Expanding home delivery

The Ideas Factory is a chance for you to pitch your own idea of what should be in the next Liberal Democrat manifesto. The proposal here is not the policy of the Social Liberal Forum. We will however be passing it – and the response it generates – onto the Manifesto Working Group.

The Proposal

James Graham: work with the industry to develop incentives to dramatically switch from supermarket use to home delivery.

A couple of disclaimers to start with: this isn’t an attack on supermarkets. Nor is it a fully fleshed out policy agenda. Ideally it could be achieved with minimal state intervention, but government may be able to play a role in terms of creating incentives to make it easier for industry to adapt.

Home delivery is generally seen as a middle class indulgence. And in its present form, frankly, it is. But a significant shift towards home delivery would have a whole host of positive outcomes:

a) It would reduce the carbon footprint of grocery shopping.

b) It could be combined with waste collection and thus lead to waste reduction: if the industry had to collect food packaging and waste, it would have an incentive to keep it to a minimum; if food went directly from warehouse to home, there would be less need for packaging. Savings could be passed onto consumers in the form of reduced municipal taxation.

c) If business had a profit motive to do so, it could help tackle the digital divide. Just as my mobile phone is subsidised by my phone company who want my monthly payments, so potentially could supermarkets have an incentive to discount home computers to make it easier for people to shop online.

d) Improved quality of life; less slogging around around a supermarket on a Saturday afternoon.

Nonetheless, there are significant barriers to this shift happening by itself. Supermarket chains with existing stores have a short term profit motive in keeping their stores profitable, and thus filling them with customers (in the longer term, a significant shift from shop to home delivery would inevitably lead to shop closures, although these would be replaced by warehouses). Most people will want their goods to arrive at around the same time – weekends and evenings and so there is a problem with scaling up. And then there is the simple habit of people used to a certain way of shopping.

In other areas however, big shifts are happening. The music and video industry has transformed over the past decade from one largely based on the high street to one based online. Amazon now dominates the book industry (the Amazon model is an interesting one: imagine a system where local farmers could use tesco.com to sell their own produce, making a daily delivery to the local Tesco warehouse to fulfill the orders, just as Amazon allows third parties to sell books via its Marketplace). Why shouldn’t we look to make a similar shift in grocery sales? After all, it wasn’t that long ago that people took it for granted that milk and other dairy products were delivered door to door; the local milkman wasn’t abandoned because it was a bad system of distribution but because they couldn’t compete on price.

There will always be a place for buying food in person, but that side of things will always be done better by specialist retailers such as greengrocers and butchers (Who knows? Maybe freeing people from the weekly trudge to an out of town supermarket will encourage them to rediscover their local high street?) What supermarkets do best is distribute food in large quantities. This policy would preserve that while attempting to minimise the more negative aspects of supermarket retail.

Note: this idea came out of a brainstorming session at the Liberal Democrats’ policy conference in January 2009. My thanks to the other members of that group who helped develop the idea.

Responses

Susan Gaszczak: The interesting point here is linking home delivery to waste reduction. Over the last 25 years we have moved from a culture of going to the local shop to shopping in large warehouses, and that in itself has caused the increase in waste. 25 years ago, when shopping, you would go to the greengrocer, butcher and fishmonger and buy the quantity of food you required and it would be wrapped in either a plastic or paper bag.

The situation now is that supermarkets dictate the quantity of food you buy by wrapping it together. If we could persuade supermarkets to move away from standardised sizes and back to the counter model, where you could take your own reusable containers in and buy the quantity you require would in itself reduce waste.

This solution would not reduce the food miles, which are astronomical, but would reduce the amount of packaging. Shopping online is great when you know exactly what you are going to eat and cook, but it does not allow you to try new foods. Many people who do an online shop still find themselves visiting the branch they have ordered from because of the things they have forgotten and this actually increases the number of food miles. If a solution can be found for this then your idea could work.

Richard Huzzey: This is a good aspiration, but I find it hard to see how you would coerce such activities. You could offer a VAT rebate for online shopping – but this would further the problems for small local bricks-and-mortar shops which already struggle against internet competition. I think this may be one of the cases where well-meaning tweaks to the tax system could have unpredictable effects down the line — a frequent problem, as Lib Dems know, with New Labour’s legislative diarrhoea.

One of the biggest problems is supermarket monopoly as a result of lack of market competition in the grocery sector. In this respect, supermarkets’ property portfolios are a huge asset – and one that a shift to land value tax would do much to address. Capitalism acts in the consumer interest when monopolies are restrained and competition is promoted — that’s wealth creation Lib Dems can believe in.

I’m afraid I want to know more about what ‘incentives’ would be. It’s interesting that market advantages in selling some items (books, DVDs) have helped make business like Amazon and Play.com thrive, but buying food is still something we generally prefer to do in person. I don’t plan meals and hence purchase ingredients very far ahead.

Just as I deny that free market lessons from selling bread and milk can be applied to health and education, so I’d beware thinking that the state can always pull levers and change consumer practices with ‘tweaks’ like this! Show me more detail, and maybe I’ll take your idea on a buy-one-get-one-free offer with LVT.

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8 comments on “Expanding home delivery
  1. James Graham says:

    Ah, I was kind of hoping other people would help me with the detail! :)

    If it can’t be made to work, I’m open to binning this idea. It is also possible that supermarkets might end up going in this direction regardless of any intervention. But I see so many positive outcomes that exploring how it could be made to happen is worth doing, in my view.

  2. Andrew says:

    Although I am no expert on the economics of large-scale grocery sales two things come to mind:

    1) As both Susan and Richard alluded to, few people know exactly what they are going to buy beyond the basic provisions when shopping – Supermarkets of course take massive advantage of this to make you buy things you weren’t planning to, and good on them. Therefore any incentive you could give them to stop doing this would have to be pretty bloody impressive!

    2) It seems strange for a “social liberal” forum to be advocating job losses. Again no expert, but surely it requires far fewer people to run a large automated warehouse, such as Amazon have, than to run the dozen or so supermarkets that said warehouse distribution system would cover? Personally, I am all for efficiency but I am surprised you want to see the 1/4 million people that evil, nasty Tesco employ in this country out of work. You know, even I think that’s a bit steep!

    James, last week you said you “entirely agree[d]” that figures and facts are the key to winning an argument, yet here you haven’t presented even a modicum of research to back your idea. Is this the kind of slipshod thinking you hope to present to the Manifesto Working Group?

  3. Jock says:

    I don’t see why it need differ from the current arrangements where you have the superstore and the pickers there rather than in some central distribution place.

    Either way, I think this whole area is something we need to be interested in. In the new era of markets that the super-interconnected world is in, transport and delivery systems are going to be the key players alongside the ICT & network providers.

    When we can deal directly with producers in far off lands the logistics, which up till now have been handled by commodities type intermediary corporations are going to be much more fragments and new demands made on such services.

    If Tesco can deliver a TV at 11pm, Currys, Comet and Dabs are all going to have to start offering this sort of time flexibility in deliveries.

    I wrote in 2006 about how “Most supermarkets will already deliver your rubbish to your door, complete with its temporary contents of course, why not collect the empties at the same time?” I think getting the supermarkets involved in this market is key to the next stage of reducing waste and/or making recycling easier and more transparent and getting competition into waste collection and disposal.

    I’ve also always maintained, on the point Richard makes about local high streets, that local trader groups need to get together and set-up mutual services to create, for an example I floated ten years ago now, the Oxford Covered Market virtual-supermarket.

  4. Chris White says:

    The positives are perhaps more apparent than real. Doorstep delivery is a potential boon to those who are busy, housebound or who are in remote locations. In practice, however, those who are helped are those who are on-line or who receive deliveries of over a certain size. The housebound elderly are unlikely to be able to benefit to the same extent. They were helped by doorstep milk delivery but that service has largely faded, presumably because it has failed to move with the times (pint bottles delivered conspicuously on a doorstep in the middle of a summer’s day are not what most people want).

    If, therefore, we were to encourage more home deliveries of the sort which have sprung up over the past ten years, we are in danger of encouraging more comfort for those who perhaps do not need comfort and at the expense of the small retail outlet. The supermarkets will simply get stronger.

    What would be interesting would be to encourage doorstep deliveries from independent shops: could not a consortium of high street shops be given a tax incentive to club together to hire a van? Or is this a service which could usefully be provided by local government? (After all, in an ideal world, local government would regain its right to run bus services – which are in some ways merely the reverse of doorstep deliveries).

  5. David Heigham says:

    The monster hypermarket is a species which is beginning to struggle. Its environment is beginning to turn against it. As the price of driving rises, and our reluctance to dedicate hours of increasingly valuable leisure to their interminable warehouse aisles grows, hypermarkets will find economic survival harder and harder. Already all the major chains are developing formulas for smaller outlets – City, Express, etc. And they are pushing to find home delivery formulas that will pay. In the cities, I favour letting them get on with it.

    In rural areas, there is a strong case for the local authorities to find ways of facilitating home delivery. Reliable services which reach everybody can and should help to sustain rural communities. They could carry the post too, as well as deliveries from all types of shops. As the cost of driving rises, these services will steadily become more economic.

  6. Andrew says:

    I don’t see why it need differ from the current arrangements where you have the superstore and the pickers there rather than in some central distribution place.

    But why would they? If they can make the same amount of money employing less staff in a cheaper place, surely they’d do that?

  7. Peter1919 says:

    If a lot people start buying online (as I assume would be the aim of ths policy) with home delivery then would at least some ‘local’ supermarkets not become unviable? We would then risk having areas with no supermarket within a reasonable distance. So that anyone with no online access might struggle to do their shopping without having to travel relatively long distances and I can see the main Groups this affecting being the elderly and less well off.

  8. Teek says:

    An interesting concept, and one that could work with a little modification. Instead of delivery from warehouse to doorstep, how about from warehouse to local (?cooperatively-owned?) store? Each housing estate, each local neighbourhood could have a store that people can walk to, they place orders online and pick up from store at their convenience. A bit like what happens with a library (you request a book online, it gets delivered, you pick it up). That way local businesses need not fold as they keep their customers, the scaled-up purchasing power of the supermarket-model is retained as well. As David Heigham and Chris White already mentioned, a role for local government would be great, especially in rural areas.

    @ Susan Gaszczak: I do like the idea of counter-based selling and having your own containers, some high-end stores in the US do this.

    As for incentives, any supermarket group adopting this model and hence demonstrably reducing its carbon footprint could be offered tax relief.

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