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Price and non-price competition in supermarket deliveries

Geoff Riley

5th September 2020

The surge in demand for supermarket home delivery services raises interesting examples of price and non-price competition.

This Guardian article provides a timely overview of what each of the major UK grocery stores are offering to customers. Their main challenge in recent months has been to ramp up supply-capacity to meet increasing demand from those in lockdown, shielding or opting to continue working from home. Asda for example )owned by US group Walmart) is aiming to make 1m deliveries a week by the end of 2021, up from 700,000 at present after online sales doubled in the three months to the end of July 2020.

Key aspects of price competition include whether to charge a flat-rate per delivery (as Tesco has chosen to do) contrasted with demand-led pricing with deliveries being more expensive at peak times in the evenings and at weekends. To what extent are customers price-sensitive when it comes from delivery charges?

Most stores have a minimum order value ahead of delivery. Some stores now offer monthly and annual delivery passes similar to the Amazon Prime system.

Non-price competition may well turn out to be crucial in driving increasing market share. The Co-operative is promoting a trial partnership with local delivery service Pinga that can offer a 30 minute delivery service of smaller orders using bicycle couriers. The availability of delivery slots is vital in maintaining a competitive edge, so too the efficiency, reliability and covid-secure nature of the final delivery service.

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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