Iceland offers home delivery from all stores

Iceland, the struggling frozen food retailer, yesterday announced the nationwide roll-out of its home delivery service in a move that will create 1,000 jobs. The service, which has been tested for a year, will be available in all Iceland's 770 outlets by the end of this month.

Malcolm Walker, chairman, said home delivery would attract new shoppers, expand its demographic target market and increase the average spend in its shops: "We'll see no benefit from this for a year and it will be a long haul. But we are doing something unique. There are massive costs but it is getting massive take-up. The customers love it."

The comments came as Iceland announced an 18 per cent fall in pre-exceptional half-year profits to pounds 24.5m. The company could not explain how its results came to appear in one national newspaper a day ahead of schedule. The Stock Exchange expressed some concern but said there had been no breach of its rules.

Iceland's home delivery service is free to customers though they must hold the company's Privilege loyalty card and spend a minimum of pounds 25. The drawback is that customers must visit the store to make their purchases and must live within a 10-mile radius (or three miles within the M25).

Deliveries are made during normal trading hours within two-hour time slots.

Mr Walker said the service would be attractive to its core market which is the 60 per cent of British housewives who do not have access to a car from Monday to Friday. Half its stores do not have car parks.

Iceland has spent pounds 12m developing the system. It has bought 850 refrigerated vans and will employ an extra 1,000 staff. It is testing a telephone ordering system in one area using a call centre at its head office in Deeside in north Wales.

Though Mr Walker claimed the launch was a unique system that was ahead of rivals, it was criticised by analysts. David McCarthy, food retail analyst at BZW, said: "I don't think it will work. It is too expensive to run and too easily copied."

Somerfield is testing a similar home delivery system with telephone ordering. Others such as Tesco and Sainsbury's are well advanced with Internet ordering and call-and-collect systems, where customers order by phone or fax then visit the store to collect their shopping.

Another analyst said: "They had to come up with a new idea but you still wonder where the growth is going to come from. I don't believe it will win new shoppers to the chain."

In the six months to 28 June Iceland improved its sales by 4.4 per cent to pounds 711m. Like-for-like sales rose by 1.1 per cent during the period and are up by 2 per cent in current trading.

The company said it expected home delivery to increase sales by a level sufficient to cover its costs. This would mean a like-for-like uplift of around 3 to 4 per cent.