Tesco Direct is to introduce a £2 surcharge on all non-food orders under £30, according to reports in Retail Week.
Covering the costs of low value orders
Commenting on the development a Tesco spokesman is quoted as saying "To ensure our click-and-collect service remains sustainable for the future, from February 2 we will be introducing a £2 surcharge on all Tesco Direct click-and-collect orders under £30. We want to provide customers with a great online experience and continue to offer customers the convenience of our click-and-collect service at every Tesco store across the UK." Last July Tesco raised its minimum order size for free groceryhome delivery from £25 to £40, with a £4 surcharge applied to smaller orders. That move followed a similar change by Asda which raised its threshold for free delivery from £25 to £40 a year ago.
Surcharge fails to dent C&C sales at John Lewis
Tesco's £2 fee mirrors a charge introduced by John Lewis last July for similar reasons. For John Lewis the charge appears to have had little impact on trading. Today the department store group revealed that click & collect sales grew by 16% over the Christmas period and that it was the delivery method of choice for over half of online orders. At John Lewis, shoppers appear to have bought more items to take their order value above the £30 threshold and Tesco will be keen to achieve the same result. In H1 2015/16, online general merchandise sales rose by just 2.7%, though clothing sales were strong at +14.0%.
Moving towards a more profitable online model
The move towards charging for low value orders is part of an industry wide shift to make online more profitable. In October Sainsbury's director of online Robbie Feather told the IGD Online and Digital Summit: “We’ve managed, in this country, to create the world’s best online grocery industry, and yet we’ve also single-handedly managed to destroy most of the value in that channel by removing the charge for the work that we do to pick the product for the customer and deliver it to their homes.”
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