Amazon is a real threat to wholesale and retail grocery: TWC Trends

Online shopping is increasingly being used for top-up grocery shopping, according to a new report from TWC Trends.

The report, ‘Online Explosion’, explores the digitisation and delivery of food and drink and its impact on the convenience retail sector.

The report looked at how trends are evolving and how consumers’ online behaviour is changing.  What is clear is that online grocery shopping is not just for the main shop but is increasingly being used for top up shopping.

38% of those buying groceries online say that they do top up grocery shopping missions online, with this proportion increasing to 42% amongst the 18 – 34 age group.

One in five (22%) say they are only doing top up shopping when they buy groceries online, rising to 28% of the younger cohort.

The report also found that 30% of consumers have shopped in a channel other than supermarkets for some of their purchasing of groceries online.  Amazon is leading this charge with 13% of consumers saying they have ordered groceries from the online giant – that’s 60% more than have ordered from third party aggregators, such as Deliveroo.

High figure

Sarah Coleman, Communications Director for TWC, commented that this figure is high given Amazon’s small market share in grocery.

“Frequency and basket size will need to increase for Amazon to make significant headway in grocery. As we’ve already seen, appealing to the younger shopper will be key to winning the online grocery top up mission,” she said.

Whilst 35–54 is the key age demographic for shopping online for groceries from a supermarket’s website, other channels for grocery deliveries such as Deliveroo, Amazon, delivery direct from a convenience store and meal kit boxes all over-index with 18–34-year-olds.  We can see from the online shopping behaviour of this cohort that we are likely to see a shift towards faster, smaller, online grocery deliveries.

“This is also evidenced in the type of tech that is being used.  Whilst the uptake of QR codes and live streaming is fairly consistent across all age groups, other tech such as Apple/Google Pay, voice search and buying items directly from social media posts are all biased towards the younger shopper,” she said.

“For instance, 41% of 18–34’s have used Apple/Google Pay in the last month, whilst 1 in 5 have purchased an item directly from a social media post on Instagram, TikTok or Facebook, making this age group 60% more likely to do this than the average consumer.

Augmented reality

Whilst over half of this age cohort said the use of cutting-edge technology like Augmented Reality to showcase products is important when ordering food/drinks online (vs. 43% across all consumers), only 2% say they have seen AR in practice.

“Augmented Reality has been adopted well within fashion but is yet to make significant traction in food and drink. In our view this could offer an effective way of replicating the in-store experience, which we know is the biggest barrier to online grocery shopping. Half of shoppers that hadn’t shopped online for groceries said it was because they prefer going to the shop for groceries in person, whilst a similar proportion agree that they like to browse the aisles,” Coleman said.

“Two-thirds of shoppers who haven’t shopped for groceries online in the last 3 months think it is unlikely that they will do so next year, suggesting that online grocery penetration could plateau – at least unless some of the current barriers are addressed. Driving more online top up shops will certainly help to drive frequency, especially amongst the younger generation who are most engaged with this mission.

“Who can own this space is still unclear – and also whether it can be done profitably, especially outside of London and other big cities. We can’t deny that Amazon remains a real threat to the traditional wholesale and retail markets, but frequency and basket size will need to increase before it can make significant headway in grocery.”

This research on “Online explosion: the digitalisation and delivery of food and drink and its impact in the convenience and foodservice sectors” is the second in a series of new mini reports from TWC Trends.

The TWC Trends Autumn Edition 2021 series is based on the views and sentiments of over 1,000 consumers across the UK. The research was conducted between 5-8 November 2021.