Comment: Digital is the new battlefield for the grocery sector

In breaking the £1bn barrier for digital sales, John Lewis has not only demonstrated 2013 will be a seminal year in its own development, but that it will mark a crossroads for the industry at large.

The continual evolution of digital retailing is hardly new ground, but there is a growing sense that, as you survey the strategic and financial announcements of the past few weeks, it has reached a tipping point in scale - resulting in a significant shift in the competitive battlefield from the store to the screen as retailers seek to win spend online.

John Lewis’ IT director Paul Coby said the business is seeing an “unprecedented pace of online growth”; quite a claim for an organisation that’s been ahead of this curve for some time. His response has been to oversee the launch of a £40m web platform as the partnership seeks to take advantage of the ever increasing migration of sales online in general merchandise and fashion.

But it is in grocery where the game is set to be played out with the greatest intensity. Questions around profitability have, to this point, meant digital brinkmanship has been more prevalent in other categories such as fashion, where retailers continue to raise the competitive bar, and with it customer expectations, in areas such as fulfilment.

Profitability remains a quandary, but there is little doubt there is a new urgency to establish a clear roadmap for digital growth among the grocers and with it the ability to steal a march on rivals.

Tesco drew its battle lines last week when it wrote down £800m in property assets and pledged to invest £490m in technology this year, up threefold in three years. In its full year, Tesco reported group online sales up 13% to £3bn for the first time.

That news was quickly followed by a £700m investment by Asda in a number of initiatives including same-day delivery for food orders, click-and-collect, as well as new stores.

“Digital,” as Tesco boss Philip Clarke said last month, “is now intrinsic to retail”. And while that is certainly true, the relatively underdeveloped nature of this channel means market share is up for grabs for those that execute strategies quickly and well. The result will see the traditional rivalries that colour this sector now played out online, and the dash for digital will be significant in this era as the race for space was in 1990s.