Asda aims to roll out its home shopping service to 60% of the UK population in the next two years.
Asda has a clear confidence that home deliveries will make a vital contribution to its future business. It is confident enough to roll out its current venture, serving three million households within Greater London, on a national scale.
But with its home shopping service going mainstream, efficient deliveries and supply chain practices will be key. Running an efficient supply chain should be a core competence of Asda, whose parent company Wal-Mart is the acknowledged leader in this area, at least in the US. Two elements are key to Wal-Mart’s efficient logistics: its Retail Link software and scale economies. The Retail Link system will need to evolve to cope with the problems of small orders and frequent updates, but if the technology is flexible enough, then dedicated distribution centers should allow scalability in both food and non-food sectors.
Regardless of efficient warehousing operations, however, goods still need to be delivered, and this is where Asda @t Home could face greater difficulties. Scale may not offer any great benefit. Added to this are the problems of congestion in built up areas, uncertain delivery times and the fact that during large parts of the day many consumers are not at home to receive their goods deliveries.
This problem of efficient delivery to consumers’ front doors, also known as the last mile, has seen two eCommerce start-ups in the UK – Urbanfetch.com and BagsofTime.com – disappear and Sommerfield’s online operation has also been wound up. Only Iceland’s operation is turning a profit. If Asda solves the problem of the last-mile then it will have a great competitive advantage. However, if the firm is relying purely on achieving scale benefits in the supply chain then more difficulties may be in store.
