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| Is click and collect too hot for retailers to handle? | Is click and collect too hot for retailers to handle? |
| (about 1 hour later) | |
| In the classic poem by Goethe, a young sorcerer's apprentice unleashes forces he can't control. | In the classic poem by Goethe, a young sorcerer's apprentice unleashes forces he can't control. |
| In an attempt to make life more convenient, he bewitches a broomstick to mop the floor. | In an attempt to make life more convenient, he bewitches a broomstick to mop the floor. |
| When that gets out of control, he tries to stop the whole process by splitting the broomstick in two - but that just creates two brooms, and doubles the problem. | When that gets out of control, he tries to stop the whole process by splitting the broomstick in two - but that just creates two brooms, and doubles the problem. |
| Is that what retailers have done by offering traditional location shopping alongside online? | Is that what retailers have done by offering traditional location shopping alongside online? |
| Click and collect is a fairly new battleground for UK retailers, and promises rich rewards for daring firms. | Click and collect is a fairly new battleground for UK retailers, and promises rich rewards for daring firms. |
| It has been hugely popular over the past five years, as customers embrace the convenience of being able to order goods online and pick them up in store or elsewhere. | It has been hugely popular over the past five years, as customers embrace the convenience of being able to order goods online and pick them up in store or elsewhere. |
| Online boom | Online boom |
| John Lewis announced this week that it would start charging a £2 fee for click and collect purchases costing less than £30, after finding that its current free model was unsustainable. | John Lewis announced this week that it would start charging a £2 fee for click and collect purchases costing less than £30, after finding that its current free model was unsustainable. |
| Click and collect demand has boomed for the department store. | Click and collect demand has boomed for the department store. |
| It now processes over 6 million click and collect orders per year, compared with just 350,000 in 2008, and moves tens of thousands of parcels every night. | |
| A spokeswoman said John Lewis had seen a 32% growth in demand for the service so far this year. | A spokeswoman said John Lewis had seen a 32% growth in demand for the service so far this year. |
| And the seemingly effortless method of shopping is anything but for retailers as it needs an army of behind the scenes pickers and delivery staff. | And the seemingly effortless method of shopping is anything but for retailers as it needs an army of behind the scenes pickers and delivery staff. |
| John Lewis is having to move fast to cope with demand, but it is not alone, according to Andy Mulcahy of online retail industry body IMRG. | John Lewis is having to move fast to cope with demand, but it is not alone, according to Andy Mulcahy of online retail industry body IMRG. |
| It estimates a 20% per year growth rate in click and collect across all retailers. | It estimates a 20% per year growth rate in click and collect across all retailers. |
| For retailers that sell online and also have physical shops, click and collect accounted for 4% of online sales in 2010. That figure jumped to 17.7% in 2014, he adds. | For retailers that sell online and also have physical shops, click and collect accounted for 4% of online sales in 2010. That figure jumped to 17.7% in 2014, he adds. |
| John Lewis is in a position of strength, but this growth is causing significant problems for some retailers - especially UK supermarket giants, according to some retail analysts. | John Lewis is in a position of strength, but this growth is causing significant problems for some retailers - especially UK supermarket giants, according to some retail analysts. |
| The phenomenon is adding to supermarkets' woes, rather than easing them, says Marc de Speville, the founder of Strategic Food Retail. | The phenomenon is adding to supermarkets' woes, rather than easing them, says Marc de Speville, the founder of Strategic Food Retail. |
| 'Online cannibalisation' | 'Online cannibalisation' |
| Free click and collect is "clearly a burden on supermarkets' already slim margins, as it does not bring in nearly enough incremental sales to cover the extra costs involved," Mr de Speville says. | Free click and collect is "clearly a burden on supermarkets' already slim margins, as it does not bring in nearly enough incremental sales to cover the extra costs involved," Mr de Speville says. |
| Even Tesco, which charges £4 for click and collect orders below £25, still has to heavily subsidise orders above that, he says. | Even Tesco, which charges £4 for click and collect orders below £25, still has to heavily subsidise orders above that, he says. |
| "All the major brick and mortar supermarket groups face the same problem: whether orders are picked up in store or delivered to the home, online adds considerable cost and complexity, but very little in the way of additional sales," he adds. | "All the major brick and mortar supermarket groups face the same problem: whether orders are picked up in store or delivered to the home, online adds considerable cost and complexity, but very little in the way of additional sales," he adds. |
| Supermarkets face many pressures on their profits, including a bitter price war, and having to try to regain market share from discounters. | Supermarkets face many pressures on their profits, including a bitter price war, and having to try to regain market share from discounters. |
| But the more the online market grows, the more margins will be diluted, he says. | But the more the online market grows, the more margins will be diluted, he says. |
| And what's more, there are dis-economies of scale, he adds. | And what's more, there are dis-economies of scale, he adds. |
| Once online sales account for around 10% of a store's sales, picking of products has to be moved out to dedicated warehouses or "dark" stores. | Once online sales account for around 10% of a store's sales, picking of products has to be moved out to dedicated warehouses or "dark" stores. |
| This can duplicate running costs and means customers are less likely to visit physical stores, making them more of a drag on profits, Mr de Speville says. | This can duplicate running costs and means customers are less likely to visit physical stores, making them more of a drag on profits, Mr de Speville says. |
| "I see this 'online cannibalisation conundrum' as an even greater long-term threat to supermarkets' profitability than competition from the hard discounters such as Aldi and Lidl," he adds. | "I see this 'online cannibalisation conundrum' as an even greater long-term threat to supermarkets' profitability than competition from the hard discounters such as Aldi and Lidl," he adds. |
| Supermarkets also face a much bigger challenge than other retailers, Mr de Speville says. | Supermarkets also face a much bigger challenge than other retailers, Mr de Speville says. |
| Grocery orders are much more time-consuming and costly for the retailer to fulfil than general merchandise. | Grocery orders are much more time-consuming and costly for the retailer to fulfil than general merchandise. |
| Sorcerers or apprentices? | Sorcerers or apprentices? |
| So far, retailers have been split into those who have made click and collect work, and those who haven't. | So far, retailers have been split into those who have made click and collect work, and those who haven't. |
| And so far, supermarkets have been firmly on the losing side, says Phil Dorrell of Retail Remedy consultants. | And so far, supermarkets have been firmly on the losing side, says Phil Dorrell of Retail Remedy consultants. |
| "Any complexity just costs more," he says "If [click and collect] is not offset by an increase in market share, it's not really worth it." | "Any complexity just costs more," he says "If [click and collect] is not offset by an increase in market share, it's not really worth it." |
| For example, Asda "piled into click and collect" and was "very ambitious" in its targets, but it's "been a bit of a side show" for the supermarket giant, says Mr Dorrell - Asda has continued to lose market share. | For example, Asda "piled into click and collect" and was "very ambitious" in its targets, but it's "been a bit of a side show" for the supermarket giant, says Mr Dorrell - Asda has continued to lose market share. |
| "Their race towards click and collect hasn't done them any favours," he says. | "Their race towards click and collect hasn't done them any favours," he says. |
| Likewise, Morrisons "at best has been testing the water" - the supermarket chain is "not fussed about click and collect", and has concentrated on improving its stores - but it also has lost market share. | Likewise, Morrisons "at best has been testing the water" - the supermarket chain is "not fussed about click and collect", and has concentrated on improving its stores - but it also has lost market share. |
| Success stories | Success stories |
| By contrast, there are some retailers which have really made click and collect work, he says. | By contrast, there are some retailers which have really made click and collect work, he says. |
| Fashion retailer Next has been "a game changer" by being "brave and exclusively customer-focused", Mr Dorrell says. | Fashion retailer Next has been "a game changer" by being "brave and exclusively customer-focused", Mr Dorrell says. |
| "Next don't really put a foot wrong," he says. | "Next don't really put a foot wrong," he says. |
| If you order from Next by 10 in the morning, your order is ready the next day, he says. | If you order from Next by 10 in the morning, your order is ready the next day, he says. |
| Amazon has also been "doing fantastically well", he adds, pointing to the "awesome" service of one hour delivery that is being trialled in London by the company. | Amazon has also been "doing fantastically well", he adds, pointing to the "awesome" service of one hour delivery that is being trialled in London by the company. |
| The common characteristic of the success of both retailers is strong leadership, which is even more important than efficient distribution and timeliness in the market, he says. | The common characteristic of the success of both retailers is strong leadership, which is even more important than efficient distribution and timeliness in the market, he says. |
| "It's about being able to see where the market's going, and being able to make strategic adjustments," he says. | "It's about being able to see where the market's going, and being able to make strategic adjustments," he says. |
| So, can retailers control the powerful magic of click and collect shopper convenience, or will they end up being swamped? | So, can retailers control the powerful magic of click and collect shopper convenience, or will they end up being swamped? |
| One thing seems certain: the problems for those who don't get it right may take more than a wave of a wand to fix. | One thing seems certain: the problems for those who don't get it right may take more than a wave of a wand to fix. |