Apr 15, 2009


SuperValu, America’s no. 5 food retailer, just announced it will stop delivering goods that consumers order on line.

The end  of a distribution channel?

Not exactly, and that’s what caught my interest. 

SuperValu has listened to its customers (in surveys 60% of on-line shoppers say in-store pick-up is actually more convenient for them) and they’ve looked at the economics of individual specific operating activities (channel flows). They aren’t eliminating the channel. They’re sculpting it. Shoppers will still get the convenience of on-line ordering and store-staff picking of selections from the store aisles. They just won’t get that ($$$) drop-off at their doorstep that is so hard to coordinate and frustratingly inconvenient.

Retailers — and manufacturers — should do a lot more of this: determine what experience provides end customers the most benefit. Compare that benefit to its cost to you.  Will shifting some activities to a partner (e.g., delivery via local trucking companies) improve net value? Will restructuring the offering in a novel way that comes at consumers’ need from a different direction (e.g., pick-up at loading dock available when store is closed) add more value?

There are always improvements to channel systems and better alternatives. As a rule of thumb, the most resilient distribution systems are multichannel and adaptive. 

Bottom line: avoid shutting any route to market entirely. Try reshaping it instead.

No comments: