London online grocery demand is underestimated, study suggests

The number of Londoners buying groceries online is much higher than national figures suggest, indicating that the capital’s last-mile supply is more squeezed than previously thought, according to new data. A study from logistics investor Valor Real Estate Partners shows that 40% of people in London now buy food online at least once a week, while 35% of Londoners order meals online from third parties such as Deliveroo and Uber Eats. Researchers said demand is putting “severe pressure” on the city’s limited last-mile delivery infrastructure. Valor estimates that e-commerce revenue growth will lead to 187m sq ft of additional logistics demand in the UK between 2023 and 2027. Some 42m sq ft of that demand is in the North and South Circular corridor, equating to 42% of 2022 stock. To satisfy this, a 7.2% year-on-year increase would be required. The study, which surveyed 4,000 residents to improve the industry’s understanding of grocery purchasing habits, also showed that 61% of people want groceries by the next day or sooner. Consumers in London do not just rely on online deliveries for convenience food orders, with 48% of grocery basket sizes having a value of between £40 and £99. The findings show that the level of online penetration for grocery shopping is significantly higher in London than national data suggests, according to Valor, with the Office for National Statistics reporting just 8.8% of food retail sales by value were online in July last year. Valor said working patterns are impacting how people purchase groceries, with a higher percentage of Londoners who work from home (55%) shopping entirely online versus those who commute to work (45%). Demographics are also a key factor in shopping habits, with order frequency increasing with educational and income levels. The City of London, Camden, Hammersmith & Fulham and Hackney showed the highest levels of online sales. Qiong Xu, head of research at Valor, said: “Despite the challenges posed by higher inflation and consumers’ return to bricks-and-mortar shopping, the online channel continues to demonstrate resilience, with consumers blending their online and offline shopping behaviours. “Our research suggests that the proportion of food purchased online is significantly higher in London than national data suggests, driven in part by demographic trends, and with grocery spend being largely non-discretionary we can expect these online channels to continue to grow despite economic headwinds. “Consumer behaviour and the preference to buy more goods online is shaping how cities develop and is creating more demand for critical last-mile infrastructure. In order for grocery retailers to meet consumer expectations around deliveries, it is vital they have the right distribution facilities in the right locations to complement their store portfolios. “The primary cost in fulfilling orders is transport, but well-located last-mile facilities reduce vehicular miles and reduce the carbon cost, which is increasingly important to the conscientious consumer.” Photo © Richard Gardner/Shutterstock