Deloitte recently published the Deloitte Consumer Tracker Q2 2021 which highlights shifts in consumer behaviour, including in grocery shopping.
The standout statistic for grocery shopping? That whilst the proportion of consumers using online as a channel for their main grocery shop (26%) has remained stable in Q2 2021, the number of people using the large supermarket store channel continues to decline falling by 3 percentage points (to 54%) compared to the same period a year ago.
With working from home continuing and data from the Deloitte State of the Global Consumer Survey showing that consumers are continuing to exercise caution over ‘in-person’ retail it seems that the trend for online grocery shopping is here to stay. In this article Deloitte’s Legal Advisory specialists examine three of the key legal considerations associated with this shift: complying with consumer law; keeping Ts and Cs up to date; and delivery relationships and requirements.
Surreal substitutions and unripened ugli fruit
Almost everyone who has ever done an online food shop has a story to tell about a surreal product substitution: from sweet potatoes instead of potatoes to olives instead of olive oil.
For this reason, and because there is no option to self-select the produce (checking for perfect ripeness, for example), many shoppers are cautious about ordering fresh groceries online.
If shoppers do choose to trust the online shopping route the key obligations on retailers under the Consumer Rights Act are that the goods meet the following requirements:
- Satisfactory – this means that the produce should be of the quality reasonably expected by the consumer based on the information available to the customer when they made the purchase as well as the cost of the product.
- As described – this means that the product must meet the description provided to the customer at the time the customer made the purchase.
- Fit for purpose – this means that the product must meet the purpose that it is meant to perform.
If the produce does not meet these criteria, the retailer should provide a full refund or replacement to the affected customer if requested by the customer within 30 days of the purchase. Many supermarkets provide substitutions as offers only, as opposed to suggesting that the substitutions are necessarily the supermarket’s attempt at meeting the order. Legally speaking, this gives rise to a new contract in relation to that substitute item, with the customer being given the option to accept it, or not. It is therefore imperative that the cost of the substitute (and any differential with the ordered, but unavailable, item) is made clear to the customer either prior to or at point of offering the substitute. Without that notice, the ‘new contract’ lacks a specific, agreed price and arguably, the customer could refuse to pay any extra cost associated with it.
In cases where there’s no substitute, but produce is delivered that could arguably be said not to meet the above criteria because it is over-ripe, under-ripe, too small, too green etc., then legally the retailer will often have the upper hand, as long as the item is not damaged or in an expired condition. This is because the customer is not going to have had the opportunity when ordering to incorporate specific requirements for the produce, or set out the planned purpose. For retailers, online descriptions should be kept relatively vague and high level, so as not to encourage arguments that the produce does not meet the description. Introducing terms or descriptors like ‘ripe and ready’ or ‘ripen at home’ encourage buyers to increase their expectations one way or another, and may well result in more returned stock. Having said the above, it is arguably better in any event, i.e. whether or not the produce meets the necessary criteria, to accept that “the customer is always right” and in practice many retailers adopt that “happy customer” approach. The cost of a replacement or refund to most retailers is fairly minimal compared to the negative impact that perceived poor customer service can have.
Updating sales terms and conditions
In addition to the relevant statutory law, it is equally important to consider the contents of terms and conditions. Selling online changes the way in which consumers and retailers are interacting and clear terms and conditions should reflect that.
Terms and conditions should cover the ordering of, payment for and delivery or collection of produce as well as what happens if any element should go wrong.
When it comes to online grocery purchases, this means including provisions to clarify when and by whom produce is accepted. Unlike in the store itself, there are a myriad of ways in which a contract can be formed between the retailer and customer.
With online purchases, the idea is often that the customer makes the offer by clicking “buy now” and making a payment, as opposed to the contract being concluded at that point, and the parties bound. This means online retailers can, legally, reserve acceptance until they can verify stock.
Online point of sale Ts and Cs can go a long way to provide additional protections to the retailer though they cannot trump statutory requirements. For example, it is possible to reserve the right to increase or amend prices, in the case of stock changes, shortages or other supply issues provided that this is transparent to customers. The more a term in a retailer’s terms and conditions subvert a customer’s expectations, the more important it will be to ensure that such terms are clear and suitably flagged to customers.
It’s also important to address what happens if stock is not available at all, e.g. setting out what role ‘substitutes’ will play and what the retailer is entitled to charge (see above), and provide for whether customers have to be present for delivery, e.g. what the delivery driver is or is not entitled to do or assume. Given the importance of the delivery experience, the delivery of the goods, and what this looks like and who will be responsible, should be dealt with transparently in the Ts and Cs, in order to mitigate risk.
What delivery model is right for any retailer?
The delivery service is a significant part of a consumer’s experience when shopping online, so it is important for retailers to offer a delivery service that reflects their brand in terms of quality, value and speed of service.
Whether a retailer decides to outsource their delivery service or keep it internal (whether including third party contractors for some elements or not) there are a number of considerations retailers will need to take into account:
- Branding. Retailers should consider if they want their image tied up with that of a delivery service or if they would rather present their offering as a single entity and avoid competitors being associated with their delivery provider. If the parties are able to agree branding, publicity and presentation can be addressed in contracts but the question of who staff are actually working for is a thornier one and it may be that legal advice is required.
- Outsourcing or acquisition. If a retailer does not have the infrastructure in place to offer a delivery service, it may need to work with an established delivery service. The contract for services with the delivery company should be detailed and regularly reviewed, incorporating, amongst others SLAs or KPIs, and offering maximum protections for poor service or failure to meet expectations. Equally, some flexibility needs to be retained in the contract to accommodate new requirements, scaling up or down according to demand, and/or force majeure issues.
- Data. Delivery of goods means the collection of more personal data and more uses of that personal data. Whether sharing such data with a third party delivery service provider or providing the service internally, retailers will need to be careful to ensure that they are handling their customer’s personal data appropriately. The cost of a data protection claim from a distressed customer is not only financial, but reputational.
- Cost. Retailers should consider if they charge for delivery, if any pricing should be variable and whether there should be minimum spends associated with delivery. Wrapping the cost of delivery into the grocery shop may well feel like a neat selling point for the customer.
- ESG. Nowadays, retailers should also consider how they can minimise their environmental impact:
- is it possible to lease or acquire a fleet of electric vehicles and if so, what happens to the existing fleet – can the lease be re-negotiated; or
- can assurances be made about returned stock not going to waste (for example, rejected substitutes). If so, will the retailer or the delivery provider be responsible for what happens to returned stock. If the retailer, consider if a relationship needs to be developed with a third party who can make use of that stock (for example, a charity). If the delivery provider, consider if the retailer requires audit rights to check compliance or termination rights to enable termination for failure to comply with ESG obligations
For more information on the digitisation of the retail sector take a look at our article here or contact our team through Calum Murray (Partner), Rachael Barber (Partner) or Emily Nuttall-Wood (Director).