Delivery is the new battleground

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Supermarket group Morrisons was one of the big losers over the Christmas period reporting a fall in sales of 5.6 per cent. It put much of the blame for this on the lack of an online service reflecting the fact that this has become a critical part of the product offering for big retailers.
Figures from other retailers only serve to confirm this. Online was a bright spot for Marks & Spencer, and Tesco.

Sainsbury’s reported strong growth its online business as well as its convenience stores, outperforming most of its rivals. In fact, online now accounts for some £1 billion of sales.

But online shoppers are notoriously fickle, so how do you keep customers   coming back? At least part of the answer is getting the customer to buy into your delivery process.

When Morrisons launched its online service after Christmas it set its delivery charges to start at just £1. Waitrose offers free delivery – provided you spend more than £50.

But other retailers have been trying to lock customers into their services by enticing them with delivery passes.

The principle is simple, as a customer you buy the delivery pass and then you get as many deliveries as you want over the duration of the pass.

ASDA’s pass is typical – the standard price is £8 a month and the customer can choose their delivery slots. There is a minimum order value of £40. Tesco has a similar offering, while Ocado’s smart pass costs £109.99 a year.

Sainsbury’s has just introduced a £100 a year delivery pass (currently discounted to £66). Chief executive Justin King told financial analysts last month that it has already gained 10,000 customers. “We were able to launch at the back end of the quarter our own delivery pass – because that is one of the things that the changes have allowed us to do – and already 10,000 customers signed up to that.”

King went on to point out that by 2020, he expects online to make up ten per cent of Sainsbury’s business. That’s too important to leave to the chance press of a button. The delivery pass is just one step in the development of delivery options that tie the customer more closely to the retailer.

Malory Davies FCILT,

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