The “Home Delivery Trap”
I was watching TV this week – the Money Programme – looking at supermarket spending habits during the recession. Interestingly, Fairtrade purchases have increased over the last 12 months, ‘Organics’ have fallen off a cliff.
During the programme, one family was asked to stop its weekly Tesco shop, and instead try in turn: shopping on the urban high street (butcher, greengrocer…), Iceland, and purchasing only ‘Value’ items. All three turned out to be cheaper (in 2 cases, up to 25% less) – however, at the end of the trial, the shopper stated that she was going to carry on using Tesco for her weekly shop. When asked why, she said that she liked the flexibility and convenience of shopping on line and having it delivered.
Clearly, shopping on line is here to stay, which is a mixed blessing for the retailers. As a process, it is one of the most inefficient going – supermarkets now have legions of staff walking round their own stores, picking up items that their colleagues have put out a few hours before, bagging them, putting them in plastic boxes, and then passing them to other colleagues to drive them up to customers’ houses. The economics are nutty. But the supermarkets are caught in a tight spot – what they would love is for you to pick it up yourself whenever possible, and pay a hefty premium for the convenience of home delivery. The premium being charged is too low, but is now a ‘market rate’, and scope for increasing appears limited.
How can the supermarkets create a change in customer behaviour that will address these issues? Slots could be reserved by geographic area – larger vehicles carrying out more drops in a smaller area may help a bit. Or maybe setting up a dedicated delivery network – Waitrose, via Ocado, have a parallel sales channel, which may have slightly better economics, but it’s not a breakthrough.
I am not sure the current ways of working can last forever – the supermarkets will look for ways to change customer behaviours, either through rewarding store visits, or limiting home deliveries, to get more of us back into the stores.
But if the Money Programme is to be believed, if we have to go to the stores, we may go elsewhere…
4 Responses to “The “Home Delivery Trap””
Leave a Reply
Latest Posts
Categories
Tags
Tagnetic Poetry by Roy Tanck and Merel Zwart requires Flash Player 9 or better.
Tweets
-
- What Does the Future Hold for IT? - Susan Cramm - Harvard Business Review http://lnkd.in/jGbcnT
- is attending the BuryTwestival 25th March http://burystedmunds.twestival.com/ social media chat, art, wine & music - what's not to like?
- Improving service through employee engagement http://www.change-directors.com/execellence/happy-employees-happy-customers-engage-and-grow/
- http://www.guardian.co.uk/politics/2010/mar/08/lack-women-top-boards-unacceptable-brown
- How to Kill Innovation: Keep Asking Questions - Scott Anthony - Harvard Business Review: http://bit.ly/aDHqJ2 via @addthis
It always struck me as strange that the food I get delivered to my house comes from the shelves of the local store. I assumed for a long time that there were purpose built warehouses which served a larger geographical area and that slot availability had something to do with drivers being roughly in your area at that time anyway. The reality, as you say, is that for about £5 you pay someone to be your personal shopper and to deliver your items to your door.
The recent “I’m Running Sainsburys” series was another glimpse in to the strange world of the supermarkets and demonstrated one of the reasons why fresh thinking is so hard to find in our big companies. These organisations simply don’t know how to deal with ideas. Absolutely great to ask those on the ground for their thoughts – they are closer to the customer and can often see opportunities. But expecting those same individuals to put that idea in to practice and then sell it without additional resource, proving whether it worked within a week or two…it was inevitable that most of these ideas would fail.
If this is how large companies “think” it isn’t surprising that they end up selling a personal shopper service for less than the price of a coffee and a donut.
I often wondered how much brand loyalty is gained by online shopping. Once you’ve set up your list it must be psychologically harder for the customer to switch. I bet customers don’t switch that often and that is all the more surprising because all online stores are ‘an equal distance away’ whereas in-store shoppers, I believe, most often go to the nearest store. Hence their brand loyalty is part-driven by their next house move!
So, assuming that brand loyalty is increased by online shopping, then how many additional &/or impulse in-store purchases do these customers make? Perhaps that makes them more valuable than just the activity cost of putting something on their doorstep.
It’s the old “curse of knowledge” dilemma isn’t it? It’s easy to assume visitors know how to comment or even that commenting is encouraged. Excellent post.
interesting reading your articles- good things, that i forget and you manage to pick them up