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Supermarkets to take the war online

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Supermarkets will take their battle for customers online, with loyalty set to become key in coming years, according to new research from analysts at Verdict.

Its new report forecasts that growth in the food and grocery market will slows to 3.4% in 2010, taking the market to £124bn. That’s the slowest rate of expansion since 2006, thanks to lower food inflation and greater consumer caution.

The key areas for future growth are online, where grocery sales are forecast by Verdict to grow by 81% from 2009, reaching £7.4bn, and in the convenience store market, expected to grow by 14% to £35.7bn. Customer loyalty will also be “essential” for growth, given that five supermarkets currently share 64% of the market.

Senior retail analyst Malcolm Pinkerton said: “With shoppers leading increasingly busy lifestyles the popularity of shopping online for the weekly groceries is on the up. This has a knock-on effect, increasing the need for top-up shopping in between deliveries. Changing demographics, including an ageing population and a rise in single occupancy households, are also leading to an increase in frequent smaller shopping trips, which is significantly benefitting the local convenience store.”

He says it’s in these changes to shopping habits that retailers will need to focus their efforts in the years to come.

Pinkerton said: “Supermarkets will need to fight to establish their online and convenience presence and steal market share from rivals. Moreoever as competition intensifies among the major players loyalty is set to be a fiercely fought battleground. Those able to balance the needs of consumers with value and deliver what they want will win loyalty and reap the rewards.”

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