Online grocery is growing fast. But how will it impact different markets, and which models will win out? In this complimentary guide, we reveal the scale and potential of food and consumer goods eCommerce across Europe, the drivers of its growth, latest developments from key retailers and what's happening in Europe's largest online grocery market.

1. Guide
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© IGD 2013

2. Hello and welcome
This guide is from IGD’s Retail Analysis service – your online
source of insight on retailers, markets, channels and trends in
the food, grocery and consumer goods industry
Resources include retailer and country profiles, trends and channels
analysis, daily news, store visits and photos, and an interactive
database of figures and forecasts
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• Develop stronger business plans based on robust data and analysis
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• Better understand the future direction of leading retailers
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of innovation and best practice
Please contact us to find out if your company
subscribes or to request a free trial:
E: retailanalysis@igd.com
T: +44 (0) 1923 851 956
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© IGD 2013

3. This guide will help you understand…
1
1. What leading global retailers think about
digital
2
2. The scale and potential growth of grocery
eCommerce across Europe
3
3. The drivers of grocery eCommerce growth
and the different models of execution
4
4. Latest developments from some
key retailers across Europe
5
5. What’s happening in Europe’s
largest online grocery market
© IGD 2013

4. 1
What are global leaders saying about digital?
Grocery delivery is not new for us. We know
what it is and we know how to do it. It requires
market density – enough customers. It
requires basket density – meaning you have to
put enough items in that basket to make it
work. And it requires route density, meaning
you’ve got to put enough orders into a truck
Our expectation is that pick
up points can be more
profitable than home
delivery
We’re expanding our digital presence in
all of our markets this year. One of the
most exciting things is that our digital
innovation is being driven and refined
by the demands of our Asian markets
We consider [the Morrisons
agreement] to be a strong
validation of Ocado’s operating
model, providing a solution for the
challenges faced by grocery retailers
worldwide as the online channel
continues to increase in importance
© IGD 2013

5. 2
European online grocery market forecasts
Which markets will
have the highest
online grocery
penetration in
2016?
6.3%
UK
4.3%
France
4.3%
Luxembourg
4.1%
Netherlands
1.7%
Germany
1.3%
Austria
W Europe Online Grocery Market Sizes 2012-2016f (€bn ex VAT)
• We see online grocery doubling in many European
markets over the next five years. If multichannel
capabilities are scaled, especially around click and
collect, our estimates could be conservative
• As the cost of picking online orders is higher than
customers shopping in-store AND the channel grows,
retailers will need to find a better economic model
for online grocery
Source: IGD Research
© IGD 2013

6. 3
European market development – models & drivers
What are the challenges and opportunities?
Educating shoppers
• From a shopper perspective, barriers to online grocery
shopping are low, with improved website experiences - such
as fresh guarantees – improving ease and speed of shop
Infrastructure
• Challenges vary depending on the fulfilment model.
Legislation around collection units could alter the growth
trajectory of click and collect
Anywhere, anytime shopping
• Getting mobile right for a multi-item basket shop –
understanding how people shop will be a major challenge
as mobile is already part of the journey
Market competition
• New entrants and different models of distribution – e.g.
monthly subscription – will disrupt traditional grocers
High levels of consumer acceptance
Few businesses have integrated online into a seamless
multichannel offer
How will the business model develop?
DRIVE
DELIVER
TO HOME
THROUGH
STORE
WAREHOUSE
PARTIALLY
FULLY
PICK
PICK
AUTOMATED
AUTOMATED
• Population density will be a key determinant across Europe when retailers
weigh up click and collect (Drive) against home delivery
• Drive will likely dominate given its lower cost, although in densely
populated cities, deliver to home is likely to remain a viable option
• Picking efficiency gains will be essential as the market scales. The degree
of automation and centralisation will vary by retailer
What are the future trends and implications?
• In advanced online markets, namely the UK and France, the opportunity to develop bespoke products just for online will challenge manufacturers
to innovate like never before. Products that meet shopper needs that don’t work in store could revolutionise consumer goods
• Developments in France point to a hybrid future model. For example, Auchan’s Drive attached to a fresh food emporium (Arcimbo), and Leclerc’s
central warehouse that delivers to three separate collection points, show how traditional formats are changing to reflect changing shopper habits
© IGD 2013

7. 4
European market development – retailers
Market entry: Morrisons
• Morrisons’ agreement with
Ocado to start grocery online
sales in 2014 is a first for
several reasons:
1. Shopper acceptance for online is higher than
ever before
2. Morrisons is turning on instant capacity to
deliver significant volumes from day 1
3. Morrisons has an existing shopper base to
talk to and encourage to shop online
Format development: Auchan & Leclerc
• Auchan has developed a
fresh food emporium
located next to a Drive, a
good example of ‘bricks and
clicks’ working in tandem
• Meanwhile, also in France,
Leclerc has set up a central
unit that picks grocery
shopping for three remote
collection points, located at
high traffic destinations
Mobile innovation: MySupermarket
• Mobile is a mainstream way of
shopping for groceries, yet few
businesses have developed a
solution that enables quick, easy
shopping for a 50 item basket
• MySupermarket’s new app is high
up the download chart and
focuses on visual navigation and
makes finding deals easy
Ability to browse by shelf and product is
a great addition to the search and
barcode scanner
iTunes review
Click and Collect: Ahold
• An expanding network of pick up points and
lockers are advancing Albert Heijn’s ‘buy
anywhere, collect anywhere’ credentials in NL
• Shoppers who purchase before midday can
collect after 1800, with spend typically
between €75 and €100
© IGD 2013

8. 5
UK: Europe’s largest online grocery market
What’s changed in our market size forecast?
• We have upped our growth projections; anticipating the market will increase around 2.2x for the 5 years
to 2018, versus our prior estimate of 2x to 2017
• There are two primary drivers: first we think the rapid adoption of click and collect services will drive a
degree of incremental sales. If retailers accelerate plans to deploy pick up points to standalone locations
and shopper acceptance levels are high, our estimate could turn out to be too conservative. Second, we
have modelled an incremental sales increase from Morrisons’ entry over the period on the basis that
more players means a degree more channel sales
• Increasingly important will be combining online into multichannel plans and understanding how
shoppers behave across all channels – do you have plans to follow families and find out how they are
shopping?
UK Online Grocery Market Size 2012-2018f (£bn inc VAT)
What are manufacturers’
priorities over the next 3 years
in terms of online trading?
1
Understanding the shopper online
2
Developing an effective internal
structure
3
Building category management
skills
4
Developing marketing solutions
for entire shopper journey
5
Developing tools to understand
the financial impact of online
6
Understanding the supply chain
impact
Source: IGD Online Trading Capability Survey
© IGD 2013

9. Insights from
5
UK: technology helping to drive online growth
• Click & collect is already an established sub-channel within
UK online grocery retailing
− Almost one in five (18%) online grocery shoppers claim
to have used a Click & Collect service in the last month
• However, Click & Collect shoppers are still at the
experimental stage - 5% only using this type of online
grocery service
• Those using Click & Collect can be expected to increase
over the coming year, with 15% of online grocery shoppers
intending to use the service more in the future
• Some are already using a smart device as they shop online
for groceries
‒ Almost three in ten (28%) claim to have recently
shopped online using a smartphone or tablet and a fifth
(20%) use both a smart device and a PC/laptop for
online grocery shopping
• Tablet shoppers are more likely to conduct their whole
grocery shop on their device – 79% compared to
57% among smartphone shoppers
ShopperVista Online Channel Focus, past month online grocery shoppers, Jul’13
© IGD 2013

10. Next steps
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Please contact us to find out if your company subscribes
or to request a free, no-obligation trial:
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T: +44 (0) 1923 851 956
W: retailanalysis.igd.com
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