Online Grocery Shopping Research FINAL

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Contents
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

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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

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Contents
03/07/15
Max Naylor
Work experience
1. Background on me
4. Conclusions

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
03/07/15
Max Naylor
Work experience
1. Background on me
4. Conclusions

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
03/07/15
Max Naylor
Work experience
1. Background on me
4. Conclusions

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

Online Grocery Shopping Research FINAL

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