1. Javelin Group | 200 Aldersgate Street | London EC1A 4HD | United Kingdom | +44(0)20 7961 3200 | www.javelingroup.com
Online Grocery Shopping Research
03/07/15
2. 2
Contents
Online Grocery Shopping Research
03/07/15
Max Naylor
Work experience
1. Background on me
2. Online Grocery proposition and current market
3. Online Grocery Proposition Summary
4. Conclusions
5. What I have learned
3. 3
Background on me
Who am I and what do I do
My name is Max and I am doing work experience at Javelin Group
I go to The Latymer School, Edmonton
o I have recently finished my GCSE’s
A-Level topics
Hobbies
o Sport
o Music
o Volunteering
I have an interest in going into management consultancy or law in the future
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What I wanted to gain from this week
During this week I had hoped to achieve certain aims
o To gain experience of working in an office environment
o To learn more about management consultancy
o To find out how various members of the team got to where they are
o To make connections with people
o To add some substance to my CV
5. 5
Contents
Online Grocery Shopping Research
03/07/15
Max Naylor
Work experience
1. Background on me
2. Online Grocery proposition and current market
3. Online Grocery Proposition Summary
4. Conclusions
5. What I have learned
6. 6
Grocery summary
Wiki and Forbes
Firstly, what is Proposition and how is it important for a business
USP – Unique Selling Point A proposition is what makes the business stand out from its competitors in the market to the
customers
For a business having a USP isn’t enough
o Standing out from the crowd
o A customer needs to see the value of your product or service
As a business your propositions determine who you are
o Certain propositions will attract certain customer bases and then you will be know for those by your customers
o for example, Waitrose are known for a higher quality of product which is more expensive
o so that appeals to a certain market segment and that forms and contributes to their brand image.
Having clear propositions as a business is important
o as your customers or potential customers will know what you are selling or offering as a service
o that will help them decide whether to choose you.
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Grocery Summary
What is it that customers want from their grocers
Value for money
o Tesco losing to ALDI and Waitrose
Time efficient shopping
o they want to be able to shop quickly and often
Healthy, low fat, alternatives
o consumers have access to more information, and that’s leading them to demand more
o for example, more than 70 percent of consumers now read food labels often
and nearly half want to see food products rated by “healthfulness”
Wide product range
o Due to globalisation and containerisation, importing and exporting foods has become easier and cheaper
o Consumers now demand a variety of products and are no longer satisfied with basics
Good customer service
o consumers recognize that grocers are gathering information about who they are and what they buy
they expect you to use that information to give them a better shopping experience
o they no longer want you to simply sell them food
they expect you to help them achieve their goal of a healthy lifestyle for themselves and their families.
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Grocery Summary
These customer changes have resulted in huge changes in the retail industry
Market focus has shifted
o from superstores out of town to convenience stores, discounters and online
o Superstores still have an incredibly large market share (35% of total grocery market)
o But convenience stores, discounters and online are the fastest growing grocery formats
As a result of this shift Tesco have been ‘squeezed’ in the market
o international, super and extra stores, bank, GM, Tesco mobile, propositions have all made losses
o They are losing ground from both rich and ‘poor’ ends of the market
Tesco and Sainsbury's have still tried to appeal to both lower end and higher ends of the market
o For example, Tesco value and Tesco finest ranges
The lower quality high volume stores like Lidl and Iceland and Aldi have appealed to customers more
o The credit crunch (2008) was a huge contributor to that
o As a result some of the more aggressive discounters have taken some of Tesco and Morrison's market share
o the more compelling propositions from Waitrose and Asda are holding firm.
Retailers like Waitrose and M&S have still appealed to higher end customers
o Other retailers have seen costs escalate as they invest billions in price matching and slashing
o Waitrose’s margins remain healthy thanks to their unique, quality-led proposition.
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Grocery Summary
Consumer behaviour developments have forced grocery retailers to respond
Over the past few years we have become
o Tighter on time and budget
Our once 3-4 hour £200 weekly shop has now been reduced to cheap and often ones
o Ease-orientated
As a consumer we have began shopping online, on the move, in our spare time i.e. on the way home
We often look for simple and easy meal solutions
o Price Conscious
We continue to demand high value without compromising quality
o As a consumer many retailers seem to struggle to grasp this concept
o Savvy
We shop around and buy according to our particular circumstances
Loyalty is to a grocer is becoming less frequent and is becoming more easily broken by consumers
In response to this grocers are
o Heading back to the high streets and opening increasing numbers of convenience stores
This results in increasing competition
o Managing overheads burdened by big and expensive stores and complex operations
o Squeezing margins and investing in price reductions
o Polarising their positions
responding to the growth of the discounters such as Aldi and Lidl
raising quality standards is one solution, this would earn them a premium or fighting the ‘price plus quality’ battle.
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Contents
Online Grocery Shopping Research
03/07/15
Max Naylor
Work experience
1. Background on me
2. Online Grocery proposition and current market
3. Online Grocery Proposition Summary
4. Conclusions
5. What I have learned
11. 11
Grocery summary | Market map | Venn Diagram
The retailers I have researched offer the following propositions on grocery online
Tesco, Sainsbury's, Asda, and Ocado all offer
all 3 services
o This gives them a competitive advantage
M&S and Waitrose have an opportunity to
expand and offer a delivery saver/pass
Iceland and Morrison's are in a very weak
position in the market
o They only offer home delivery
o However they are the discounters in the
market and so they are likely to be more
price competitive than the other retailers
Aldi offer no delivery service
o This is a clear opportunity for expansion
for them
o If they chose not to then they may save
costs but more likely they will lose out on
potential profits
Click & Collect Home Delivery
Delivery
Pass/Saver
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Grocery Summary
Here are the Click and Collect locations available for the 6 retailers who offer that proposition
Waitrose have introduced 7 new temperature-controlled Click & Collect lockers
o These are at service, train, and tube stations
Ocado are trailing 2 tube collection points
o but these have seen limited success with Tesco and JS pulling out of the C&C proposition
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Grocery Summary
This pie chart emphasizes the market shares of the online grocery retailers more clearly
Non food
comparison
(opportunity for
food??)
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Grocery Summary
The % of Grocery Collection stores out of total stores highlights the efficiency or the retailers
Percentage of Grocery Collection stores out of total stores for click and collect
Waitrose are the most efficient retailer, they are using the highest % of their stores (96.45%)
o However they still have less grocery collection points than competitors like M&S and Asda
Asda and M&S both are reasonable efficient as they have percentages of 57.14% and 58.57%
o However there is still an option to expand there and match Waitrose's proposition
Tesco and Sainsbury’s both are very inefficient, both having % lower the 10%
o Tesco still offers 350 collection points which is one of the highest
o Sainsbury’s however only offers 28 and this is an area that they should look to expand upon
They have over 1,203 stores in the UK that could be used as collection points
Ocado have no stores and so have had to try something to compete with rivals for C&C
o So they have trailed tube station pick ups but Tesco and JS found this unsuccessful
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Grocery Summary
The Delivery Pass/Saver is another proposition offered by select retailers
Comparison of delivery pass costs (annually and over a 6 month period)
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Grocery Summary
Home Delivery is the final of the 3 propositions that I have researched
Home Delivery
o A comparison of costs for each time of delivery for each retailer
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Grocery Summary
The minimum spend on online grocery varies considerably between retailers
C&C = click and collect
HD = Home Delivery
DP = Delivery Pass
C&C = click and collect
HD = Home Delivery
DP = Delivery Pass
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Grocery Summary
The cut off times for changes or cancellations are reasonably similar though throughout
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Contents
Online Grocery Shopping Research
03/07/15
Max Naylor
Work experience
1. Background on me
2. Online Grocery proposition and current market
3. Online Grocery Proposition Summary
4. Conclusions
5. What I have learned
23. 23
From this research that I have done, I can conclude that
Everything that is going on in the market now is a result of changing customer habits
o As their needs change the grocers must adapt quickly in order to stay ahead of their competitors
o Whilst Tesco are being squeezed, aggressive discounters are thriving on these changing demands
Of the 3 key propositions, (C&C, HD, DS) only 4 of the 9 major online grocery retailers offer all 3
o This means less competition for Tesco, JS, Asda and Ocado
o However this is also an opportunity for the other retailers to seize a larger market share of online grocery
Which is predicted to grow by 93% by 2020 – from £7.7bn in 2014 to £16.9bn in 2019
o An example would be for Lidl, who currently offer none of the 3 propositions to invest in a click and collect system
This would be cheaper than starting with a home delivery service which would require them to hire or buy trucks
They already have 600 UK stores for customers to collect from, and C&C gets customers into stores were they are likely to buy additional items
o It is the same for Ocado and Sainsbury's who offer very few click and collect locations compared to their rivals, they are missing an opportunity
The delivery pass saver costs almost exactly the same from Tesco, Asda and Sainsbury’s – however ocado is almost double the price
They do this because they offer a ‘smart pass’ which gives customers discounts, free delivery's, anniversary gifts and so on.
The delivery pass saver is effectively guaranteeing the retailer a loyal customer for that period
o this is useful as customer loyalty is becoming increasingly non-existent as they often look for the cheapest price
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I can also see that
Home delivery prices vary considerably depending on time and retailer
o Morrison’s are almost consistently the cheapest excluding Waitrose, Ocado and Iceland who offer free delivery
o JS are often the most expensive of the retailers
o Tesco and Asda fluctuate between being relatively expensive or cheap
o Fridays, Saturdays and Sundays show very similar trends from all the retailers who charge money
There is a negative correlation with minor fluctuations
o Monday to Thursdays show us that they have very different prices at in the morning but generally by the afternoon they all merge to form a visible trend
(Sainsbury’s expensive, Tesco and Asda average and Morrison’s cheap) in the mornings
Minimum spend shows no trend for any of the 3 propositions
o They all have different amounts and fees if under
Cut off times however are between 10pm and midnight the night before delivery
They are all very competitive here and try to offer the latest possible time
There is perhaps an opportunity here for a rival to be aggressively competitive and offer a cut off time say 2 hours before delivery or something similar
o However this is an unrealistic option as that would cost the retailer too much and so the profit margins wouldn’t be improved enough
by the ‘better’ customer service
Slot lengths are very similar here as they all are either 1 hour long or 2 hours long.
o There is a gap in the market for a half hour delivery slot and this would give that retailer a serious advantage and they could charge a
high premium for it
o An example would be Amazon who have launched ‘Prime now’ which delivers the product within 1 hour of ordering to certain London
postcodes and they charge a premium price of £6.99
