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Future of tesco, morrisons
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Glen_Clark wrote: »The channel 4 programme last night put the REAL cost to the supermarket of an online shop at about £20 :eek:
And they charge the customer what ... £1
No wonder Aldi & Lidl are happy to leave online shopping to their competitors.
For the supermarket, it is expensive to operate this way, as you say. Not sure on the revenue side whether people are more inclined to make impulse purchases when they see an item on a shelf right in their face, or see a promo photo of it online. Maybe the former but perhaps the latter if they're doing the shopping in front of the telly with a glass of wine in hand. Maybe people will do more bulk buying at special offer prices if they don't have to lug the stuff home. But certainly there is a cost of fuel and people to get a door to door service working smoothly and it costs more than having the customers come to you.
My tube station carpark has a Tesco delivery van parked in a dedicated spot every evening for people to collect their shop and throw it into their boot on the way back from the commute, without having to go 2 miles up the road and start trawling the aisles after a hard day at work. Sounds great for people working long hours in London but I don't know how many customers they're actually serving out of the van that sits there about 5 hours every night. Personally I just get them to deliver right to my door when I know I'll be in.What I don't understand is why the big 4 are falling over each other to see who can lose the most money on it, and why people on this forum are criticising Morrisons for getting in late, when in my view they shouldn't be in it at all.
To me it looks like the dot com lunacy all over again.
Still, Amazon has proved that if you can aggressively build a monster customer base and diversify the brand into a load of tangentially related areas, you can have the market believe in you to the extent that your low low margins are less important and get a nice valuation without even paying dividends. Because a large loyal customer base is worth something even if the effective net revenue per user / customer after costs is currently not so high. That is part of what the big 4 are looking for, even though bricks and mortar retailers have traditionally being valued rather differently to dotcoms.
Really there's 2 choices serving the ever increasing gap between rich and poor - the Aldi/Lidl camp with "pile it high stack it cheap limited range but gets the job done" or a couple of brands off the top end of the scale that serve people who can afford to get all their groceries from M&S and Waitrose or aspire to be seen shopping there.
Then in the middle of those extremes you have the gang of 'traditional' generalist supermarkets competing for most of the market share with what Tesco is doing - wide choice, a brand running across different platforms (convenience stores to hypermarkets to home delivery) and brand extension through ancilliary services to hammer home the customer recognition, trusted brand, loyalty/retention.
If Morrisons can't go for the Waitrose end or the Aldi end then they have to see what they can do about the land grab in the middle. And that land grab is probably more about share of customers cash, setting up customer habits and loyalties, than the absolute bottom line. It is harder to win new customers than to keep them. So you need to have ways of winning them other than a price war for transient customers looking for the cheapest deal that week.
I have 3 of the big 4 within a 10-15 min drive of me, and Morrisons is the best at doing a fresh meat/ fish counter. But the range of other stuff it sells that I want isn't as good as the bigger Asda or Tesco. If I had all the time in the world I might do my general shop at one of those and head over to Morrisons for the butcher/ fishmonger aspect. But in the real world, if I've already done my general shop somewhere else, I'll have already picked up my meat and fish - or if I haven't and need a special trip for it, I can just go to a butcher/ fishmonger. So Morrisons don't really get much of my custom other than if I happen to be in the area and want to borrow their carpark.
As I increasingly do my shopping online, my cash is being diverted to the people with credible home delivery options. The weekly £100+ that I could have spent in Morrisons but generally didn't, will turn into £100+ that I'll definitely never spend if they don't have an online home delivery platform. Whereas if they have a competent and affordable delivery service with a good range, I would be tempted to start giving them my money, if they can get it launched before I have made Tesco my standard habit.
I suppose you might think, well it's no great loss because that guy wasn't spending much with them anyway. But there are lots of customers who were spending with them anyway, that might not if shopping migrates to online/home services. One counterpoint is that perhaps the demographics of Morrison's existing customer base has many who just won't move online (older people, lower income people local to the store) and this is less of a factor for them. Looking around on a typical trip to my local Morrisons, compared to my local Tesco Extra that would seem to be the case but they are different store types and locations so it's hard to jump to conclusions.
I remain invested in Tesco (from a couple of years ago when the price dropped from £4+ to the £3ish range) as I think it will take time to improve but they are doing the right sort of things to recover their ground/ stand their ground.0 -
Glen_Clark wrote: »The channel 4 programme last night put the REAL cost to the supermarket of an online shop at about £20 :eek:
And they charge the customer what ... £1
doesnt sound right then. 20 per customer would suggest low usage of that system maybe.
The whole point of computers is they scale up so well, starting costs might relate to 20 per customer but if they are serving a million a few years later with the same initial cost it starts to be a good investment
Tesco might finally be waking up, the online model also allows them to reduce their store space around the country while still expanding. Building houses instead could be highly profitable.
It sounds feasible anyway, we'll have to see if they can make the most of what they got0 -
Well if it takes an hour to fill a trolley that's at least £6.31 (with NI on top etc), then another hour of delivery but probably only 15 minutes just dedicated to you. If you allow for petrol and depreciation on the van I do not think £20 is unreasonable. That is of course without start up costs.
People talk about economies of scale but for that to work people need to have deliveries in the same areas at the same time.0 -
Well if it takes an hour to fill a trolley that's at least £6.31 (with NI on top etc), then another hour of delivery but probably only 15 minutes just dedicated to you. If you allow for petrol and depreciation on the van I do not think £20 is unreasonable. That is of course without start up costs.
I doubt if it takes them an hour to fill a trolley, but 15 minutes to deliver it sounds very optimistic. Bear in mind
1) The sort of people who want their groceries delivered are likely to live in remote and inaccessible locations
2) the level of congestion on our roads
3) the delivery driver cannot be expected to get it in your home as fast as you can - he has to find the place... somewhere to park...ring the bell and wait..... - wheras you know exactly where to go and just walk straight in at any hour of day or night“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0 -
I dont think they would run the service at all if it was more then 15 mins driving time per customer.
Tesco is the biggest, I would hope they can make a dozen deliveries in 1 area
Retailers have a really big profit margin on their products, its for this reason that they can offer these services. What would matter more is if customers had an entire list of tesco value stuff and only ten quids worth, then even with a service charge its not profitable.
50 quid is the minimum Tesco would prefer if their offers are anything to go by, they are well into the profits if customers get that much delivered with all the normal brands. Aldi cant do this as they dont sell those high margin brands0 -
bowlhead99 wrote: »But all this 'lunacy' at the moment is a marketing spend to get the customer share .“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0
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sabretoothtigger wrote: »I dont think they would run the service at all if it was more then 15 mins driving time per customer.
........
Retailers have a really big profit margin on their products....
Last time I looked Morrisons & Sainsburys had overall net profit margins of around 2%, Tesco's approaching 5%, but they have all fallen since then.“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0 -
Hi all
Thanks to everyone who has contributed to an interesting discussion.
It looks to me like these Tesco shares are getting pretty cheap. I'm thinking of having a dabble if/when they hit 250p. Is anyone else looking to buy in, and if so what is your target price?Midas.0 -
Hi all
Thanks to everyone who has contributed to an interesting discussion.
It looks to me like these Tesco shares are getting pretty cheap. I'm thinking of having a dabble if/when they hit 250p. Is anyone else looking to buy in, and if so what is your target price?
Its trying to catch a falling knife.
They touched 253p earlier.0 -
Well... every little helps.
I'll have a few grand to play with next week. I'll probably buy into Tesco even if they increase slightly (say, 260ish? I don't think I'd mind 265).Q: What kind of discussions aren't allowed?
A: It goes without saying that this site's about MoneySaving.
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