Co-op Finally Makes a Move into the Online Grocery Market

Posted on 29 August, 2013 by MOVEHUT

The Co-op has become the last major British retailer to move into the online grocery sector, announcing plans for a trial delivery service.

The four trial schemes, which will each test a different delivery method, are an attempt by the mutually owned supermarket chain to win back market share as its 2,800 outlets face increasing competition from its competitors and convenience store chains.

The Co-op’s head of food, Steve Murrells, said: “We recognise that the online grocery market is a rapidly growing channel, which provides a significant opportunity for us as, primarily, a convenience retailer.”

The supermarkets have been battling it out to get a slice of the e-commerce action because the online grocery market, worth £1.6bn, has been one of the few growth areas amid the economic recession. According to the industry research body IG, Internet sales make up 3.4 per cent of the total grocery market, but some industry experts believe this could rise to 20 per cent or more in the long term.

The retailers move comes weeks after Morrisons became the last of the big four supermarkets to tap into the online grocery service.

The Bradford-based retailer completed a deal with Ocado, to sell groceries online from next April.

Tesco is the UK’s biggest online grocery chain having first launched its service in 1997, followed by Sainsbury’s launch in 1999 and Asda since 1998. The Co-op faces a tough challenge to find a profitable way into online groceries as it enters the market well behind its biggest competitors.

City analyst at Shore Capital, Clive Black said: “The Co-op is losing out at the moment because it isn’t participating online which is growing three to five times faster than stores.”

The group has previously said that an online service would not be sustainable because its shoppers only spend an average of £6 a visit to its outlets. However, Murrells is now hopeful that the new online service will encourage shoppers to place their grocery order online and pick up the goods at their local outlet.

So-called “click and collect” services are growing rapidly with some supermarkets, such as Tesco and Asda, now offering drive-through pickup points in their car parks so that shoppers don’t have to enter their stores or wait at home for a delivery.

Such services are part of a number of tactics being used to entice shoppers into out-of-town sites, which are falling in popularity due to high petrol prices and belt-tightening shoppers.

The Co-op ought to be benefiting from the trend towards local shopping as its 2,800 stores are largely found on local high streets and shopping parades, however the business has struggled.

Whilst speaking to trade journal Retail Week, Murrells said: “We need to get match fit if we are going to start to compete again. For the last few years we had lost our mojo and we needed clear leadership and direction.”

The Co-op already offers a home delivery service for customers who have spent over £25 in store. The Co-op has teamed up with Amazon lockers, which allows the internet retailer’s customers to pick up goods bought online. Now the retailer is looking at how a similar scheme might be used by customers wanting to pick up their groceries.

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