Aug 2020

Paul Skeldon

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Online grocery sales have grown by 117% to take a 13.5% share of the sales, as supermarket chains and new entrants such as Amazon Fresh ramp up multi-channel operations, according to two sets of data from Nielsen and Kantar.

Nielsen finds that online sales accounted for 97% of this growth – a total of £658 million – as sales made in-store were only up by £20 million. Over the last four weeks, in-store sales growth overall remained flat at +0.3% but online grocery growth continued to accelerate, up +117%, maintaining its 14% share of all FMCG sales.

According to the data from Kantar, Ocado reaped the biggest reward, gaining a market share of 1.8% over the past 12 weeks, following a year of 40% growth. Nielsen finds that overall, Morrisons (+13.6%) continues to outperform the other ‘big four’ UK supermarkets and increase market share, but Iceland (+24.4%) has the strongest growth overall.

Discounters Aldi (+10.8%) and Lidl (+9.1%) also show signs of steady growth, which, in their case, is coming almost entirely from in-store sales.

Mike Watkins, Nielsen’s UK Head of Retailer and Business Insight, said: “It is evident that some new shopping habits that developed as a result of the pandemic – such as opting to shop online – continue. UK shoppers are now establishing a new, regular shopping routine and we can expect the current levels of growth to continue for the rest of the summer. Shoppers are still shopping less often than they did prior to the pandemic, visits to stores are down 15% on the same period last year, but up from the 22% decrease registered in May, so there are signs of a willingness to return.”

Watkins concludes: “The shift to online grocery shopping, which looks set to stay, is the most dramatic change of shopping behaviour we’ve ever seen. Though it has clearly been a positive gamechanger for shoppers and some retailers, it has come at the expense of stores – something that we have already seen in non-food retailing.”

Nigel Naylor-Smith, Head of Retail and Hospitality, Fujitsu UK, agrees, pointing out that, as retailers embrace technology and drive omni-channel, these habits are likely to stick. “The processes they now have in place may well accelerate the adoption of technology in supermarkets overall and, as a result, improve the omnichannel shopping experience for their customers,” he says.

“Even with lockdown easing, online sales have continued to rise, indicating that a large proportion of consumers are continuing to embrace the shopping habits developed during lockdown as part of their new normal. Looking ahead, grocers will need to ensure they continue to invest in their technology and infrastructure so they can cater for those new habits,” Naylor-Smith adds.

However, the challenges that grocery retailers face are still large – and changing. The shift in how shoppers shop and who they shop with is particularly prescient believes Tim Reay, Head of Grocery at Wunderman Thompson Commerce. “Morrisons and Tesco in particular – the two stand out performers with a 16% and 12.8% sales increase [in the Kantar research] – will want to capitalise on consumers’ desire to purchase one big shop for the week instead of multiple smaller visits, while continuing to champion safe, Covid-19 friendly measures,” he says.

“Yet there is another, more defining challenge on the horizon; after much consideration, Amazon is stepping up its expansion in the UK with a nationwide rollout of its online grocery service at the end of 2020,” Reay warns. “Bigger orders placed on Amazon Fresh will become commonplace and most importantly free to Prime members – with the majority (55%) of UK consumers Prime subscribers, supermarkets will face renewed pressure to compete with a service as wide-reaching as Amazon’s. Fear of contracting the coronavirus will also play its part in driving online spend with 48% of shoppers scared about in-store shopping,” he adds.