The UK online grocery market is estimated at £4.4 billion (including sales tax and delivery charges) in 2009, having more than doubled (134% growth) in value over 2005-09. Rapidly rising food inflation, particularly in 2008, has contributed to high value growth in the sector, while dampening demand in volume terms.

However, even the underlying growth has been explosive. On the consumer side, rising broadband penetration and higher connection speeds, together with the steady expansion of the online grocers’ geographical coverage, has made the service accessible to more people. Meanwhile, the improvements to the online grocers’ services and rising web fluency have encouraged usage.

Despite its impressive growth, online retailing still accounts for only 3% of sales of the total grocery sector, making it a niche channel in the broader context. The sector is dominated by store-based grocers, Tesco alone generating more than two fifths of total sector sales. Ocado is the odd one out as the only pure-play internet grocer, capturing 12% of the sector to rub shoulders with the second- and third-largest UK food retailers, Asda and Sainsbury’s.