Co-op looks to catch up rivals with launch of online groceries

The Co-operative has revealed plans to launch groceries online, in a belated attempt to grab a slice of the fast-growing £6.1bn market dominated by Tesco, Asda, Sainsbury’s and Ocado.

The UK’s fifth-biggest supermarket chain is to introduce four trials before Christmas, each with a different delivery model, to figure out which is the most profitable method.

The Co-op and Morrisons, which is teaming up with Ocado to sell food on the web next year, are the only big supermarkets currently not selling groceries online.

The Co-op’s head of food, Steve Murrells, admitted it had been losing out to rivals by not having an internet grocery presence.

He told the trade paper Retail Week: “We need to get match fit if we are going to start to compete again.

“For the last few years we had lost our mojo and we needed clear leadership and direction.”

In addition to smaller convenience stores, food online is the fastest-growing area of the UK’s £163.2bn grocery market.

In fact, spending on groceries on the web is set to almost double from £5.6bn in 2012 to £11.1bn by 2017, according to the trade body IGD.

The online market is dominated by Tesco, which has nearly a 50 per cent share, although Sainsbury’s, Ocado, Asda and Waitrose also have substantial businesses.

The low average basket spend of £6 at the Co-op, which has nearly 3,000 grocery shops, has been one of the factors which has made it reluctant to launch online before now.

Mr Murrells said: “There are two channels growing in grocery – convenience and digital. We want to find a convenient solution to online food retailing.”

He added: “Evidence shows it replaces bricks-and-mortar sales and is margin eroding.

“But if you are not prepared to eat your own children someone else might.”

Grocery is a key business within the pharmacy-to-funeral service mutual organisation, which has been hit by a gaping black hole in its banking division’s finances recently.

The Co-op’s food operation saw profits fall by 9 per cent to £288m over the year to January, following weak sales in its first half.