The Global Grocery Market

The global market we operate in represents around half of all retail sales. The global food distribution market is worth £5.6 trillion. Roughly 30% of all supply chain costs are spent on warehousing and last mile delivery.

The Institute of Grocery Distribution (IGD) estimates that by 2022, the global grocery retail market will expand by approximately $2.7 trillion (£2.12 trillion at current exchange rate) due to growth in both population and spending power. This will provide attractive and sustainable opportunities for retailers. Europe and North America combined will account for 40% of total grocery sales by 2022.

The UK Grocery Market

Grocery is the largest retail segment in the UK, and is forecast to grow by 15% over the next five years, from £190 billion to £218 billion (IGD). IGD also forecasts that over the next five years, the online share of the market will grow 52% to over £17 billion. UK shoppers are increasingly digitally dependent, and it is becoming more important to use technology to improve the customer experience, whether online or in store, as well as in managing costs and enhancing loyalty across the industry. UK retailers have also been experiencing cost increases, primarily from labour inflation. Alongside this, retailers and the market have been having to adapt to the fall in the value of sterling which has increased the cost of imported goods.

Inflation Will Drive Growth

Inflation will drive growth

UK Grocery Sales

UK grocery sales

Low growth

Moderate growth

High growth

UK Grocery Sales Growth

Low growth

Moderate growth

High growth

UK Market Growth

Set to Grow by 15% by 2023

UK market growth

Market value (£bn)

YOY % Change

Online and Discount

Will Capture Half of Market Growth

£bn
change

2018

2023

Total
+28.2

Online Channel Forecast

Market value (£bn)

YOY % Change

Major Trends Affecting Grocery Retail

An IGD research report confirms grocery retail is undergoing a revolution, driven by rising shopper expectations. While long-standing needs remain value, choice and convenience, shoppers' expectations of how these needs are met will continually evolve. Societal shifts and transformative technology in particular, will shape the online store of the future.

Societal Shifts – Globally the population is ageing (meaning appropriate products and convenient ordering), urbanising (meaning smaller kitchens and less storage) and becoming more health conscious. Ranges and services will need to evolve to succeed.

Transformative Technology – Artificial intelligence (AI) will enable online stores to be more personalised and to anticipate demand, while developments in robotics can provide more convenient, efficient fulfilment. Smart, interconnected devices mean shoppers can access the store whenever and wherever they want.

The shopper of the future will therefore expect more choice, convenience, inspiration, personalisation and transparency. Online stores will play an essential part in meeting these needs.

The Online Grocery Market Worldwide

Consumers shifting channel to online is taking place not only in the UK, but in all other markets where the service is available to them at a competitive price.

  • The US online grocery market will grow by 149% by 2023 and account for 3.5% of the total US grocery market
  • China's online grocery market will grow by 286% by 2023 and account for 11.2% of the total Chinese grocery market

IGD's research notes that online and offline grocery shopping are merging, and an online store will be increasingly vital to complement the physical store. The digital world typically evolves faster than the physical world, and new generations of shoppers will be more likely to view online ordering as the norm.

Across the world, online is one of the fastest-growing grocery channels.

Ocado acts as a key catalyst for this shift as a retailer in its own right in the UK, and because it can license its unique and proprietary technology to third parties in other markets.

The Options for Grocery Retailers

Aside from the choice of developing online capabilities in-house, retailers have three main options when considering how to grow and manage their online proposition:

  1. Store pick: Fulfilment is done at a local level, in either a live store environment or "dark" store using a degree of automation.
  2. Outsourcing to third parties: A customer orders from their chosen retailer, and their shopping is delivered through a third-party shopping service.
  3. Centralised fulfilment centre: A customer orders from their chosen retailer who operates through a manual or automated facility. Ocado Solutions provides the only complete package with all the proven mechanical handling equipment and software needed.

What This Means for Ocado

Ocado is in an advantageous position, as a leading pure online retailer in the UK, and as a partner to other innovative and forward-looking grocery retailers the world over.

Ocado Retail

As a pure play online retailer, we are well placed to capitalise on the shift to online channels. We continue to grow in excess of growth rate in the market, building capacity and capturing market share. Growth enables us to further invest and innovate.

Ocado Solutions

Based on our Ocado Smart Platform, we are ideally positioned to take advantage of the accelerating changes in e-commerce. Working with the world's leading grocery retailers, we can change the way the world shops.