Online retailing for food and grocery is thriving. Despite the economic downturn, retailers are continuing to invest significantly in online, recognising the brand building and shopper engagement opportunities that the internet brings.

But what recent trends have there been in online retailing and marketing, and where might retailers invest in the future?
 

The performance of online groceries

Online remains an important growth channel, growing at over three times the rate of the grocery sector as a whole, and against a backdrop of ever improving technological infrastructure, retailers continue to ramp up their online activities. Each of the leading operators enjoyed good growth in 2008, and across the market, IGD remains very optimistic about future growth prospects.

Enhancing the proposition

Few can afford to miss out on the online trend. Each of the leading retailers, aside from Morrisons, have developed a strong online presence, while this week’s Grocer suggests that Morrisons may be considering this opportunity too. The attractions are clear: large baskets, affluent shoppers, and a growth market - longer term, structural trends.

But it remains a rapidly evolving market, and successful participants need to place considerable focus on research, development and innovation to stay ahead. The model continues to evolve, and enhancements continue to feed through. Greater personalisation, for example, with more tailored home pages, is an area of growing focus across the board. Ocado has long placed significant focus on this, with features such as personalised offers, although this is emerging as a growing focus for all major operators.

And retailers are seeking new ways through which to deliver greater value online. Ocado’s price match with Tesco on brands is well-known, but other recent initiatives here have included Waitrose, which no longer charges for delivery, and Tesco, which, as part of its double rewards on Clubcard initiative, now offers double rewards on online delivery charges.
 

	More retailers are using online communities as a way of communicating with people

Online marketing

Recent months have seen the online marketing machine coming alive as retailers, as well as brands, delve into previously uncharted territory. Most now have a Facebook presence with some even starting to “tweet”. Clearly, the use of technology offers an excellent opportunity to engage with shoppers, in particular, younger shoppers. It also offers scope to communicate values and develop aspects of the brand.

For example, Waitrose has introduced its own waitrose.com forum where members can exchange recipe ideas and suggestions, and M&S recently launched M&Stv featuring a large array of video clips, ranging from top tips from beauty experts to how to choose the best pinot noir.

Asda has a dedicated YouTube channel which features both official Asda tv advertising clips as well as unofficial videos of people imitating the back pocket pat. Marqt in the Netherlands has posted a clip on YouTube to publicise the opening of a new store, depicting efforts to sympathetically re-develop an old, historic building, transforming it into an ultra-modern, fresh foods focused store.
 

The Outlook

Ultimately, retailers must keep investing in their websites, both in terms of functionality and usability, to ensure that customers get what they want, when they want . It’s also about being one step ahead. The key to success for retailers is to stay ahead of the technological curve, both at a planning and implementation stage. This will determine the future winners within the online channel.
 

More information:

	Online Shopping 2009	Arriving November 2009
	IGD predicts that the online grocery market will be worth £5 billion in 2012. Understand how online grocery shopping behaviour and motivations have changed over the last few years, and the drivers and barriers to the future growth of online shopping with IGD's Online Shopping 2009 report.

	UK Online Grocery Channel presentation	(Subscriber only)
	A PowerPoint guide to the UK online grocery channel and expected future trends.

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Erika Reid is a Senior Business Analyst at IGD, working within the Market Intelligence team. She focuses on UK and European research, specialising in Germany, Scandinavia and the Baltic States. Her work encompasses publications, training and conferences as well as the publication and presentation of strategic analysis for major players in the industry.