How to succeed in the world's second largest online grocery market-Complete Analysis of UK online Grocery Market, and Online Retailers' ...
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How to succeed in the world’s second largest online grocery market — Complete Analysis of UK online Grocery Market, and Online Retailers’ Features and Functionality
COMPLETE ANALYSIS OF UK ONLINE GROCERY MARKET, 2 AND ONLINE RETAILERS’ FEATURES AND FUNCTIONALITY Introduction The growth of the digital channel means that success for fast moving consumer goods (FMCG) manufacturers is more and more dependent on how their products are represented in the online channel. Hence knowing how these retailers operate online, and what functionality they offer is key when it comes to empowering brands to optimise their products’ representation to drive sales and protect brand equity in the digital channel. In this analysis Clavis Insight looks at the major online grocery retailers in the market, comparing sales, range and online store functionality for the six biggest established players, plus recently launched AmazonFresh. Go to the Appendix for a full table showing the functional capabilities of each, including size of portfolio, membership, delivery and navigation options, as well as content, consumer engagement and mobile app capabilities.
COMPLETE ANALYSIS OF UK ONLINE GROCERY MARKET, 3 AND ONLINE RETAILERS’ FEATURES AND FUNCTIONALITY Size of the Prize: What is the opportunity for brands? The UK grocery market, worth £175 billion in 2015, is Despite the obvious growth some brands still question under pressure. Traditional UK grocery retailers are why they should commit dedicated resources and seeing sales shrink – overall sales value fell by 1% in effort to serve the eCommerce channel. But sales value 2015 compared with 2014 – due in no small part to the is only the tip of the iceberg when it comes to summing rise and rise of the German discounters. up the importance of online channel presence and performance. The digital channel is also an increasingly However, amongst the doom and gloom in recent years significant influencer on in store purchases – up to the Digital Channel has provided a few rays of hope 35% of in-store UK food and beverage purchases are for traditional retailers and national brands, as online digitally influenced (Deloitte), with shoppers using the grocery sales continue to provide double digit growth. online channel for tasks such as product research, price comparison and consumer review analysis. The UK is a booming online grocery market, second in size only to China. Online retailers continue to win an Sales Versus Eyeballs increasing share of UK shoppers’ baskets – IGD pegged the 2015 value share at 4.4% of total UK grocery spend Given the influence of the digital channel on off line (or £7.7 billion) and predicts this will grow to almost 9% sales it is worth taking note of the relatively high by 2020. monthly visitor numbers of major retailers (Table 1). At 41 and 22 million each Tesco and Asda are clearly being used by a lot of shoppers to carry out product research for buying elsewhere (most likely in-store), while Ocado is remarkably efficient at converting online browsers in online buyers generating almost £1bn in sales from just 3.5 million monthly visitors.
COMPLETE ANALYSIS OF UK ONLINE GROCERY MARKET, 4 AND ONLINE RETAILERS’ FEATURES AND FUNCTIONALITY The Major Players Regardless of the growing influence of internet pure Tesco leads in terms of online sales with 37.7% market plays, traditional retailers such as Tesco, Asda and share (see Table 1 below), with Sainsbury’s and Asda Sainsbury’s still dominate the online channel aided by at 15%. Ocado comes in fourth with 11.8% and both their national footprint and sheer size. Together, these Waitrose and Morissons have much smaller shares three own over two-thirds of the online grocery market. at 3.4% and 2.6% respectively. The impact from AmazonFresh’s recent UK launch is yet to show in the market share numbers, but we can expect to see its sales rise steadily in the coming years as it rolls out its services to more cities. *Table 1: UK Online UK Online Grocery Market Grocery Market Share: Tesco Asda Sainsburys Ocado AmazonFresh Waitrose Morrisons (multiple sources) Grocery Share 37.7% 15% 15% 11.8% — 3.4% 2.6% Revenue 2015 £2.9bn £1.2bn £1.2bn £0.9bn — £0.26bn £0.2bn Monthly Visitors 41M 22M 10M 3.5M — 3.8M 3.5M Launch Year 2000 2000 1995 2002 2016 2000 2013
COMPLETE ANALYSIS OF UK ONLINE GROCERY MARKET, 5 AND ONLINE RETAILERS’ FEATURES AND FUNCTIONALITY eCommerce Pure Plays To date, Ocado has been the clear pure-play leader The pure play nature of Ocado means it is ideally in UK online grocery. The retailer is continuously set up for NPD. With no physical store legacy to take innovating, and developing alternative revenue streams. into account there is no need to consider online/offline It has for example integrated its service with the SKU alignment, which frees it up to host a diverse Apple Watch to allow users to shop from that device range of products. using voice recognition, while at the same time it has developed the Ocado ‘Smart Platform’, which offers Amazon, with its AmazonFresh offering, is aggressively infrastructure and operating capabilities to retailers moving into the lucrative UK market, and is likely to such as Morrisons. The e-grocer offers some 43,000 provide significant disruption. It may have started with SKUs (Stock Keeping Units) in its range and boasts a a small geographic foot print - 69 postcodes across consumer base of 453,000 active users delivering some central and East London – but it trumps all its rivals in 183,000 weekly orders. terms of range, claiming to offer up to 130,000 fresh and frozen grocery products. “Amazon, with its AmazonFresh offering, is aggressively moving into the lucrative UK market.”
COMPLETE ANALYSIS OF UK ONLINE GROCERY MARKET, 6 AND ONLINE RETAILERS’ FEATURES AND FUNCTIONALITY AmazonFresh is competitive in terms of price, but it is Share of Shelf and Size of Portfolio not cheap to avail of the service as its only available to customers who buy a Prime membership at £79 Each retailer offers a wide range of grocery related per annum and then pay an additional £6.99 monthly products including food and beverages, pet care fee for Fresh. However, its entry into the market is products and health and beauty. After AmazonFresh, likely to shake up grocery shopping as a whole by Tesco.com offers the largest online portfolio (and accommodating more frequent, top up shopper the widest national coverage). It publically claims missions, and picking off the highest spending grocery to have around 70,000 products on its site, but Clavis shoppers in key markets. Insight analysis actually found close to 85,000 SKUs on Tesco.com. By comparison Morrisons, Ocado, As Amazon and Ocado intensify their competitive Sainsbury’s and Asda host smaller (but still extensive) threat the ‘Big 3’ are becoming aware that they need a ranges at approximately 54,000, 49,000, 45,000 strong focus on better technology and new innovations and 35,000 respectively. such as Sainsbury’s recent piloting of one-hour delivery times via its Chop Chop App in London.
COMPLETE ANALYSIS OF UK ONLINE GROCERY MARKET, 7 AND ONLINE RETAILERS’ FEATURES AND FUNCTIONALITY Private Label With the prevalence of own-label in the UK grocery Nineteen own-label items were returned in the first market a significant proportion of the range of each 20 Search Results on Tesco.com, effectively blocking of these online retailers is taken up by store brands. other brands out of the all-important first results page. To illustrate this point Clavis Insight searched for Asda and Sainsbury’s also strategically place their own ‘frozen foods’ on each of the stores to identify which products in the Top 20, or first page of results, whether by products returned in the first 20 Search Results searching or navigating through the menu. Ocado delivered (see Table 2 below). a more diverse range of products in the top 20 search results, with 12 spots going to national brands. Table 2: UK Grocery UK Grocery Own Label Dominance on Search *Frozen Food Top 20 Own Label Dominance Asda Ocado Sainsburys Tesco on Search Frozen Product Product Product Product Food Top20 Brands Brands Brands Brands Count Count Count Count Own Label 18 Own Label 8 Own Label 11 Own Label 19 Richmond 2 Frank Dale 4 Bird’s Eye 5 Bird’s Eye 1 Dohertys 1 Valley 2 Bannisters 3 Smooze 2 Linda 1 McCartney’s Frys 1 Vbites 1 Cross & 1 Blackwell
COMPLETE ANALYSIS OF UK ONLINE GROCERY MARKET, 8 AND ONLINE RETAILERS’ FEATURES AND FUNCTIONALITY Online Store Functionality Membership and Delivery options In our analysis of online store functionality, we looked Other than AmazonFresh and Ocado there is little to at differences between the retailers’ membership and distinguish the main online retailers from each other delivery options, and mobile capabilities, as well as in terms of delivery options, cost of delivery and how products are represented in the online stores. membership/subscription. All offer both home delivery Monitoring how they perform against these elements and Click and Collect (or buy online pickup in store of representation, such as landing page content, (BPOIS)) options. Delivery is generally next day, with availability, ratings and reviews and placement (search charges ranging from £1 to £7, and free delivery cut- and category menu) and ultimately optimizing their off at £40 for subscribers to Delivery Subscription performance for each, offers brands a framework for packages. Tesco.com offer a ‘Delivery Saver’ improving their eCommerce channel business and subscription package, which only requires customers working more closely with online retailers. to spend £10 to qualify for free shipping. Many retailers also have a £25 minimum order. “Other than AmazonFresh and Ocado there is little to distinguish the main online retailers from each other in terms of delivery options, cost of delivery and membership/ subscription.”
COMPLETE ANALYSIS OF UK ONLINE GROCERY MARKET, 9 AND ONLINE RETAILERS’ FEATURES AND FUNCTIONALITY The AmazonFresh model is different with an annual The products that appear on the first page of results Prime membership of £79 plus a monthly subscription for category key word Searches, or on the first page charge of £6.99 for same day delivery. Ocado also of the category menu, are more likely to be added to a offers a subscription model in lieu of delivery charges shopper’s basket. Therefore, it’s important for brands and has a ‘same day’ service in limited locations. In to know what their target is in terms of getting on the recent months Tesco and Asda have been trialling a first page. The fact is menu category and Search results same-day service for “click and collect” orders, while pages vary by store (see Appendix - Navigation and Sainsbury’s is also piloting same day delivery, in Online Shelf Placement), and ultimately the higher up direct competition with AmazonFresh, out of its new the page your products are the more likely they are to Bromley-by-Bow-based dark store. be added to basket. Navigation and Online Shelf Placement Availability In the physical world brands aim to get their products eCommerce product availability may well be the onto the top shelf, or in the bull’s eye depending on most important metric that brands track in both the brand strategy. Online however as we know there is online and offline channel. The UK market, options of no shelf, so “placement” is determined by how well Availability are limited to products being “In Stock” or products rank for keywords on search results pages, “Out of Stock”. Currently there is very little support for or where they are located in the category navigation low stock information on the sites themselves, with the menu structure. exception of Amazon which publishes availability level if stock is low. Tesco and Ocado also enable consumers to sign up for stock level notification emails.
COMPLETE ANALYSIS OF UK ONLINE GROCERY MARKET, 10 AND ONLINE RETAILERS’ FEATURES AND FUNCTIONALITY Consumer Engagement – Ratings and Reviews Reviews and Ratings are a significant lever in the online While most of the retailers analysed here (other than channel, as they serve to interrupt a shopper trip much Tesco) carry consumer reviews for grocery products, like an in-store display or a shelf tag might. This is the concept is still in its infancy in the UK, compared particularly true when consumers are looking for new with the US and China at least. In UK online stores products or brands. A brand a shopper doesn’t usually many products have no reviews and only Amazon buy with five Stars may suddenly be of interest appears to be committed to opening up a dialog when they realize their usually preferred brand between consumers and suppliers by enabling only has 3.5 stars. manufactures to respond to reviews on its site. Table 3: Number Top 5 Most Postiviely Rated Laundry Brands of Reviews and 100% Percentage of Positive Reviews Laundry. 100% 61% 55% 65% 39% 47% 100% — Number of reviews 99% per Brand 99% — % of postive reviews per Brand 99% 93 85 74 71 70 99% 99% Lenor Fabreze Ariel Persil Comfort
COMPLETE ANALYSIS OF UK ONLINE GROCERY MARKET, 11 AND ONLINE RETAILERS’ FEATURES AND FUNCTIONALITY Clavis Insight analysed Reviews and Ratings for the Lenor and Ariel also perform quite well in terms of Laundry Category, focusing on the five brands with coverage, with 73% of their products Reviewed in the largest number of consumer comments (see Table online stores. But there is still an opportunity for these 3, page 10). Lenor performs well in terms of consumer and rival brands to increase the level of consumer engagement with 93 reviews across the sores analysed, engagement in UK online stores (see Table 4 below). however Ariel does even better as it has a higher percentage of positive reviews (four stars or better), 65% versus Lenor’s 61%. Table 4, Percentage of Percentage of Products Reviewed for Top Reviewed Brands in Laundry Category Products Reviewed for Brands % Products Reviewed Top Reviewed Brands in Laundry Category. Ariel 73% Lenor 73% Febreeze 61% Comfort 58% Persil 46%
COMPLETE ANALYSIS OF UK ONLINE GROCERY MARKET, 12 AND ONLINE RETAILERS’ FEATURES AND FUNCTIONALITY Content and Product Pages Mobile Apps Landing page content in online stores is the means In terms of eCommerce and online content in particular for brands to educate, inform and convert consumers, more and more industry watchers are talking about in the absence of having a physical product to touch the importance of Mobile. Speaking at the Clavis and feel. In this sense, the internet has democratized Insight eCommerce Summit in 2015 Ocado’s Head of the brand battle. It is essential for brands to take Product and Merchandising, Hannah Gibson, stressed full advantage of what each store offers in terms of the importance of content, adding that brands and content, images and page layout in order to present retailers needed to think mobile first when it comes to their products in the best possible light to consumers. creating their online store content. “At Ocado, 50% of orders are now touched by mobile and this isn’t the With any shopper, clarity and speed are paramount. To peak. Pinterest says that about 70% of their usage is on win over shoppers, brands should make their product mobile. I don’t suspect it will be too long before we are pages clear and concise. That means descriptive at a similar level,” she said. product titles and succinct features and benefits bullet points. In addition, optimizing product images will help “It’s really difficult to create content that works well shoppers accelerate their decision-making. to engage the shopper on mobile, with small screens, minuscule images and short bursts of text,” Gibson But not all brands are taking advantage of the explained. “But if you can get your content to work on functionality available to them on the online stores small formats then it will work for desktop web pages – for example half of the stores we looked at allow as well.” brands to publish more than one image on the product page, but this is not universally applied.
COMPLETE ANALYSIS OF UK ONLINE GROCERY MARKET, 13 AND ONLINE RETAILERS’ FEATURES AND FUNCTIONALITY What do brands need to do Build a Solid the Business Case to win in this environment? Despite eCommerce being the primary driver of growth in many consumer goods categories it is not always Market analysis and common sense tells us that easy to immediately prove a return on investment- eCommerce is growing rapidly in importance, but it’s based business case for the level of effort and still essential for the eCommerce team to get some investment required to succeed in the channel. In the quick wins on-board early and create a long term early stages at least, it is unlikely that online channel plan if the channel is to deliver success. The steps to revenue alone will be significant enough to add up- consider in order to win online are: to-much in terms of direct ROI. In any case it may not even be possible to get reliable online sales figures. In Build a Solid the Business Case the absence of reliable or convincing eCommerce point Create a Relevant and Realistic eCommerce Strategy of sales data, the argument for investment focuses Develop new Capabilities three key areas: Protecting valuable brand equity, the Impact of online on other channels and future proofing Setup for Success with the Right KPIs the organization. Score Some Quick Wins “It’s still essential for the eCommerce team to get some quick wins on-board early and create a long term plan for success”
COMPLETE ANALYSIS OF UK ONLINE GROCERY MARKET, 14 AND ONLINE RETAILERS’ FEATURES AND FUNCTIONALITY Create a Relevant and Realistic eCommerce Strategy Develop new Capabilities The eCommerce strategy a brand adopts will depend All too often in FMCG manufacturers, one person is heavily on where the organization and categories handed the eCommerce brief and told to figure it out. are, in terms of eCommerce maturity. For some But if the organization is to succeed in the channel, and organisations the eCommerce strategy might focus on ultimately succeed in the market, there needs to be protecting brand equity, building brand presence and wider involvement from company leadership down, educating the consumer. For others the strategy could as well as the addition of new skills and capabilities. be more about impacting omni-channel and offline The capabilities you have today, supporting your sales, brick-and-mortar shoppers, and brick-and-mortar brick-and-mortar or traditional retail channel, will retailers that have an online presence. A third approach not be effective in achieving eCommerce growth and would concentrate more on the actual eCommerce beating emerging online competitors. You and your revenue via pure plays and online retailers. organization are going to have learn to do things differently and adapt traditional category management tactics for the new channel.
COMPLETE ANALYSIS OF UK ONLINE GROCERY MARKET, 15 AND ONLINE RETAILERS’ FEATURES AND FUNCTIONALITY Setup for Success with the Right KPIs Score Some Quick Wins The key foundation of capabilities and resources In order to secure more resources and grow internal needed to succeed in the online channel will include support for eCommerce in general it is handy to be measurement and analytics. The metrics and KPIs you able to quickly prove your ability to impact the channel. choose to follow will depend largely on the level of Luckily there are usually plenty of examples where you eCommerce in your key categories, but again in the can demonstrate impact. It might be about optimising virtual world they are likely to be a bit different than product titles for better search performance or quickly they might be for your traditional channels. Online identifying distribution gaps in certain online retailers. the brand has to ensure its products are in-stock in Another problem that is easily solved, once it’s spotted, the online store, consumers can easily find them is where your product can be twisted with that and when they do are persuaded to buy in sufficient provided by a third-party seller in Amazon to deliver numbers to create demand from the retailer. incremental sales for your brand. This is something See page 16 for example metrics. that you can quickly identify if you are tracking your share of search and search rank, and make a change in Amazon to demonstrate immediate. The eCommerce channel isn’t going to go away; in fact, it is continuing to grow its share of overall retail. Brands need to understand the new landscape they are playing in terms of retailers and the functionality of their online stores to be better armed in order to win in the coming years.
16 Online Key Metrics Availability Track your portfolio’s state of Ratings and Reviews Set targets for availability by retailer, category, brand, and total number of product reviews and manufacturer to optimise your range, maxi- average rating score to help drive mise distribution, and improve sell-through. omnichannel sales. Search Rank Understand where your Media Tracking Monitor online products rank in search results for specific media placements for compliance search terms to ensure your products are and effectiveness; track category discoverable. competitors. Content Integrity Monitor compliance Price and Promotions Tracking of product content for individual SKUs Monitor pricing and promotions for by category and online retailer so that you your products and your competitors’ can make sure your products are optimised products to make sure your products to win the digital shelf. are optimised to win the digital shelf. Category Placement Understand where your products rank on the online store category menu structure. Target categories to ensure specific product sets are easily discoverable.
APPENDIX 17 UK Online Grocery Market — Size, Operations and Offering UK Online Grocery Market — Consumer Engagement Functions Tesco ASDA Sainsbury's Ocado AmazonFresh Waitrose Morrisons Functions Tesco ASDA Sainsbury's Ocado AmazonFresh Waitrose Morrisons Online Grocery 37.7% 15% 15.0% 11.8% ? 3.4% 2.6% Ratings and Reviews N Y Y Y Y Y Y Share Online Retail Enable Manufacturer £2,902,900,000 £1,155,000,000 £1,155,000,000 £908,600,000 ? £261,800,000 £200,200,000 N N N N Y N N Revenue (2015) Responses Average Monthly 41M 22M 10M 3.5M ? 3.8M 3.5M Review Syndication N Y Y Y Y Y Y Visitors Online Launch 2000 2000 1995 2000 2016 2000 2013 Q&A Y Y Y Y Y Y Y Year (UK) Wales, Scotland, Wales, Scotland, Wales, Scotland, UK Online Grocery Market — Pricing and Delivery Regions Wales, Scotland, and London: 69 Wales, Scotland and Wales, Scotland England and England and England and Served England postcodes England and England Northern Ireland Northern Ireland Northern Ireland Functions Tesco ASDA Sainsbury's Ocado AmazonFresh Waitrose Morrisons Product 84775 35389 45463 48838 100000+ 19678 53577 # secondary images Count Y N N Y Y N Y (up to 5) Own Label Y Y Y Y (Waitrose) Y (Morrisons) Y Y Video N N N N Y N N Marketplace N N N N Y N N Capabilities Detailed Description Y Y Y Y Y Y Y UK Online Grocery Market — Pricing and Delivery Images/Graphics in N N N N Y Y N description Functions Tesco ASDA Sainsbury's Ocado AmazonFresh Waitrose Morrisons Detail Bullets Y N N Y Y Y Y Shipping Y Y Y Y Y Y Y BOPIS /Click & Best Seller Rankings N N Y Y Y Y Y Y Y Y Y N Y Y Collect Subscription/ Ingredients Y Y Y Y Y Y Y Y N Y Y Y Y Y Subscribe & Save Allergy Y Y Y Y Y Y Y Membership Y N Y Y Y Y Y Annual Membership Nutrition Panel Y Y Y Y Y Y Y Free N/A Free £79 Cost Sponsored Products N N Y Y Y N Y Annual Delivery Sub £30 £60 £60 £69.99-£109.99 £83.88 NA NA on Product Page Suggested Items on Fastest Shipping/ Limited Same Day, N N Y Y Y N Y Next Day Next Day Next Day Same Day Next Day Delivery Next Day Delivery Product Page Delivery Available otherwise next Day Free Shipping UK Online Grocery Market — Mobile App Capabilities Threshold (with £40 £40 £40 £40 £60 £40 Delivery Sub) Functions Tesco ASDA Sainsbury's Ocado AmazonFresh Waitrose Morrisons Standard £3.00 - £5.99 £3.00 - £5.50 £1-7 £2.99-£6.99 £6.99 per month £3.00 - £5.00 £1-£5 Search Y Y Y Y Y Y Y Delivery Fee UK Online Grocery Market — Pricing and Delivery Search Page Size Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited Functions Tesco ASDA Sainsbury's Ocado AmazonFresh Waitrose Morrisons Menu Y Y Y Y Y Y Y OOS statuses Out of Stock Out of Stock Out of Stock Out of Stock Various Out of Stock Out of Stock Menu Page Size Full Category Full Category Full Category Full Category Full Category Full Category Full Category Low stock N N N N Y N N R&R N N N Y Y Y Y Waitlist /Email Y N N Y Y N N Notification Multiple Images Y N N Y Y N Y UK Online Grocery Market — Navigation options and Placement Functions Tesco ASDA Sainsbury's Ocado AmazonFresh Waitrose Morrisons Video N N N N Y N N Menu Filtering Y Y Y Y Y Y Y Navigation Detailed Description Y Y Y Y Y Y Y Menu Page Size 20 60 30-90 Unlimited 24 Unlimited Unlimited Images/Graphics in N N N N Y Y N Description Search Page Size 20 32 30-90 Unlimited 24 Unlimited Unlimited Detail Bullets Y N N Y N N Y Suggested Search N Y Y Y Y Y Y Terms Ingredients Y Y Y Y Y Y Y Spelling Forgiveness Y Y Y Y Y Y Y Sponsored Products N N N Y N N Y on Product Page Sponsored Search Y Y Y Y Y Y Y Suggested Items N N N Y Y N Y on Product Page Search History Y Y Y Y Y Y Y Average App 4.5 4.6 3 3.5 4.2 3 2.5 Rating iOS Average App 4 4.6 4 4 4 3.5 4 Rating Andriod
18 Thank You About Us To learn more about the Clavis Insight Clavis Insight is at the forefront of Index, CI2, and to find out how our Insight the ecommerce revolution, delivering will enable you to maximise your digital ecommerce insights and online retail store channel performance please contact : analytics to a broad range of consumer info@clavisinsight.com products brand leaders around the world. Our Insights are designed to enable you to optimise your distribution, content integrity and online placement in the digital channel in order to protect your brand online and grow your sales. BOSTON LONDON SHANGHAI DUBLIN 46 Farnsworth Street, #610, 6th floor, Room 965, ECO CITY 7th Floor, 1 Floor, st 22 Upper Ground No. 1788 Nan Jing Road O’Connell Bridge House, Boston, London, West, Jing An District, D’Olier Street, MA 02210 SE1 9PD Shanghai, China Dublin 2, Ireland + 1800 693 9591 +44 20 3318 6329 +86 21 2231 0511 +353 1 254 3440
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