Home shopping is the real threat

Are the big four supermarkets losing their grip? They’ve certainly come in for a sustained barrage of criticism from media and government recently over alleged profiteering at the consumer’s expense. And the flak is beginning to take its toll. Only last week, John Bridgeman, director-general of the OFT decided to refer them to the Monopolies & Mergers Commission.

However, we (like them) have been there before and emerged none the wiser. Note that Bridgeman did not restrict the terms of reference to the big four: practically the whole industry has been sucked into an elusively defined investigation that will lumber on for many months.

The crumb of comfort for brand manufacturers – which have long since portrayed themselves as hapless victims of supermarket bullying – is that supplier relationships will be receiving special treatment under the MMC microscope.

In fact, changes in the market will bring surer relief to hard-pressed manufacturers than any legal redress recommended by the competition authorities. A new strategic opportunity for loosening the hegemony of the top four does exist and will gradually open up the market. It’s called home shopping.

Sceptics will be quick to scoff. Home shopping, they will say, is an embryonic techie daydream doomed to die in the cradle, because the big retail players, which have invested so much in out-of-town property, will stifle it.

But they will be wrong. Second-tier retailers are already seizing the initiative. Last week Iceland revealed that home delivery services already account for over 11 per cent of turnover; while Somerfield signalled its commitment to the new sector by acquiring Flanagan’s, a specialist home delivery business operating in London. Perhaps most interesting of all – given its market position – Asda has just opened its first dedicated home delivery depot, in Croydon.

But it is not simply second-tier retailers, or those with patchy national representation, which stand to benefit. If, in the quest for greater convenience, more and more shoppers take up home delivery services, the trend will have profound consequences elsewhere in the industry. Take packaging, for example. As Alan Mitchell points out, home delivery sales will be less dependent on shelf-screaming promotion and more on rational calculation. Quantities typically purchased will change and so, in all probability, will frequency of purchase. Which may well affect the size as well as appearance of packaging.

In time, home delivery services are likely to change the mould of shopping behaviour. More so, certainly, than the outcome of a protracted MMC inquiry.

Alan Mitchell, page 26

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