Click-and-collect: once you start you can’t stop

The click-and-collect service – currently regarded as a must-have by almost every large multi-channel retail chain in the country – has so far mostly been available free-of-charge, as British retailers are aware of the close relationship between the delivery option and increased sales. Marks & Spencer is now reportedly expanding its 200-store free click-and-collect network by around 100 new locations in an attempt to attract more ‘always-on’ customers and drive extra revenue from the footfall the new collection points generate. However, the impact of free click-and-collect on retail chains does not always turn out to be so positive.

Too much of a good thing?

John Lewis, who runs a chain of 43 department stores and 338 Waitrose supermarkets, has recently decided to revolutionise its in-store collection policy. Customers picking-up orders worth less than GBP 30 will now be charged a GBP 2 click-and-collect fee, as the increasingly popular service’s profitability is apparently slipping in the face of a market slowdown. “Deflation and the focus on price and value, especially in grocery, are creating pressure on margins. So too are the different operating requirements for omni-channel businesses, where every item sold online carries the cost of picking, purchasing and delivery,” the company claimed in its 2014/2015 report, stating that now 54 pct of its online orders are delivered through the click-and-collect service. Over the last fiscal year, the retailer has fulfilled a staggering total of over 6.4 mln click-and-collect orders with 98.7 pct of parcels delivered in-store the next day. This must have a significant impact on its operational costs. “With increasing investment levels and market pressures, we will be placing more emphasis on efficiency and less on growth to achieve sufficient profit,” John Lewis has announced.

At the same time, one of the company’s biggest competitors, Tesco, which currently charges its customers for both home deliveries and order collection, has disclosed that it plans to increase its minimum online order threshold from GBP 25 to 40 GBP. The news comes shortly after Amazon started its one-hour home delivery service in selected areas of London. Entitled Amazon Prime Now, it is being offered to Amazon Prime members at a fixed-rate of GBP 7 (with a minimum order of GBP 20) along with the equally attractive free same-day delivery service. Given that these delivery options offer comparable or even better convenience, and that Amazon’s online grocery platform, Amazon Fresh, is now gearing up for its UK launch, the fact that click-and-collect services and related infrastructural costs have become a battlefield for multi-channel retailers should come as little surprise. Sports goods retailer Sports Direct has seen its online UK revenues increase by 14.4 pct over the last financial year, which the company mainly attributes to the recent launch of its click-and-collect service. “It now accounts for over 20 pct of our all UK online orders. This performance is exceptional considering we charge GBP 4.99 for this service,” says Sports Direct.

Untapped potential

According to a report by research company Verdict Retail, click-and-collect enabled sales are set to grow to GBP 6.5 bln in 2019 – an 82 pct increase on 2014. The expenditure will, of course, depend on the retail segment: the fastest growth in the market is expected in the food and grocery sector, while clothing and footwear is set to continue its dominance. But, as the analysts also point out, despite its increasing importance and popularity, the potential of click-and-collect services are still some way off from being exploited to their maximum by retailers themselves. Especially since many are still expanding their physical retail presence. In 2014/2015, the combined sales floors of John Lewis increased to app. 930,000 sqm after both store extensions and refurbishments. In February 2015, Tesco’s UK sales area amounted to 3.91 mln sqm – a 55,700 sqm y-o-y increase.