Marks & Spencer has gone live with online grocery trials at two stores in the UK, piloting rapid delivery and click & collect. The first trial is taking place at its Camden store in London and the second in Reading.
In Camden the retailer is trialling a limited assortment of “dinner made easy” items including pizzas and ready prepared meals for one hour delivery within a three mile radius. A broader assortment of other grocery items can also be added, for delivery within two hours.
Meanwhile a separate trial of click & collect groceries is in operation in Woodley, near Reading. Here shoppers may place orders online for collection from the store within two hours. The minimum order value for using this service is GBP10 (EUR12.20). Both services are being made available to M&S Sparks loyalty card holders initially in order to gather feedback.
Marks & Spencer’s CEO Steve Rowe reportedly told senior executives in April that the retailer could no longer ignore opportunities within the fast-growing online channel and that the company “needed to be ready with the right response” to changing customer expectations.
Online is the fastest growing channel in the UK and shopper expectations are shifting rapidly, spurred on by superior services offered by Amazon and the like. By being present online solely with clothing and home, M&S had to date failed to capitalise on its quality food offer, which is the strongest part of its business. M&S’ exploration of the online opportunities for food are long overdue, although which option to adopt and roll out to all stores may prove to be a difficult decision for the retailer.
By assessing both a home delivery service of popular food-to-go items and a fuller click & collect option, the company is able to compare and contrast some alternatives. Its Camden offer is in line with Amazon Prime Now and services such as Deliveroo, both of which address the impulse-driven food for now shopper. This will suit busy professionals and those living in the city, although delivery costs will be high and order values low. Other retailers including Tesco and Sainsbury's are also trialling similar one hour services in London. By contrast, M&S' click & collect trial in Reading offers shoppers the choice of a much broader assortment, but with lower overheads as the customer takes care of the last mile. This option is more likely to suit those living outside of city centres, with easy access to a car.
A problem unique to M&S is that it is largely used by customers for top-up shopping, food for tonight and Food to Go, which means that basket sizes are smaller than at other retailers. This means that making any online grocery option work profitably is likely to prove more of a challenge for M&S than for its Big Four competitors. With its quality food offer online M&S will naturally compete against Ocado and Waitrose, both of which already have established customer bases. In addition, new players are entering the market all the time – Morrisons in 2014, Amazon Fresh last year, even the discounters are flirting with the UK online channel. The retailer with the first-mover advantage, Tesco, still leads though with more than 40% online market share, according to LZ Retailytics data.
The results of the two trials are likely to shape the future strategy for the retailer. With click & collect M&S has the option of offering a lower cost alternative to home delivery, particularly if it included the option to pick up from its around 630 owned and franchised M&S Simply Food stores. Home delivery is likely to be attractive to shoppers, but will they be happy with a reduced assortment focused on food to go? A third option – not currently being explored – might be to team up with a partner in a wholesale supply model, such as Waitrose’s agreement with Ocado or Morrisons’ with Amazon. If M&S can get the economics right, and potentially find a way to bundle food and non-food, it could drive significant revenue growth and increased market share.