IGD expects excessive growth in online shopping with groceries

Online shopping, illustration.
The British non-profit analysis institute IGD predicts major growth in online grocery shopping in the next five years.
By Reidar Molthe

26 June 2019 14:46

IGD expects excessive growth in online shopping with groceries

Those who reject online shopping in groceries as a flop will get a big surprise in a few years, predicts IGD, a British non-profit analysis institute. Three key global markets will see 212% combined online growth over the next five years, according to IGD.

  • UK: online grocery sales to grow by 48% by 2022 and account for 7.5% of the total UK grocery market.
  • China: online grocery sales to grow by 286% by 2022 and account for 11.1% of the total Chinese grocery market.
  • US: online grocery sales to grow by 129% by 2022 and account for 2% of the total US grocery market.

Three main reasons

The latest insights argue there are three main reasons why no grocery retailer or supplier can afford to downplay online retail:

  1. Across most of the world, online is already a fast-growing channel.
  2. Online and offline are merging, with an online store vital to complement physical stores.
  3. The digital world evolves faster than the physical one and online stores will become increasingly compelling.

Dramatic changes

Based on a survey of 223 senior industry members across 42 different markets and a series of in-depth interviews, digital experts expect to see dramatic changes in the competitive landscape.

78 % of respondents think shoppers will use online price comparison services more regularly to switch to the cheapest retailer, while 67 % believe shoppers will be able to choose from a wide range of specialist online retailers underpinned by a common and consistent delivery service.

Additionally, 75 % expect more manufacturers to sell directly to consumers online.

Five key features for the future

Combining industry input with IGD’s global team of experts, the research concludes that the online store of the future will contain five key features:

1. It will be a shopper’s personal micro store offering individualized and online-exclusive products, personalized promotions, recommendations, advertising and loyalty schemes.

69 % of respondents believe some retailers will apply personalized pricing and promotions in future. An additional 77 % think almost all digital communication to consumers by retailers will be personal.

Simon Mayhew, Online Retail Insight Manager at IGD, argues:

"AI will help to unlock personalization. The store’s layout will be dynamic and able to predict the customer’s reason for shopping. So, if you need a meal for tonight, your homepage will display only the relevant solutions. When generally browsing, you will only see the products and pack sizes likely to meet your needs. Many products will only be buyable online where there is no constraint on shelf space, and in high-value categories, there will be customizable products, so you can create your own ideal shampoo or cereal."

2. It will act as a smart personal assistant, connecting with various devices, preventing shoppers from running out of products and supporting their lifestyle goals. Nearly two thirds (60%) of the experts surveyed predict that smart devices automatically re-ordering products will become a firmly established way of shopping for many people. The shopping experience will also be more inspirational, through personalized planners and sophisticated digital assistants like chatbots. 71% of respondents expect some retailers to provide a service to offer personalized dietary guidance.

"Smarter devices will make shopping simpler and more inspiring," continues Simon Mayhew.

"The online store will help stop you running out of products. Shoppers will subscribe to have their favorite products delivered regularly and AI will predict when you may run out and make or suggest a reorder. Household devices, such as washing machines, will connect to your store and reorder when necessary. This will lock in customer loyalty."

“The online store will offer more than just groceries; it will also help around the house. With populations urbanizing and tending to live in smaller properties, businesses will offer services that prevent the need for space-hungry appliances, such as home cleaning and laundry.”

3. It will be more efficient for shoppers, easier and quicker to order products. Login and payment will be available through facial, voice or touch recognition technology. Shoppers will incur less waste, with a greater choice of pack sizes and meal planners to help manage quantities and advise on using leftovers. A better fulfilment service will be on offer with more deliveries on time.  

Improvements in service will reduce the number of returns and make deliveries quicker. We will see greater collaboration in the supply chain, including manufacturers pooling resources to sell directly to consumers. However, there will also be new challenges and potential inefficiencies. Shoppers will expect faster deliveries, and this means smaller, more frequent orders.

4. It will help give shoppers a frictionless combined offline and online shopping experience. People will switch seamlessly from shopping online and instore with data cross-referenced between the two. This will help bring more personalization to the physical store and help shoppers find their favorite products quickly and discover new ones. This is an opportunity that many companies need to work on with over half (53%) survey respondents saying they haven’t or have only just started to integrate their online and offline teams.

"Before visiting a physical store, you will be able to look online to check in-store, real-time availability, access product information, get product usage ideas and read reviews," comments Simon Mayhew.

"When you arrive at the physical store you will then benefit from personalized offers and recommendations. An online app will help you find products and pay for your shopping without cash."

5. Shopping at any time. With shoppers buying products from shoppable digital content such as videos, photos and social media in the future, people can be shopping at any time. There will be no limits to when you can be shopping. China has been leading the merging of media, entertainment and shopping, and Europe and North America will follow.

The shopper of the future will expect more choice, convenience, inspiration, personalization and transparency. IGD predicts online stores will play an increasing part in meeting these needs

For additional insights, download IGD’s free report Online Store of the Future 

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