Asda is to expand its grocery delivery capacity by 40% and extend a partnership with takeaway courier group Uber Eats after a surge in demand for home shopping during the coronavirus pandemic.
The retailer, which is owned by US group Walmart, said it was aiming to make 1m deliveries a week by the end of next year, up from 700,000 at present after online sales doubled in the three months to the end of July. Its delivery trial with Uber Eats, which kicked off in two outlets last month, will be extended to 25 more stores over the next eight weeks.
Strong online sales, including a quadrupling in orders made online but picked up outside stores, helped lift underlying sales by 3.8% in the quarter, excluding fuel. Operating profits fell after increased costs related to the pandemic despite the benefit of the government-backed business rates holiday.
Asda, which is seeking new investment through the sale of a majority stake in the business, said it had already increased capacity for online grocery deliveries by 65% since the high street lockdown began in March. During that time it has provided 1.4m free-of-charge delivery slots for clinically vulnerable customers who were asked to shield at home and made 3,500 slots available for small care homes.
Roger Burnley, the chief executive, said: “The pandemic has created a structural shift in customer behaviours towards grocery shopping. We have accelerated our online capacity expansion to meet levels we had anticipated reaching in eight years within a matter of weeks and we will continue to expand this offer.”
He said that shoppers were now turning from health concerns to the financial implications of the pandemic, which could have a major impact on peak trading around the Black Friday discount period and Christmas.
In a recent survey, almost half of Asda customers said they expected their household incomes to decline over the next 12 months. Asda’s regular Income Tracker survey also shows that family spending power had decreased by 2.2% in the year to June to £211 a week – the steepest fall in seven years.
Rob McWilliam, Asda’s finance director, said the outlook for Christmas was difficult to predict “without a crystal ball” given the uncertainties around the pandemic and Brexit, with the transition period currently scheduled to end on 31 December. But he said: “We will continue to invest in prices … Building online capacity and price [cuts] feels like the right positioning for what will be another challenging few months.”
With money tight, families continue to expect to spend more time at home, boosting sales of home furnishings and baking products. A long spell of good weather and the trend for staycations, as quarantine rules and travel bans have limited trips overseas, also lifted sales sales of camping equipment by a quarter.
Overall demand for clothing declined, but parents prioritised children, with new outfits including pyjamas, jogging bottoms, shorts and T-shirts. The gradual easing of lockdown and a return to work for many in August has meanwhile seen motorists return to the pumps with demand for fuel now at 90% of the level before the coronavirus outbreak.
