Why shoppers love click and collect, and the supermarkets don’t

If there is a luxury item offered by the two major supermarket giants that everyone can afford, it’s click and collect – or, in Woolworths marketing parlance, direct to boot.

But can it continue as a free offer? You’d have to wonder.

Experts contend this service could already cost the supermarkets a combined $600 million a year, an amount that could balloon to a combined $1.5 billion annually in five years, according to Citi analyst Adrian Lemme.

It is no time for the big supermarkets to start charging for click and collect.Credit: Michaela Pollock

Yet with everyone these days hating the supermarkets, which are (sometimes unfairly) blamed for our cost-of-living crisis, no reputation-sensitive grocery giant will be prepared to weather the PR or customer relations fallout from starting to charge for this increasingly popular service.

Now is not a time for Woolworths or Coles to raise their heads above the parapet by introducing a new, unpopular fee for a currently free service.

They are even less likely to move at this point given the government is still sitting on a supermarkets pricing report provided by the Australian Competition and Consumer Commission, which could be an unexploded grenade for the retailers.

If the rise of click and collect continues its rapid trajectory, it could become something of an earning albatross for the supermarkets.

The supermarkets don’t know exactly what’s in the report, but they understand it contains ammunition for the government for another assault on what it contends are the rapacious giants of the sector. The government has been sitting on this report for almost three weeks, presumably seeking the most opportune moment to weaponise it.

Last week may have been interrupted by ex-tropical cyclone Alfred as all were focused on its impact and the recovery of those affected.

Prime Minister Anthony Albanese took the cyclone period to take a swipe at insurance companies, which were the more appropriate villains for that moment. And, pleasingly for the supermarket giants, reports of their staff (or team members, as they call them) going above and beyond to ensure people affected by the storm had enough supplies to last through the crisis were getting some good airplay.

But if the rise of click and collect continues its rapid trajectory, it could become something of an earning albatross for the supermarkets.

Lemme says the service now amounts to 40 per cent of supermarket online sales. But home delivery, which makes up the remainder, comes at a clear cost to the customer – a price that varies depending on the size of the basket and the immediacy of delivery.

So, customers understand that home delivery for the most part isn’t free, but that click and collect is still a valuable service they don’t need to pay for.

Customers have a well-honed radar for value. For cash-strapped consumers, the value of click and collect is intrinsically understood.

The convenience of picking up your already ordered shopping from a nearby Coles or Woolworths after school when the kids and the dog are in the car has understandable appeal.

For supermarkets, the cheapest selling method is having their customers cruise the aisles with a trolley. So in a sense, we as customers are providing the labour for free, while click and collect means the supermarket pays for staff who are shelf-picking the order and taking it to the car.

Lemme believes that ultimately the supermarkets will need to introduce a “price signal” which, translated, means a charge. Citi suggests introducing a minimum grocery order value to receive this service for free, which is how it currently works with home delivery sales.

Citi’s verdict is: “We believe pricing on C&C (click and collect) needs to be addressed at some point, given the drain we see it placing on the supermarket [profit and loss statements] over the next five years. A failure to do so would require further cross subsidisation from in-store-only purchases. We don’t see this as sustainable.”

While this makes financial sense, click and collect services remain a point of difference for shoppers at the two dominant supermarket chains, given you can’t get this service at Aldi or Costco.

And Woolies and Coles are acutely aware that shoppers are less loyal during the cost-of-living crisis.

So it’s probably a cost the big two have to shoulder at this time. Now is not the time to rock the boat.

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