Next has quietly launched ‘Next Unlimited’, a delivery saver scheme exclusively available to credit account holders, following online pureplays such as Amazon and ASOS, which were the first to experiment with the subscription model. This is a forward-thinking move for the retailer which will help to increase loyalty and customers’ overall spend with the brand.
Online delivery saver schemes have been adopted by all of the Big Four supermarkets and are increasingly popular, with 34.1% of online food & grocery shoppers using these in February 2017, rising 6.0 pp year-on-year according to GlobalData Retail’s UK Online Shopper Tracker survey. Similarly, 24.7% of UK Amazon shoppers are a member of Amazon Prime yet non-food retailers and traditional bricks-and-mortar retailers in particular, have been slow to launch these. It’s clear that as consumers become more demanding with 71.1% using next day delivery according to GlobalData Retail’s e-retail survey, retailers must improve their delivery propositions to stay competitive.
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Next is the first midmarket multichannel retailer to offer a cross-sector delivery saver scheme but it is currently only targeting loyal customers by limiting the offer to credit account holders. Next is bound to see a positive uptake as many of its core customers will shop frequently enough to benefit from the annual £20 delivery subscription fee and while orders have a threshold of £10, customers will easily spend this on one or two items; without the scheme, next day home delivery costs £3.99 per order. The offer is also likely to attract new customers therefore Next must extend its offer to all to drive sales.
Retailers must trial delivery saver schemes to understand customer usage and demand. It is also vital to set the right price for schemes to be competitive but profitable, with the rise in order frequency negating the cost of offering free delivery. Retailers must also be able to deliver a consistent service to customers; online pureplays with delivery schemes in place, such as ASOS and boohoo.com, drive higher order volumes and are able to demand a reliable service from third-party delivery providers and similarly, Amazon has control over its delivery network, so can provide this throughout peak periods.
While delivery saver schemes have obvious advantages, the cost of these to retailers can be immense; in FY2016, Amazon racked up a bill of $16.2bn in worldwide shipping costs but only collected $9.0bn in shipping revenue. As such schemes can impact profit margins, retailers must ensure they are increasing overall spend per customer.
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Retailers which successfully implement a delivery saver scheme will be better able to compete against Amazon, driving up order frequency and customer loyalty, also keeping the retailer at the forefront of shoppers’ minds. Delivery saver schemes are particularly viable for department stores and multi-sector retailers which have a loyal customer base as they encourage customers to shop across sectors, thus increasing sales; therefore retailers such as Marks & Spencer, House of Fraser and John Lewis must consider delivery saver schemes as part of their e-commerce strategies.
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