Online retailing is still incredibly new. Amazon is still only 20 years old and for most people e-commerce has been around for little more than a decade. So retailers and consumers alike are still feeling their way. But it is becoming clearer that the way forward in retailing is to make the most of what you’re best at. For an online retailer that means service and the clear focus for service over the last year or so has been click & collect. The changes announced today from John lewis and Amazon are both about click-and-collect and both are acknowledging that if customers want that convenience, then they have to accept that there’s a cost involved. Here, Mintel’s Director of Retail Research, Richard Perks, looks into the changes to click-and-collect…

14% of consumers who have used courier or express delivery services said that they would be willing to pay more for same day delivery

Amazon: Prime Now

Amazon has announced that one-hour delivery, aptly named Prime Now, will be available to Amazon Prime members at a cost of £6.99. Over 10,000 items will be available for one-hour delivery including nappies, toys and sports equipment. Initially the service will only be available in London but it should be extended to other UK cities by the end of the year. Amazon has said that the Prime Now service will be powered by a ‘growing network of fulfilment centres that utilise high-end technology to speed up order delivery times for customers’.

John Lewis: £30 and above

At the other end we have John Lewis which is ending free click-and-collect orders under £30. The company says that only around 18% of click-and-collect orders are under £30, so only a minority of consumers will be affected. The fact is that such a service is expensive – untenably so when it comes to small orders. Speaking at the recent John Lewis Christmas event, Managing Director Andy Street said: “Customers understand John Lewis has been around for 150 years and we’ll be around for another 150 years. They understand we’re a good corporate citizen and can’t give everything away for free. There is a huge logistical operation behind this system and, quite frankly, it’s unsustainable”.

The way forward for click-and collect-services

John Lewis is acknowledging that there are considerable costs associated with click-and-collect, after all, transporting goods from a warehouse to any one of thousands of potential pick up points is not without cost. Free click-and-collect compared favourably with £3.95 for home delivery, but was just not tenable as a strategy for the longer term. Mintel’s latest research shows that 37% of UK consumers use click-and-collect because it is cheaper or free compared to the cost of home delivery and a quarter because it means they do not have to worry about waiting in or missing a home delivery. We also found that 14% of consumers who have used courier or express delivery services said that they would be willing to pay more for same day delivery – and that is the basis for Amazon’s latest move. We think that the way forward in retailing will be to make the most of one’s assets – store based retailers have great advantages, but online ones have breadth of range and the convenience that comes from great service. That’s what Amazon is capitalising on now and it makes a lot of sense. One key challenge will be ensuring a one hour delivery through London’s congested traffic.

Richard Perks is Director of Retail Research at Mintel where he advises clients, writes retail reports and presents webinars. Richard joined Mintel in 1999 and previously headed the Retail team, overseeing the content and strategy of the retail reports. He regularly provides analysis to the global media on retail issues. Before joining Mintel, Richard worked as a City analyst and as a journalist.

For more information please see Mintel’s  Click-and-Collect UK 2014 report and Courier and Express Delivery UK 2015 report.