Online grocery poses unforeseen challenges

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Is online shopping actually a good thing? The question is prompted by some research from the IGD which suggests that four in ten grocery shoppers could potentially be converted to online shopping.

Malory Davies FCILT, Editor.

Malory Davies FCILT, Editor.

There are obvious benefits in terms of convenience for the customer, but for the retailer there are some definite downsides. The process is more complex and cost to serve is higher. And online customers can be more fickle – after all the next retailer is just a click away.

According to the IGD research, 26 per cent of grocery shoppers class themselves as regular users of online services. While a total of 42 per cent say they would consider converting to online shopping, about one third of all those surveyed described themselves as lapsed online grocery shoppers. And nearly half of them haven’t shopped online in the past year.

In other words, about one in seven of all those surveyed have tried online and weren’t impressed.

According to the IGD’s Ben Miller: “Those shoppers who have lapsed from online – or never tried it in the first place – told us that lower delivery charges, better selection of quality products and more accuracy on ordering could encourage them to make the switch.”

The major retailers have little option but to court the online shopper. But in his speech to the CBI yesterday, Dave Lewis, group chief executive of Tesco, highlighted some of the challenges that online shopping is creating not only for the retailers, but also for government.

“Digital operations have no real community footprint…far fewer employees…and a far lower tax contribution,” he told delegates.

“That should be a dilemma for the Exchequer. Without rebalancing to reflect digital business models the physical side of retail pays a higher and higher proportion of the total tax bill. Furthermore it will incentivise a swifter shift to infrastructure light, low employment business with little interaction with communities.”

Amazon has started trialling its “Fresh” grocery product in the UK ahead of a full launch early next year – a move that will drive further growth in the market.

In fact, the IGD forecasts that the market will almost double from £8.9 billion in 2015 to £17.2bn in 2020.

But the impact on supply chains will be significant as retailers focus on maintaining profitability in the new environment. And, I suspect that George Osborne’s policy wonks will be looking hard at the social issues highlighted by Dave Lewis and wondering if online grocery is really such a good thing after all.

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