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Global Retail: Making it click

Can seafood capitalize on the online grocery shopping boom?

By Jason Holland
March 01, 2013

Unfortunately for European retailers, new long-term revenue streams are almost as rare as money-growing trees. There is, however, one shining light in what is otherwise regarded as a depressed market and that is the thriving online grocery shopping sector.

Online grocery sales have become big business in the last few years and are set to get much bigger. In terms of market acceptance, the United Kingdom has been one of the quickest out of the blocks with online sales representing 3.4 percent of its overall grocery market. While that may not seem a huge figure, international food and grocery analysts IGD has forecast it will grow significantly over the next five years.  

IGD anticipates the sector will be worth £11.1 billion (€13 billion/$17.5 billion) by 2017, or almost double its current value of £5.6 billion (€6.5 billion/$8.8 billion). 

To give a further taste of e-shopping’s upward trajectory, U.K. retailer Sainsbury’s last year reported its online grocery orders were exceeding 165,000 a week, and that the annualized turnover for Sainsbury.co.uk was around £750 million (€876.7 million/$1.2 billion), a 20 percent year-on-year increase. 

Sainsbury’s still lags behind market leader Tesco, which has a 30 percent share of the online market and grew revenues in this part of its business by 11 percent in the first half of 2012. With this success, Tesco has also launched grocery dot-coms in Poland and Slovakia, and will soon unveil similar platforms in Thailand and Malaysia. In total, its online grocery presence generates annual sales in excess of £2 billion (€2.3 billion/$3.2 billion). 

Also seeing strong growth is Ocado, which only has an online presence and has relied heavily on delivering Waitrose’s private-label products. For the year to Nov. 25, 2012, its gross sales were 11.4 percent higher at £716.2 million (€837.2 million/$1.1 billion) and the company will soon double its existing capacity with the opening of a second high-tech warehouse hub.

It should be noted, however, that while Ocado’s sourcing agreement with Waitrose runs until September 2020, Waitrose recently entered the online shopping market for the first time. Analysts believe this move could hinder the former’s future growth, but the effects will be dulled by its fast-growing own-label range, which includes a number of seafood products.

But what can online retail do for the seafood category? The good news is that all the major online grocers have assembled large offerings of fresh, frozen and preserved items. One problem increasingly referenced by businesses that have tested these waters: The perishable nature and the high ticket price often associated with fish means that many shoppers want to see the product firsthand, which of course requires a visit to their chosen store. The same applies to higher-value meat products.

Fortunately, that’s not the end of fish’s Internet flirtation. There’s another tier of online retail that’s perhaps more suited to seafood products — the concept of having all the component fresh ingredients for home-cooked meals delivered to the consumer’s door. 

This form of grocery shopping is already well established in Sweden, but has also taken off in the United Kingdom too, says Ed Boyes, commercial director at Hello Fresh, which was founded a year ago but already boasts a customer base of several thousand and has been growing its orders between 30 percent and 50 percent each month.

The company has also started a U.S. presence, www.hellofresh.com, out of a New York office. From there, it is rolling out the concept across the country’s West Coast. 

Boyes believes that while online retail platforms, such as Ocado and Tesco, have “attracted significant levels of consumer take-off,” they haven’t added any real consumer value. 

“You are basically swapping your trolley for a mouse. But you still have to take the time to spend shopping for what you want and then you still have to wait a few days for the delivery of something that people often want to consume instantly. It’s not necessarily more convenient.What we are trying to do is focus on what the customer wants and what adds convenience to them,” says Boyes.

Hello Fresh customers simply sign up for a delivery of either three or five main meals, designed to feed two, four or six people, and to be cooked in 30 minutes or less. The rest is left to the chefs.

The product is targeted at people who like the idea of scratch cooking but who don’t necessarily have the time or the skillsets to cook such meals. An adventurous nature also helps because customers don’t know what the meals will be in advance of delivery.

Boyes says the company believes fish “adds another dimension” to its product. Therefore, in a three-meal box delivery, there would be at least one fish dish. And through its supply agreement with London-based wholesaler James Knight of Mayfair, the company also likes to “mix up” its seafood offerings. 

“Looking at our current ‘menu wall,’ we have sea bream, prawns, tilapia, salmon, coley, cod and mussels. As long as it’s within the price brackets, we try to introduce customers to new things. Also, we like to give them different ways to cook fish or a new flavor to try. For example, we have salmon with homemade guacamole — it’s something that people wouldn’t normally put together, but in actual fact they go together very well and customers enjoy it.”

“[James Knight] is a good independent supplier; they focus on sustainability and freshness. And the way that they package products means the fish tastes better — the packaging isn’t flushed through with preservative gases. Our concept brings with it a much smaller supply chain than the supermarkets; it’s directly producer to box to consumer, meaning our customers are getting fish within 24 hours of it being cut into portion sizes and packaged. Our name is Hello Fresh so you have to be able to tell the difference between really fresh ingredients and those that are less fresh.”

Boyes dismisses the notion that the concept is only an option for affluent consumers, saying that Hello Fresh doesn’t see it as being more expensive, but rather it’s “smarter shopping.” The average cost per portion, including free delivery, is between £4 (€4.66/$6.32) and £5 (€5.82/$7.90), which “appeals to a wide range of consumers.” And there’s no waste, he says.

“So many people have become interested in cooking and will religiously watch a Jamie Oliver show or ‘MasterChef’ contestants cooking away on terrestrial television at 8 p.m. But at the same time, it’s widely accepted that Britain does the least home cooking out of all the European nations.”

Hello Fresh works by “stripping away” time-consuming aspects of cooking, such as researching a recipe and going to the supermarket, to allow the time to cook a meal from scratch that has been designed by a professional chef and that comes with full instructions, he says. 

“The time that they would have spent walking around the supermarket on their way home from work can now be spent cooking and getting that sense of achievement that comes with putting a family meal on the table.

“Then there are people who cook but only have a five-dish repertoire. That particularly impacts on fish. Our head chef, Patrick, says that a lot of people are intimidated by cooking fish and lean more toward simple staple foods like poultry as a result. 

“Fish is a bit more difficult, but we get a lot of positive feedback from customers specifically because they hadn’t been confident enough to cook fish from scratch before. But when they have such simple, clear instructions about how to do it, they enjoy cooking fish the most. Without our help, they probably wouldn’t be cooking fish at all.”

Contributing Editor Jason Holland lives in London

March 2013 - SeaFood Business

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