More than 10% of all European groceries will be bought online (in value terms) by 2010, according to a new report on the sector. Although only 0.2% worth of goods are currently shopped on the web in Europe (0.4% in the UK), strategy consultants Roland Berger believe it is the fastest growing online market. Its study, Consumer Shopping in the 21st Century, predicts a bright future for clicks and bricks' companies. It says online grocers such as Somerfield's 24-7 usually failed because they did not focus on the target constumer, did not have enough established brands, and because they pushed for too much, too soon. Project manager Hans Krebs said start-up companies' acquisition costs were also higher than the potential lifetime value of a customer. "The players who will succeed in the future ­ probably only one or two ­ will use the internet as a way of building loyalty and relationships, not to make money. It's not a 100m run, it's a marathon." He said that US firm Webvan, which is purely web-based, turned over $260m last year but made a $400m loss. Its warehouse in San Francisco handles 2,000 orders a day but is equipped to handle 8,000. "They aimed for an order frequency target of 35 times year, but it's actually six," said Krebs. Although Tesco was praised for its position at the top of the home shopping league, Krebs said its instore picking operation did not offer enough scale in the long term because of the predicted growth. "It's detrimental to consumer satisfaction. You have significant out-of-stocks using this method." However, he said retailers should treat the dedicated warehouse model with caution, as it was very cost effective ­ but only for highly populated areas. Roland Berger's survey of shoppers in France, Germany and the UK, revealed that one-third of shoppers still did not realise they could shop on the internet. And of 500 home-shoppers, one-sixth were completely or somewhat dissatisfied with their shopping experience but this was because of browsing and delivery problems, not pricing, range or promotions. Meanwhile, a study by the Confederation of British Industry and KPMG Consulting, The Quiet Revolution, found that retail was characterised by an unconventional "all or nothing approach" to e-business, with half the firms studied pioneering and half lagging. KPMG head of retail Alison Plant said the next step for the sector would be e-category management and multi-channel management. - See Storewatch, p30 {{NEWS }}