Editor's Comment

Size matters – Asda’s ToYou and Argos’ Fast Track depend on it, Alibaba already has it

After announcing it was pulling out of Black Friday, Asda unveiled a new end-to-end parcel delivery and collection service it’s called ToYou, which will put the retail giant’s 600+ stores on the click-and-collect map.

The economics behind this are worth reflecting on.

One of the big questions the major supermarkets have been chewing on for the last few years has been what are we going to do with all those enormous supermarkets now that customers’ shopping habits have changed?

One answer, and it’s a good one, is to rethink the way you use the available space. And that’s what Asda has done. With a decline in the popularity of the big weekly supermarket trip, Asda has hit upon a plan to get people coming back into its stores.

When I first heard about it, it reminded me of the Carrefour approach, where a hypermarket site is designed to give customers lots of reasons to visit; once there the likelihood of impulse purchase, or top-up shopping, is considerably higher than if they weren’t there; it’s a long way from rocket science.

Similarly, if you have a fleet of vehicles already making trips why not fit in more trips to more places – maximise the use of space and thereby maximise your return per trip. Hence, Asda trucks and vans are going to be picking up from and dropping off at retailers’ DCs and 3PLs.

That move isn’t very different from the Argos Fast Track service – if you have vehicles making lots of regular, local trips between stores it isn’t a great stretch to divert them to shoppers’ homes.

Both ideas need one thing to succeed, and it isn’t luck. It’s scale.

Both retailers are pushing into unexplored territory. Without the volume – from customers using the service in Argos’s case, and from that as well as from retailers signing up in Asda’s case – the economic model underpinning Fast Track and ToYou could become unsustainable due to the cost base required to keep them operational.

Elsewhere on eDelivery, the journey to becoming a true omni-channel retailer is proving to be tougher than some expected. This, we learn from some research from LCP Consulting, has led to a drop in the number of retailers describing themselves as omni-channel operators – down from 54% last year to 31% this year.

The reason for this change? The complexity and cost involved in developing operations systems that are truly omni-channel ready. The research also found that 70% of respondents rank customer satisfaction as the most important consideration in supply chain design.

We looked at Singles’ Day last week, the Chinese mega-shopping event on 11 November. This week, we have news that Royal Mail has strengthened its partnership with Alibaba, the Chinese ecommerce colossus that accounts for around 80% of all online sales in China. The move will reduce the time taken for Chinese deliveries to get to the UK down to just two weeks. It will also make it easier and quicker to ship goods to China, which is the largest single destination for UK ecommerce exports. If cross-border shipping isn’t on your agenda already, perhaps it should be. This is a topic we’ll come back to as part of a special focus.

We return to Asda’s Black Friday u-turn and consider why it came about? Is it a brave move, or one that was unavoidable? Could it really be true, as Asda claim, that customers aren’t that interested? Doesn’t that seem to contradict many of the £1bn Black Friday predictions..?

We also hear from a small selection of the eDelivery readers who have been in touch to share their views on the subject, and you can read their thoughts here.

As always, if you haven’t subscribed to eDelivery yet we’d love it if you did. You’ll get a weekly newsletter summarising the main stories we’ve covered, and we’ll keep you informed of other big announcements. But we won’t spam you – no one likes spam? You’ll find details on subscribing here.

You can also join our LinkedIn group for analysis and networking as it happens, or if you want your updates in real-time find us on Twitter @edeliverynet.