Grocers: is going online key to growing revenue?

Growth and strategy

4 May 2016

An increasing number of tech-savvy grocery retailers are recognising the benefits of e-commerce for their business – particularly the ability to reach a much wider consumer base and grow their revenue.

If you're considering the practicalities of selling produce online, here are some key questions to think about.

What are the figures?

Online grocery shopping has been available through the 'big four' supermarkets for years. In 2015, the Institute of Grocery Distribution (IGD) reported that more than one in four shoppers regularly bought their groceries online in January of that year, and more than one in ten use the internet for their main food shop – an increase from 6% in 2011.

As a result, the UK is one of the world's biggest markets for online grocery shopping, coming second only to China. Overall, British consumers spend nearly £1 out of every £5 of all their shopping online, and research suggests that's set to double over the next two years.

What are the benefits?

People shop online because often it's convenient. By opening an online shop, it's possible to reach people who are unable to visit your bricks and mortar store. Consequently, people who live far away or work during your business hours become potential customers. YouGov recently found that nearly 80% of Brits believe it's important to buy local produce, but only around 30% actually do this regularly. The demand is there, and putting your grocery business online could help give customers the opportunity to practice what they preach.

Who are the big players?

The world's biggest online retailer, Amazon, has seen the potential in the online grocery market. The company launched its Pantry service in Britain at the end of last year. The grocery service currently offers 4,000 branded products from big labels like Heinz and Nestle, but they've got big plans for expansion in 2016 – which could be bad news for the 'big four' supermarkets that currently dominate. At the moment, Amazon doesn’t offer fresh food to UK customers – a service that's available to consumers in some parts of the USA – but it's a possibility for the future.

Who are the up and comers?

Lots of enterprising small grocers are already experiencing success online. Riverford Organic Farms have won awards for their online grocery boxes, and are one of the market leaders. Customers can choose a weekly delivery of seasonal veg, organic meat and fresh-picked fruit, or put together their own box by selecting individual products. Riverford started by delivering to 30 households in Devon and now supplies tens of thousands of boxes across the UK using their franchise partners. The company has been enjoying solid growth since its launch, and outperformed the big supermarkets in organic produce sales in 2012.

The examples above offer some great lessons for other small grocers looking to expand through technology. Testing a simple online ordering and delivery model with loyal customers in your local area could be a good first step for gauging demand and tapping into the opportunity.

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