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Online delivery services cost supermarkets dearly

01 August 2014 - 11:56 by Sarah Collinson

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This week the Daily Mail reported that supermarket chains in the UK are losing a significant amount of cash by offering consumers the chance to shop online and get their orders delivered direct to their homes.

The paper quotes industry analyst, Dave McCarthy, as claiming that these retail giants are losing up to £100 million a year in profits so that they can offer affordable delivery options.

McCarthy states that in reality, the cost of delivering a full load of food shopping, including chilled goods and other perishable items, to people's homes costs supermarkets £20 per customer. But given that most slots are charged at under £5 or even offered free of charge, the retailers are taking quite a hit to achieve this.

The point here is not that retailers are making a loss on online orders, but rather their customers who decide to do all of their shopping via safe shopping online are less profitable for them than those who still visit bricks and mortar outlets.

Delivery of groceries requires finding the cash to pay for vehicles, fuel, maintenance and additional wages for drivers. And some believe that while supermarkets are chasing customers who have switched to using mostly e-commerce platforms to order other items, they would be better off trying to compete with discount supermarket chains, like Aldi and Lidl, on the high street.

Profits have been hit at most of the UK's biggest supermarkets in the past half decade. And it seems unlikely that any of these companies will suddenly start charging significantly more for grocery deliveries in the future.

However, McCarthy makes a valid point about the profitability of e-commerce for this type of order. So for the time being, consumers who do shop online can be confident that they are getting a good deal.