From 28th July John Lewis is to charge customers for their popular click and collect service, with a £2 charge to collect all orders below £30. Orders above £30 will still be free to collect from both John Lewis and Waitrose stores.
The retailer processes 6 million click and collect orders each year, which is now the most popular order fulfilment choice for its customers. So why then would John Lewis impose a £2 charge to use the service?
For many retailers, click and collect works as an effective eCommerce fulfilment tool as they use store stock to fulfil orders, therefore no additional delivery or packaging costs are incurred in getting the product to the customer. In John Lewis case however, it’s understood that each Click and Collect order is fulfilled from their central DC, which naturally incurs costs, especially when shipping orders to Waitrose stores for collection. Charging £2 per order will help to recover some, or even all of this cost.
Increasing Average Order Value
Adding a spend threshold is one of the most prominent techniques for increasing average order values (AOV). The logic is clear, spend just above a certain amount to avoid a delivery charge. In John Lewis’ case, it is understood that of those 6 million click and collect orders it processes each year, only a small percentage of those are under £30.
With that in mind, it’s clear that the retailers rationale for introducing this charge is to recover some of the cost of the click and collect service, as the retailer intends to invest £80m in it’s click and collect retail logistics service this year.
Is it ok to charge customers?
In the case of John Lewis, time will tell. Will click and collect still be so popular? Why pay £2 to collect from a store when a you can pay £3 to have the product delivered to your home? Albeit in 5 days rather than next day with click and collect.
That is the question many retailers will be asking in the coming months. For many, offering a free click and collect service is completely logical, as it reduces home delivery cost, drives store footfall, and the chance of further in store purchases. But with click and collect from store and local pickup points representing a huge growth area in eCommerce order fulfilment, it will be interesting to see how the cost of the service is recovered by retailers.