ResearchFARM

August 2013

INCLUDED: Access to our online database with 700+ retail pictures

Tesco, Asda, Sainsbury’s, Ocado, Waitrose, M&S and exclusive analysis on the Ocado pivot

UK Online Grocery Marketby Quarter 2010-2013,

Sales, active customers, orders

UK ONLINE GROCERY MARKET 2013: INTRODUCTION

The UK online grocery sector is highly innovative and disruptive - and it provides a template to the rest of the world.

Online is - hard discount and convenience apart - also the only meaningful growth driver in UK grocery at the moment.

While the sector is dominated by Tesco, Asda and Sainsbury’s, start ups such as Ocado, which have made a huge bet on the future, are finally beginning to mature. With the recent pivot to turning tech provider and sharing its Intellectual Property with Morrisons, the sector is seeing a new entrant with a new business model (as the only multi channel grocer using a centralised hub and spoke system rather than utilising its store estate footprint) further driving competition for shoppers and their loyalty.

Moreover 2013 has seen a number of interesting entrants into the sector, such as Iceland, new start up models from outside the retail sector and of course Amazon. Providing the most professional platform the pureplay and its marketplace will become the choice of route to market for most FMCG companies and has the potential to truly change the nature of the game once again.

“Online grocery UK 2013” features in depth analysis and data on online grocery sales, orders, and customers for each of the UK’s main grocers (Tesco, Asda, Sainsbury’s, Ocado, Waitrose and M&S). It also features exclusive analysis on the Ocado pivot and tie up with Morrisons and our analysis on the rest of the sector and a forecast.

How many orders and customers have the six profiled retailers •on a quarterly basis? What are their average basket sizes and frequency? And should delivery fees really be included in the sizes?

Who has the highest number of customers/orders? Who currently •shows fastest and slowest growth? Whose customers shop most frequently with their online retailer? Who has the greatest churn and most of the promotion chasers as shoppers?

At which retailer is average basket spend highest/lowest? Who •has the best frequency?

Who is leading the competition in fulfillment options, click & •collect, lockers, drive throughs?

Who is furthest ahead in exploiting data for advertising purposes, •personalisation, a single view of the customer and selling this on to suppliers?

With the business model competition between using dark stores •and mixed models on the one side and Ocado and centralised picking on the other developing into an epic race, we ask: Is it better to fulfill from the store estate and leverage the property footprint or to have a centralised hub and spoke model?

Who is profitable now, how will this change in future?•

What numbers of orders and customers will £500m capacity •translate into for Morrisons, when benchmarked against the figures of the competitors?

What is the future outlook and the forecast for each of the •retailers?

KEY QUESTIONS ANSWERED

How far is Tesco ahead of the competition? What does the •retailer do about its non food online proposition and the cross sell opportunities? What about the marketplace operations of Tesco and the recent click & collect integration?

Who is the fastest growing online grocer? Asda or Sainsbury’s? •Or is it someone else entirely? Who is the number two in the sector? Why is Asda the template for Walmart’s online grocery operations abroad?

What is the big challenge facing Sainsbury’s? What should be •done about TU? Will Nectar and Aimia be the trump card for Sainsbury’s to finally overtake Asda? Will Sainsbury’s model have to evolve to dark store picking plus store based fulfilment in future?

What is the impact of the Ocado pivot and the tie up with •Morrisons? When will Ocado become profitable? What is the current trajectory pointing to?

What does Waitrose get exactly right in online grocery? Why •should it in principle be easier for Waitrose to reach profitability than for some of its more downmarket competitors? What will 24hr access lockers at the stores enable the retailer to do?

What will happen with online grocery at M&S after the break •from the Amazon platform? Is there an opportunity beyond party foods, hampers and the wine club, even though management denies it at the moment? What about cross selling with non food and health & beauty? And how much money can you make with party foods online?

Will Amazon, as the most professional online outlet, become •the direct route to market for the major FMCG suppliers, will this transform the sector?

KEY QUESTIONS ANSWERED

FEATURES AND BENEFITS

FEATURES

Quarterly sales, customer and order data, average basket sizes and frequency for the six •leading UK online grocers from 2010 to 2013, annual sizes and growth rates

Our forecasts for the sector•

In depth analysis on the respective models and paths to profitability, including non food •and fulfilment developments

Exclusive analysis on the Ocado pivot and the tie up with Morrisons•

Analysis of the rest of the sector•

BENEFITS

For FMCG: CPG companies are given the necessary tools to assess the real size of the key •retailer operations and decide who it makes most sense to partner up or even compete with, where to launch new product developments and how to influence pricing levels

For retailers: the report provides competitive analysis into strengths, weaknesses, •opportunities and threats of rivals by providing hard, difficult to obtain data and in depth insight

The report helps industry players to understand the importance of the data opportunity •in online grocery and advertising on the retailers’ websites, serving up personalised dynamic and relevant content to online grocery shoppers and shows the respective reach of the players

Highlights the strengths and weaknesses of different approaches to reach profitability in •online grocery and an expert future outlook on where the sector is headed

Methodology

The data in the report is based on:

One on one conversations with key retailers and FMCG players including some data sharing •agreements, annual reports, quarterly updates, published accounts, trade pressMarket research providers for background on total grocery and online grocery and for •annualisation coefficients

The figures are broken down into quarterly performance, the data also include forecasts for 2013

TABLE OF CONTENTS (1/4)

Executive summary – the state of the sector p10

Tesco – market leader and market maker p12

Online grocery, UK sales by quarter in £m from Q1 2010 to Q4 2012, y-o-y growth rates p13Online grocery, UK sales, annual historical and forecast of sizes (in £m) 2010-2013, analysis p14Online grocery, UK orders by quarter in m from Q1 2010 to Q4 2012, y-o-y growth rates p15Online grocery, UK orders, annual historical and forecast of sizes (in m) 2010-2013, analysis p16Online grocery, UK active customers by quarter in m from Q1 2010 to Q4 2012, y-o-y growth p17Online grocery, UK average basket size and shopping frequency 2010-2013 p18

Asda – George the non food jewel in the crown, the OG template for Wal-Mart p19

Online grocery, UK sales by quarter in £m from Q1 2010 to Q4 2012, y-o-y growth rates p20Online grocery, UK sales, annual historical and forecast of sizes (in £m) 2010-2013, analysis p21Online grocery, UK orders by quarter in m from Q1 2010 to Q4 2012, y-o-y growth rates p22Online grocery, UK orders, annual historical and forecast of sizes (in m) 2010-2013, analysis p23Online grocery, UK active customers by quarter in m from Q1 2010 to Q4 2012, y-o-y growth p24Online grocery, UK average basket size and shopping frequency 2010-2013 p25

Sainsbury’s – catching up fast p26

Online grocery, UK sales by quarter in £m from Q1 2010 to Q4 2012, y-o-y growth rates p27Online grocery, UK sales, annual historical and forecast of sizes (in £m) 2010-2013, analysis p28Online grocery, UK orders by quarter in m from Q1 2010 to Q4 2012, y-o-y growth rates p29Online grocery, UK orders, annual historical and forecast of sizes (in m) 2010-2013, analysis p30Online grocery, UK active customers by quarter in m from Q1 2010 to Q4 2012, y-o-y growth p31Online grocery, UK average basket size and shopping frequency 2010-2013 p32

Ocado – the pureplay disruptor, moving towards profitability? p33

Online grocery, UK sales by quarter in £m from Q1 2010 to Q4 2012, y-o-y growth rates p34Online grocery, UK sales, annual historical and forecast of sizes (in £m) 2010-2013, analysis p35Online grocery, UK orders by quarter in m from Q1 2010 to Q4 2012, y-o-y growth rates p36Online grocery, UK orders, annual historical and forecast of sizes (in m) 2010-2013, analysis p37Online grocery, UK active customers by quarter in m from Q1 2010 to Q4 2012, y-o-y growth p38Online grocery, UK average basket size and shopping frequency 2010-2013 p39

Waitrose – the growth champion p40

Online grocery, UK sales by quarter in £m from Q1 2010 to Q4 2012, y-o-y growth rates p41Online grocery, UK sales, annual historical and forecast of sizes (in £m) 2010-2013, analysis p42Online grocery, UK orders by quarter in m from Q1 2010 to Q4 2012, y-o-y growth rates p43Online grocery, UK orders, annual historical and forecast of sizes (in m) 2010-2013, analysis p44Online grocery, UK active customers by quarter in m from Q1 2010 to Q4 2012, y-o-y growth p45Online grocery, UK average basket size and shopping frequency 2010-2013 p46

TABLE OF CONTENTS (2/4)

M&S – going beyond party foods, health & beauty and Amazon break up potential p47

Online grocery, UK sales by quarter in £m from Q1 2010 to Q4 2012, y-o-y growth rates p48Online grocery, UK sales, annual historical and forecast of sizes (in £m) 2010-2013, analysis p49Online grocery, UK orders by quarter in m from Q1 2010 to Q4 2012, y-o-y growth rates p50Online grocery, UK orders, annual historical and forecast of sizes (in m) 2010-2013, analysis p51Online grocery, UK active customers by quarter in m from Q1 2010 to Q4 2012, y-o-y growth p52Online grocery, UK average basket size and shopping frequency 2010-2013 p53

Ocado – the pivot to technology provider, the entrance of Morrisons into the sector p54

What’s in it for Ocado? The positive aspects of the deal p55What’s in it for Ocado? The negative aspects of the deal p56What’s in it for Morrisons? The positive aspects of the deal p57What’s in it for Morrisons? The negative aspects of the deal p58

Others: the rest of the market p59

Others: dedicated pureplays, department stores, wine clubs p60Others: Organic box schemes, regional aggregators, drugstores, Amazon p61

Sources p62

TABLE OF CONTENTS (3/4)

Table 1: Tesco online grocery sales in £m from Q1 2010 to Q4 2012, y-o-y growth rates p13Table 2: Tesco online grocery orders in m from Q1 2010 to Q4 2012, y-o-y growth rates p15Table 3: Tesco online grocery, active customers in m from Q1 2010 to Q4 2012, y-o-y growth p17Table 4: Tesco online grocery, UK average basket size and shopping frequency 2010-2013 p18

Table 5: Asda online grocery sales in £m from Q1 2010 to Q4 2012, y-o-y growth rates p20Table 6: Asda online grocery orders in m from Q1 2010 to Q4 2012, y-o-y growth rates p22Table 7: Asda online grocery active customers in m from Q1 2010 to Q4 2012, y-o-y growth p24Table 8: Asda online grocery, UK average basket size and shopping frequency 2010-2013 p25

Table 9: Sainsbury’s online grocery sales in £m from Q1 2010 to Q4 2012, y-o-y growth rates p27Table 10: Sainsbury’s online grocery orders in m from Q1 2010 to Q4 2012, y-o-y growth rates p29Table 11: Sainsbury’s online grocery active customers in m from Q1 2010 to Q4 2012, y-o-y growth p31Table 12: Sainsbury’s online grocery, UK average basket size and shopping frequency 2010-2013 p32

Table 13: Ocado online grocery sales in £m from Q1 2010 to Q4 2012, y-o-y growth rates p34Table 14: Ocado online grocery orders in m from Q1 2010 to Q4 2012, y-o-y growth rates p36Table 15: Ocado online grocery active customers in m from Q1 2010 to Q4 2012, y-o-y growth p38Table 16: Ocado online grocery, UK average basket size and shopping frequency 2010-2013 p39

Table 17: Waitrose online grocery sales in £m from Q1 2010 to Q4 2012, y-o-y growth rates p41Table 18: Waitrose online grocery orders in m from Q1 2010 to Q4 2012, y-o-y growth rates p43Table 19: Waitrose online grocery active customers in m from Q1 2010 to Q4 2012, y-o-y growth p45Table 20: Waitrose online grocery, UK average basket size and shopping frequency 2010-2013 p46

Table 21: M&S online grocery sales in £m from Q1 2010 to Q4 2012, y-o-y growth rates p48Table 22: M&S online grocery orders in m from Q1 2010 to Q4 2012, y-o-y growth rates p50Table 23: M&S online grocery active customers in m from Q1 2010 to Q4 2012, y-o-y growth p52Table 24: M&S online grocery, UK average basket size and shopping frequency 2010-2013 p53

TABLE OF CONTENTS (4/4)

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Chart 1: Tesco online grocery sales, annual historical and forecast of sizes (in £m) 2010-2013 p14Chart 2: Tesco online grocery, orders, annual historical and forecast of sizes (in m) 2010-2013 p16

Chart 3: Asda online grocery sales, annual historical and forecast of sizes (in £m) 2010-2013 p21Chart 4: Asda online grocery, orders, annual historical and forecast of sizes (in m) 2010-2013 p23

Chart 5: Sainsbury’s online grocery sales, annual historical and forecast of sizes (in £m) 2010-2013 p28Chart 6: Sainsbury’s online grocery, orders, annual historical and forecast of sizes (in m) 2010-2013 p30

Chart 7: Ocado online grocery sales, annual historical and forecast of sizes (in £m) 2010-2013 p35Chart 8: Ocado online grocery, orders, annual historical and forecast of sizes (in m) 2010-2013 p37

Chart 9: Waitrose online grocery sales, annual historical and forecast of sizes (in £m) 2010-2013 p42Chart 10: Waitrose online grocery, orders, annual historical and forecast of sizes (in m) 2010-2013 p44

Chart 11: M&S online grocery sales, annual historical and forecast of sizes (in £m) 2010-2013 p49Chart 12: M&S online grocery, orders, annual historical and forecast of sizes (in m) 2010-2013 p51

Chart 13: What’s in it for Ocado? The positive aspects of the deal p55Chart 14: What’s in it for Ocado? The negative aspects of the deal p56

Chart 15: What’s in it for Morrisons? The positive aspects of the deal p57Chart 16: What’s in it for Morrisons? The negative aspects of the deal p58

SAMPLE PAGES

36 ResearchFarm - Retail Analysts No part of this report may be reprinted or reproduced in any way without the written permission of ResearchFarm.

Online groceryUK orders

Quarterly trend

QUARTERLY FIGURES - UK - APRIL 2013

Growth measures year-on-year growth (i.e. on same period last year).

Notes Table 14

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