Asda’s decision to put the brakes on plans to open more click-and-collect sites raises doubts over the sustainability of the channel.

Asda has put the brakes on plans to open more click and collect sites and expand its smaller store portfolio in London and in petrol stations.

The supermarket giant has scrapped its strategy to reach 1,000 click-and-collect sites by 2018, meaning it will halt the planned roll-out of the service at London Underground stations.

Big four rivals Tesco and Sainsbury’s had already quit the Tube initiative, but it is Asda’s move to distance itself from the scheme – and further click-and-collect investment in general – that has caused the biggest stir.

Two years ago, Walmart-owned Asda became the first grocer to roll out click-and-collect on the London Underground network, with its then retail director Mark Ibbotson proclaiming: “Customers will value the convenience of collecting shopping at their home Tube station rather than carrying the products bought in premium convenience stores on their commute home.”  

Ambitious target

It formed part of Asda’s wider objective to become the most convenient online grocer, as it targeted the ambitious 1,000-site mark – a goal that would have seen it increase physical access to Asda from 53% of the population to 70%.  

Having openly earmarked such lofty figures, the supermarket giant has seen itself as a click-and-collect pioneer – a reputation it enhanced in May by piloting its first 24/7 click-and-collect pod.

Some analysts suggest the grocer has been made to “look dumb” by “massively overstating” the number of click-and-collect sites it wanted. It currently has around 640, still some way short of its aspirations.

“In terms of profitability, click-and-collect is the only way retailers are going to make ecommerce sustainable.”

Bryan Roberts, Kantar Retail

But they believe Asda is pursuing the correct strategy by prioritising investment in its existing store portfolio, and reckon that boss Andy Clarke – not to mention his grocery rivals – are far from finished with click-and-collect.

Prioritising stores

“This is the pause button being applied rather than any sort of wholesale abandonment of that strand of the business,” Kantar Retail senior vice president and knowledge officer Bryan Roberts tells Retail Week.

“It’s Asda asking: ‘Do we need all of these sites, particularly the remote ones?’ It’s certainly not the death knell for click-and-collect, but perhaps an admission that it went a little too far a little too fast.

“You need to look after the core business, particularly when the competition is so intense. Sharpening prices and rejuvenating the main part of your business certainly seems sensible at the moment.

“But click-and-collect is generally the way forward for grocery ecommerce. In terms of profitability, it’s the only way retailers are going to make ecommerce sustainable.”

Underground errors

Retail Remedy partner Phil Dorrell describes Asda’s execution of click-and-collect as “disastrous” and adds: “Three years ago, when they revealed how many sites they wanted for click-and-collect, I just said: ‘That’s ridiculous – no one needs that amount of sites.’ It’s not been thought out and it was ill-measured.’ That’s come home to roost.

“Not only that, but putting them into places like London Underground was a mistake – did anyone ever really think that would work? You see people in Underground stations and all they want to do is get out. They don’t want to wait around to pick up groceries.”

“The fact Asda has come away from that isn’t a surprise,” Dorrell adds. “It still has one of the largest click-and-collect offers in the UK. The problem is they have made themselves look dumb by overstating the number they would have.

“Retailers should be embracing where customers want to go. They want to go to more convenience stores – it’s the fastest-growing sector in the market at the moment – but Asda is slowing its petrol station roll-out. Equally, customers want that click-and-collect offer to be delivered effectively, but Asda is pulling away from that.”

“All the supermarkets have got to do something about making this profitable, and that’s what they are struggling with.”

Dan Murphy, Kurt Salmon

While Roberts and Dorrell appear certain of the continuing need for supermarket chains to offer a click-and-click proposition, Dan Murphy, partner of management consultancy Kurt Salmon, is not convinced that Asda’s move signals the first nail in the coffin for grocery click-and-collect.  

“That’s the $20m question,” Murphy says. “Supermarkets have got to continue down the online route, because they have educated their customers that that’s the way the market is going. But they have all realised it’s not profitable.

“All the supermarkets have got to do something about making this profitable, and that’s what they are struggling with.

‘Fixing’ stores

“Click-and-collect is seen as an important part of the answer. Andy Clarke is probably worried about how much money this is costing. He’s probably had a few heated phone calls from Walmart in Bentonville, suggesting that Asda stops experimenting and fixes its stores.”

Roberts suggests that move to “fix” stores, with Asda planning to refurbish 95 of its larger sheds as part of Project Renewal, demonstrates that the grocer is displaying “a bit more mindfulness about profitability and what’s going to generate the biggest return from investment”.

On that front, Clarke has nailed his colours to the mast, pinning the grocer’s hopes on a rejuvenated store estate to deliver much-needed growth in a flat market. Asda has already piloted a handful of new formats following a series of revamps, including one in Grantham, plus the Decathlon shop-in-shop trialled in its Watford supermarket.   

But while its bricks-and-mortar estate remains at the core of its business, it seems that neither Asda, nor its grocery rivals, will be turning their backs on click-and-collect just yet.