The German discount supermarket chains, Lidl and Aldi, are renowned for their low-cost operating models. Wherever they can gain the tiniest of savings – floor staff rotating with checkout staff, for example, or shelves stacked in bulk with products that are still in the delivery boxes – they implement it with vigour to keep costs down.
It is instructive, therefore, that until Lidl rolled out the service this week in Dublin, neither chain had implemented online grocery shopping.
Across retailing generally, online sales have always been evangelised to businesses as the low-cost, low-maintenance future of the sector. Cut down on expensive property costs by creating a virtual shopfloor, the evangelists say, and you will make bigger profits.
The truth is that online grocery shopping and associated home delivery are generally a loss-making endeavour for traditional supermarkets. The service requires dedicated staff and expensive fleets of vans – grocery and fresh food multiples cannot rely on the State’s postal service to deliver their products like other online retailers.
Tesco has offered home deliveries since 2000, but more as an additional service to customers than a profitable business line in its own right. SuperValu's owner Musgrave launched it about eight years ago. Dunnes Stores has dabbled around it but never fully committed. Aldi doesn't do it at all.
Lidl, meanwhile, has chosen to outsource the new Dublin service completely to a third-party provider, Buymie. The German company doesn't take any of the fees for the service, which all go to Buymie. Assuming its online orders serve only to displace some of the traditional shopping at its stores, Lidl won't make an extra penny from launching online services. It is just a new part of its customer service strategy.
Buymie also does deliveries for Tesco, a separate service that is run in parallel with Tesco’s company-run next-day delivery service. Pressure will eventually come on Lidl’s and Tesco’s rivals to provide similar services in this most competitive of sectors.
Hiring specialist third-party providers, meanwhile, looks like the way to go for traditional supermarkets looking to break into online grocery shopping.
