Store To Door

“I led Asda’s programme to migrate away from loss making warehouses, building a store fulfilment operation to allow rapid scalability”

Revolution: 6 February 2002

Revolution - Store to doorAsda has turned its back on warehouses for its home delivery offer. The retailer’s lain Spence tells Charlotte Goddard how the supermarket plans to boost the reach and efficiency of its e-commerce service.

To be or not to be may be the question if you are a gloomy Dane thinking about topping yourself, but for grocers running an e-tail arm, the big question is still to warehouse or not to warehouse.

The fulfilment problem that has been bothering clicks-and-mortar retailers since the launch of the first e-commerce initiative is still rearing its head – should orders be fulfilled from a warehouse or by in-store pickers and packers? went in-store from the start, with its food products at least, and has reaped the benefits. Sainsbury’s went for a warehouse and store mix and has, arguably, not done so well.

Although research company Hitwise UK ranks the supermarket’s Sainsbury’s to You service second in its combined groceries and alcohol category for visits, it has just 8.08 percent of the market, well short of’s 64.47 percent. This could be down to factors other than fulfilment, but the gap doesn’t reflect the rivals’ offline market share (although this is spend, rather than visits), calculated by Taylor Nelson Sofres as 25.4 percent for Tesco and 1 7.6 percent for Sainsbury’s in the 12 weeks to 6 January.

Among other retailers, John Lewis’ soon-to-launch grocery brand Ocado will have an entirely warehouse based system, but Asda, which launched Asda @t home on the internet in November 2000and on Sky Active’s interactive TV platform last month, recently decided to close its two warehouses and concentrate on fulfilling home shopping orders from its stores. Asda had been hedging its bets with a hybrid system. Depots served London and the South-East, while in-store pickers were employed across the rest of the UK.

“Fulfilling in-store helps us get our full range of products on the web”, says lain Spence, director of new channels at Asda @t home. “We now have 11,000 products, whereas the warehouse only handles 2,000-plus. The in-store system also lets us roll out Asda @t home quickly across the UK. Our aim for 2002 is to reach 60 percent coverage of the population, and that is only practical through stores.”

At the moment there are nine Asda @t home stores in Yorkshire and the North-East, three in the North-West, two in Wales, one in the Midlands and six in the South, with 13 more gearing up to take over from the warehouses in London. Spence defends the initial use of warehouses us a learning experience, even though they cost £4 million to set up, and suggests that the fact that Asda did not rely on them solely makes the cross over to fulfilling orders only from stores much easier.

“The depots worked well for the past three years, and we learnt lots from them”, he says. “We wanted to get the fulfilments process right before we committed to a national roll-out. One of the lessons we learnt was that managing order fulfilment through stores is certainly more efficient than running it out of depots”.

However, closing the depots has meant redeploying the 330 staff employed there to its stores, and customers in the London area have been warned to expect an uneven service while the transfer is completed.

In-store pickers use a Palm Pilot system developed by logistics specialist Excel that integrates Asda’s network, picking and load planning. “The system routes the picker around the store, letting them pick several orders at once, and suggests alternatives and substitutions if an item is missing”, explains Spence.

He adds that Asda has just completed a systems integration with parent company Wal-Mart, which should help it keep up with developments in the US.

Deliveries over £100 are free, and orders made before 5pm are delivered the following day. The trouble with in-store picking is that pickers can get in the way of other customers, particularly when the store is crowded. But Spence hopes to use elements of Asda’s e-commerce platform, built by BroadVision, to persuade online shoppers to request deliveries at less busy times.

“Friday, Saturday and Sunday are the busiest days for us and everyone wants their deliveries on those days”, he says. “We would like to incentivise people to request deliveries at other times, maybe through money-off vouchers or by dropping the delivery charges. There are lots of options”. Asda hopes that such initiatives will help it grow its share of the online grocery market. It is currently ranked third in the grocery and alcohol e-commerce sector by Hitwise above Iceland and Safeway but gained just 7.6 percent share of visits, a far cry from the 16 percent share of offline grocery spend it achieved in the six weeks to 6 January.

Asda @ home currently has 16,500 registered customers. Developed by Xpedior, now owned by Arthur Anderson Digital Solutions, it was launched online in November 2000. Since its launch, the average basket size has increased by 25 percent, according to Spence, with customers ordering 70 to 100 items a visit, perhaps attracted by the free delivery on orders over £100.
Before the online service, the supermarket operated a CD-Rom- based product, launched in July 1999, that allowed customers to access an offline catalogue then go online to place an order. Prior to this, it had a catalogue-based telephone and fax ordering service.

Both of these were fulfilled from its Croydon and Watford warehouses. In 1999, Asda launched a comparison shopping site, Valuemad, which was merged into ShopSmart (now owned by Barclaycard) in 2000 in a cashless deal that saw Wal-Mart and A0L take a joint 22.5 percent equity stake in the site.

The most recent addition to the Asda @t home multi-channel service is interactive television, with the launch on Sky Active last month. While following in the footsteps of Iceland and launching on cable interactive TV might have been easier, Asda had specific reasons for choosing Sky Active.

“On other interactive TV platforms it is more a case of putting your existing web site onto these technologies, whereas the Sky service is developed just for that platform”, says Spence. But the principal reason for choosing this platform is that there is a match in the demographics of Sky and Asda.

“lt is difficult to know for sure whether our online customers differ from our store customers, but the core Asda customers are families – ordinary working people, particularly mothers with kids at home who find it hard to get to the shops and want Asda prices without having to leave their houses”. Asda has also moved into interactive advertising on television on ITV Digital.

An interactive ad created by Carlton Active ran before Christmas, promoting special offers, the Asda @t home e-commerce site and other home delivery options. A menu of Christmas offers was split into categories such as wine and spirits, beer and chocolates. By clicking on a category, users could find out the latest offers and price reductions, updated on a weekly basis.

Asda is the first grocery e-tailer on SkyActive and is now developing ads for the platform. Only two stores are currently available via the patform, Morley in West Yorkshire and Roehampton in Surrey, but Spence says he just needs to “flick a switch” to get other stores on board. “In terms of magnitude we are the most complex e-tailer on a satellite network, which is why it has taken a long time to implement”, says Spence.

“We wanted our full range of products there from the word go. We have only been up and running for a few weeks but the early signs are very encouraging.”

Broadvision’s Turner explains that Asda’s ambition is to provide a complete multichannel offering. You can place your order at work, book a delivery slot by calling the call centre in the car on the way home [call centre is fully integrated with the web and TV offering], then check it on the TV when you get home and realise you have forgotten the cooking oil, so add it to the list, he says.

Personalisation is key to Asda’s online vision although at the moment, this is limited to a personalised shopping list that is accessible during repeat visits to cut down time spent online.

“We’ve found that a customer’s first online shop will take anything up to 4O minutes”, says Spence. “After that it should only take about 10 minutes as they order from their shopping list, which includes all the goods they bought in the past few orders.

The aim is to include cross-selling and up-selling options to encourage impulse-buying and remind customers of items they may have forgotten. The BroadVision package contains a command centre that is like a dashboard for marketing people, says Turner. It enables Asda to target ads based on what customers have bought or looked at before, to change the profile of customers according to their behaviour, to offer incentives, and basically to build a learning relationship with the customer.

Asda also personalises its e-commerce offer by postcode. While prices are the same online as in Asda stores throughout the U K, local product ranges can vary, and that is reflected online. “Stores in Wales stock Welsh milk, and that is not a big seller in Scotland, for example, so we don’t clutter the aisles with it online or offline”, explains Spence.

While Spence believes Asda’s interactive ventures need to reflect four key values : convenience, range, price and service, Turner thinks a community aspect is also important. Asda now sells pet insurance and travel insurance as well as its traditional grocery range online, and Turner sees this as a great opportunity to build a community.

“When you start getting into community groups such as pet owners, you can generate loyalty”, he says. More important, though, is that the idea of best value remains behind all Asda’s activity, be it in-store, on TV or on the web.

Wal-Mart: Integrated e-commerce initiatives

US retail giant WaI-Mart, founded in 1962 in Rogers, Arkansas, snapped up Asda in 1999 for $10.8 billion (£6.7 billion).

Asda has iust completed an overhaul of its computer networks to bring it in line with Wal-Mart’s, and hopes to learn from some of its parent company’s online initiatives. Wal-Mart’s online venture,, launched in January 2000, is a wholly owned subsidiary of Wal-Mart Stores since the company bought out its minority partner venture capitalist Accel Partners.

Wal-Mart also runs, an e-commerce site that supports its members-only discount warehouse club, Sam’s Club. Wal-Mart’s e-commerce initiatives run on the same platform as Asda’s BroadVision.

“We are particularly involved with the Sam’s Club site, which uses BroadVision as one of its standard tools”, says Ian Turner, managing director of BroadVision UK. lain Spence, director of new channels at Asda, says he also works particularly closely with Sam’s Club, which relaunched its web site in 2000.

The site now offers more than 1600 items for sale and a “click’n’pull” fulfilment system, which allows members to place orders online and pick up the goods at their local club. Future plans include broadband services such as the ability to preview CD5, DVD5, and films.

Wal-Mart also relaunched its web site last year with new features such as a travel agency and photo development centre. If a customer buys a special disposable camera in Wal-Mart store, they can drop the film off for developing and have the pictures automatically uploaded to’s online Photo Center for sharing and printing.

Wal-Mart has also used its site for webcasts of pop acts such as the Backstreet Boys and Ricky Martin, which are also broadcast in some stores. “Wal-Mart has a long history of e-commerce initiatives, and those initiatives will continue”, says Turner.