As online grocery shopping becomes increasingly popular, retailers are faced with the challenge of retaining consumer loyalty online, especially when it comes to creating a frictionless online checkout process. According to estimates, the UK is expected to lead Europe in terms of online value grocery transactions this year, with an estimated total of €22.1 billion. The appetite for home delivery in the UK is also stronger than in the rest of Europe. In a bullish scenario, a recent report by McKinsey & Company suggests that “online grocery with scheduled home delivery could be the largest channel in the UK by 2030 – larger than supermarkets”.
However, are UK retailers prepared for this shift? Although online grocery shopping behaviors adopted during the Covid-19 pandemic have not developed as rapidly since the easing of lockdowns, they have remained popular. Consumers are now well aware of the time-saving, convenience, and ease of online transactions. Many have continued to invest in delivery and click & collect to the point where what was once an occasional online order has become part of their weekly routine.
A report published last year revealed that more than half (60%) of UK consumers now buy at least some of their groceries online, with almost 20% now ordering all or most of their groceries via the internet. Moreover, “80% of UK consumers say they would do more food shopping online if the experience were improved, and 28% plan to mostly shop online within the next two years”. Home delivery was cited as the preferred channel (23%) over pick-up in-store (6.6%). Although online food and grocery sales have slowed since the lockdowns eased last year, total sales are still expected to keep on growing, with Statista estimating they will reach £29.3bn by 2025.
When it comes to online shopping, it’s generally acknowledged that frictionless shopping and payment experiences can help retailers attract more customers and improve their brand perception. Research has found that 39% of UK consumers are less likely to shop with a retailer that offers a long and confusing checkout. Moreover, 43% of UK consumers have stated that businesses offering their preferred payment types would make them more likely to purchase online.
Mobile payments are now mainstream, with 66% of Britons preferring to shop and pay online via their mobile device – one of the highest percentages in Europe. However, payment remains the ultimate challenge and the most fragile part of the retail journey. As David Delaney, Iceland Foods group chief customer and digital officer, confirmed, “payment is the ultimate challenge and the most fragile part of the retailer journey”.
While retailers have many elements to consider, including mobile optimization, up-to-date inventory, and an easy and efficient checkout process, if the customer doesn’t feel safe making a transaction, the rest becomes immaterial. In fact, 47% of UK consumers are less likely to make a purchase if they have security or trust issues at the checkout.
Hygiene and safety concerns were the primary influences driving shoppers and retailers to adopt online and contactless payments during Covid-19. As a result, the UK government rolled out a rise in the spending limit on contactless transactions from £45 to £100 in October 2021. With this new limit in place over the past 17 months, it seems that consumers are increasingly unlikely to return to cash or chip & PIN transactions.
PayPal conducted a study on the European grocery landscape last year and discovered that 59% of Europeans are paying for groceries and food delivery with online payment platforms, such as PayPal. Co-op, a major grocery retailer, offers PayPal as one of its payment methods to help shoppers make safe and secure grocery purchases through its online shop. From February this year, PayPal is now a payment option for shoppers purchasing home delivery orders and click & collect on shop.coop