Return Of The Delivery Boy by Jonathan Owen

From Market Matter October 09

Last month saw some interesting ‘positioning’ by John Lewis plc, one of the UK’s most-respected retailers. JL has always been considered a safe bet for investors because of a reputation for cautious management and middle- England customers. Although sales fell 2.9 % in its department stores due to the ‘challenging economy’, its groceries arm, Waitrose, reported a 7.4% rise, largely due to online sales. The company said it anticipates a ‘slow, drawn-out economic recovery’ but went ahead to buy the rights to ‘Duchy Originals’, the organic bakery business of the Prince of Wales and to renew a five-year contract with home delivery service Ocado.

Generation Investment Management, the investment fund run by eco-warrior and former US vice-president Al Gore, then bought a chunk of Ocado and JL transferred it’s 29% stake into it’s sacrosanct staff pension fund. It seems like John Lewis and investors are positioning themselves for growth in online sales, organic produce and home deliveries as the UK emerges from recession.

So what’s that got to do with me, you may think? Well, quite a lot if you want to stay in business. Despite the recession and unemployment nudging 2.5 million and 8 years of predicted public spending cuts, all the high street retailers continue to look for business growth areas. Online sales and home deliveries are it, so maybe it’s time to get on your bike – a bit like the lad in the Hovis Advert.

At the same time, Google’s research department published a report suggesting online sales now account for 17p in every pound spent by UK consumers, whilst the recession forces retailers to adapt. So it’s ‘goodbye!’ to counter sales and ‘hello!’ to online sales as HM Government pushes out high speed Internet across the UK.

Google estimates that broadband subscribers already spend 33 hours per month – that’s four full shopping days per month - online. The UK has the largest online market in Europe and mainstream retailers are racing to cash in. The growth in online sales is their brightest hope as the economy emerges from recession.

Thanks to search engines like Google, the level of enquiries for ‘special offer vouchers’ has more than doubled in the last 12 months as shoppers seek out bargains. Google’s UK Managing Director, Matt Brittin said, “Consumer behaviour is changing rapidly as a result of faster broadband speeds and the speed of change is accelerating in the recession. Shoppers are hunting for best value by searching for sales, special offers and discount vouchers. The smartest retailers are investing in their websites to ensure the shopping experience online is as seamless as that on the high street.”

Is the markets industry gearing-up to do the same? I think not. Some five years ago I asked a market hall stallholder how she managed to pay the rent by selling such small quantities of GM-free and ethically sourced food. She revealed that her stall was just a shop front – 80% of her business was online where the sales came in 24/7 and she had no staffing costs. She spent her stall-time packing the orders or selling goods across the counter to people who couldn’t wait 48 hours for the post.

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