Could 'Click And Collect' Revolutionize - Or Kill - Home Delivery Services?

Click and collect is another example of a tangible business - in this case, home delivery - attempting to reap the rewards and margins of intangible businesses by interposing itself as a facilitator between customers and merchants while offering the choice of delivery or picking up the order.

The question is whether consumers actually perceive the need for such a service or whether they still feel sufficiently motivated and capable of dialing themselves. JL


Izabella Kaminska reports in FT Alphaville:

The point at which a customer decides the cost of delivery is greater than the inconvenience and cost of getting off his bottom determines the cost that competes with a customer's own "get off my bottom" cost. Click-and-collect allows the customer to order online, while transferring delivery to the customer at his own convenience and cost. The platform is valuable because customers use it to book deliveries. But if click and collect subsidises delivery, more customers must use the platform for click and collect than for delivery. It's not clear they would do so unless incentivised by discounts.

It’s been six years since Deliveroo served its first order, according to a press release from the aqua-blue branded food delivery giant.
In that time, Deliveroo riders have taken over the London cityscape (and many others), and permanently changed middle-class urban dweller expectations about how food should be served to them (not on a silver platter, but in a silver foiled Thermos box, preferably worn on the back of a minimum wage worker).
They've also challenged the conventional notion of what it means to be an employee and an employer by disrupting the concept of job security.
Through it all, they've never made a profit - something usually explained away by the need to first establish scale (and absolutely nothing to do with the non sustainability of the core business model).
Six years wiser and six years bigger, however, there's finally evidence Deliveroo may be on to a profitability winner. Ironically, the solution is probably tied to turning its original proposition on its head.
From the press release (our emphasis):

Deliveroo marks its sixth birthday in the UK by announcing further expansion: the company works with 20,000 partners in the UK and is launching in new towns

Deliveroo is set to roll out ‘click and collect’ with thousands of restaurants in 2019

Yoobi Sushi is the first British restaurant Deliveroo is launching internationally

Company is set to launch in an additional 8 UK towns in the next month and plans on adding more than 40 by the end of the year

You might say it's brazen for a lossmaking company with Delivery in its title to pivot to a "click and collect" model while describing the move as innovation "that will bring even more choice to consumers".
But who can blame them? This is what digital platform start-ups do. They move fast and break things then pivot as they learn stuff everyone else already knew.
Deliveroo says it "wants consumers to have options for every occasion, which this new feature will help to achieve". But it presumably also wants to make a profit. If that means moving away from the lossmaking people-intensive and legal-headache inducing business of food delivery and over to the more profitable business of pure digital bookings, then why the hell not. Digital bookings are a good business. And the objective, after all, is to make a profit.
Nonetheless, the move to click-and-collect does speak volumes about the (non) viability of the original business model.
But first some history.
Click-and-collect was first rolled out by supermarkets who understood that the cost structure of specialised and immediate food delivery was challenging to crack.
What might be dubbed the lazy-to-active customer sweet spot -- the point at which a customer decides the cost of delivery or inconvenience of delayed delivery is greater than the inconvenience and cost of getting up off his bottom and going to the store direct -- determines everything. More often than not, servicing the lazy spot at a unit and convenience cost that competes with a customer's own "get off my bottom" cost is tough to achieve. Most online fresh food delivery is hence cross-subsidised by providers by other conglomerate means.
Click-and-collect solves this lazy paradox. It allows the customer to order online, while transferring the costly job of delivery to the customer at his own convenience and cost.
From the point of view of the customer, the click and collect proposition is genuinely appealing. The supermarket takes the responsibility of bundling goods on the customer's behalf and does that job more efficiently than the customer could do himself. An efficiency exists, hence the exercise is more than likely profitable. The bigger the basket being bundled, the more compelling the proposition.
So what about Deliveroo? Obviously, there's no evidence it can bundle food more efficiently than a customer. That's the job of the expert restaurants it partners up with.
But Deliveroo's business has always been a two-part business. Customers use Deliveroo for delivery, but restaurants use Deliveroo for the marketing services they offer as well as the order management systems they provide them.
That is a useful service. Restaurants benefit from being seen on the Deliveroo platform and being able to take orders online digitally.
But there are issues.
The Deliveroo platform is only valuable from a marketing perspective for as long as it remains a delivery site, because customers use it to book deliveries. But if click and collect is to subsidise delivery, more customers must use the platform for click and collect than for delivery. It's not clear if they would do so unless they are incentivised by discount offers. In which case, we're kind of back to square one.