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Two pieces of analysis in the Financial Times this week offer food for thought for local retailers in follow up to Tesco boss Philip Clarke’s claim that shoppers would order ahead while driving to the store.
His vision of drive-thru Tesco stores, captured by Chris Gamm in Retail Newsagent last week, includes the following: “As consumers become increasingly connected to the internet we will probably know your lounge light bulb blew this morning, so we will have already added a new one to your order as well.”
The first analysis by Jonathan Guthrie concerns the plight of Ocado, the delivery only service that purveys “chard and kumquats to yummy mummies”. Its problem is that its supermarket competitors “appear happy to subsidise their own lossmaking online operations indefinitely.”
There is a persistent question mark over the business model of online grocery sales, which is that the cost of delivery is greater than the margin, which means the bricks and mortar shoppers are subsidising the sales.
More thought-provoking is Barney Jopson’s interview with Jerry Storch, chief executive of Toys R Us. Mr Storch tells the FT it is very expensive to ship product and the internet is transformational, not transcendent. In plain English he is saying it will add to the shopping options and not remove bricks and mortar shops.
There are over 80 possible permutations to get a product ordered on line to a shopper, Mr Storch says, and in different circumstances consumers will want to use different methods such as picking up the product at a local store, another store; or having them sent to their office or their home.
In the future he expects the internet-only retailers to add bricks and mortar stores. (Amazon says it will if it can make them distinctive!) Bricks and mortar stores offer immediacy that cannot be matched, Mr Storch says. Magazine retailers with shoppers who prefer to buy from them rather than have a subscription will know all about this.
One thing that local shopkeepers should think about is the ownership of any delivery network that is set up or which they participate in.
Think about the PayPoint model for payment services where the profitability is controlled by the company that set up the network and not the retailers who provide the service. Surely an opportunity for a co-operative model. Perhaps the symbol groups could work together on this?
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