Retail Reduced – July 2024

Less consumers are choosing to embark on the ‘big shop’ at the supermarket and are instead opting for convenience. There are several reasons for this growing reliance on food delivery apps to deliver groceries: busier lifestyles, urban living, greater dependency on public transport, widespread technological innovation, a millennial market, and a post-Covid surge for on-demand groceries. Resultingly, groceries now account for 40% of Uber Eats orders whilst revenue from the grocery delivery market is expected to grow by 17.2% in 2025.

Uber Eats’ senior director of product management Therese Lim explains their process: “Once shoppers have placed an order, immediately that order gets matched with an Uber Eats courier on the back end. After accepting your order, they are directed to the store so they can begin navigating the store and picking items.” A specialist courier app then provides help with the process, including suggested replacement products, aisle indexing to save courier time, and payment authorisation assistance.

On the supermarket side, the Co-op are leading the way by fulfilling more orders than any other supermarket across major delivery apps such as Deliveroo, Uber Eats, and Just Eat. Unsurprisingly, more than 80% of the population now have access to Co-op groceries online as the grocer was an early mover, listing a handful of Manchester stores back in 2018 and expanding their presence ever since.

Technological developments have facilitated the expansion of grocery delivery, with live delivery slots, real-time order tracking and varied payment options. Apps are also offering a more personalised experience by recommending products and giving insights into customer’s shopping preferences and patterns which can be reverted to grocers.

However, convenience comes at a cost. In 2023, it was reported that ordering a basket of groceries via an online app cost more than a third more than buying direct from a supermarket whilst Which? reported that some items were more than twice the cost on apps. This is notwithstanding delivery premiums.

We investigated these price differences and found:

• Kingsmill Medium Sliced 50/50 Bread 800g: £1.30 on Sainsbury’s website and £1.75 on Uber Eats;
• Greengrocers on Market Street Bananas: 78p on Morrison’s website and £1.60 on Uber Eats;
• Barefoot Pinot Grigio Wine: £9.00 on Co-op’s website and £11.50 on Uber Eats; and,
• Waitrose Large Free Range Eggs 12: £4.25 on Waitrose website and £5.10 on Uber Eats.

Uber Eats’ global head of grocery and retail Susan Anderson recognises this, saying: “I continue to hear from customers who are time poor, wanting to eat fresh and wanting to do the right thing for their families but to do it in a value for money way. So, we’re going to continue to work to make it as affordable as possible in comparison to alternatives.”

So how big could on-demand grocery become? As consumers value convenience and efficiency and mobile technology grows more advanced, it seems likely that the market will continue to expand.

In our December edition of ‘Retail Reduced’ we discussed that loyalty schemes have been a longstanding tool for retailers; offering tangible rewards such as discounts, offers and cashback to both attract new customers and acknowledge the loyalty of existing ones. However, according to research obtained by Retail Week, 59% of shoppers believe that discounts in supermarket loyalty price schemes are made to look greater than they really are.

In January of this year, the Competition and Markets Authority (CMA) launched a review into loyalty pricing in the groceries sector. The investigation focused on whether any aspect of loyalty pricing offered by some grocery retailers could mislead shoppers. A key consideration related to whether non-loyalty prices may have been artificially inflated to make the loyalty price appear misleadingly attractive.

The competition watchdog’s analysis, which involves reviewing tens of thousands of loyalty price promotions, is still ongoing but data thus far suggests they are “unlikely to identify widespread evidence of loyalty promotions that mislead shoppers”.

The findings have been met with mixed reviews, with some industry experts describing the investigation as a “colossal waste of taxpayers’ money”, whilst the British Retail Consortium (BRC) welcomed the CMA’s update and said, “whether it’s everyday value, or loyalty schemes discounts, retailers know they have to demonstrate clear value to attract and retain customers”.

The review is still underway, with the CMA stating that it has unearthed some practices which require further investigation:

“We have seen examples of retailers alternating between ‘was/now’ promotions available to all shoppers and loyalty price promotions. This raises questions as to what the ‘regular’ price is for the product and therefore whether the claim saving for the ‘was /now’ promotion is genuine”.

The competition watchdog is comparing a sample of supermarkets’ loyalty prices to those prices charged by other supermarkets at the same time as part of its evaluation.

The CMA has also commissioned a consumer survey to understand the impact of loyalty pricing on shoppers, as well as considering how much people shop around and compare prices. The survey is also investigating issues such as whether:

• Loyalty pricing is affecting shoppers’ engagement with supermarket loyalty schemes.
• Shoppers’ trust that the price savings for members are genuine.
• Shoppers have concerns about supermarkets’ use of their personal data.
• Attitudes to loyalty pricing vary between different types of shoppers and if so how.

The CMA is due to publish their loyalty pricing analysis in November 2024 – we will keep you updated on its conclusions!