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Are home delivery services by the big four supermarkets sustainable?

17 July 2014

With the news that Ocado has posted a profit for the first half of its financial year, there are hopes it will make an annual pre-tax profit for the first time since it was founded in 2000.

However, a survey by Knight Frank has revealed that home deliveries are a loss-leading service which may ultimately be unsustainable.

Much has been made of the high fixed property overheads involved in operating from large retail stores, and the various approaches being taken to delivering maximum value from these assets but perhaps more focus needs to be given to whether home deliveries are actually a long term market trend, particularly if the real cost of supplying this service through the logistics chain cannot be cut and ultimately needs to be passed on to consumers.

If it is accepted that the current level and cost of home delivery cannot continue, it puts an interesting slant on the traditional ‘race for space’, with rentals for new large stores nationwide now being significantly lower than the height of the market in 2012. This opportunity for increased market share is being seized by the discounters and it’ll be interesting to see what the big four do next.

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