Big interview: Iceland eCommerce boss John Mackie

The nation has been given a behind-the-scenes view of frozen food grocer Iceland in the last few weeks thanks to the fascinating BBC documentary, Life in the Freezer Cabinet, but there are more new developments to come from the retailer later this month.

By the end of November, the food specialist will launch the first of a number of non-food affiliate websites, which will see the business selling white goods in association with owner DRL.

It’s a natural product extension for the company, which has been growing food sales and store numbers over the last few years, as well as recently launching its own eCommerce platform. Iceland did sell appliances in the past, but took these lines out of stores four years ago as CEO Malcolm Walker chose to focus on grocery.

DRL will fulfil orders from an Iceland-branded website, with the product range including fridge freezers, cookers and washing machines.

John Mackie, a former Iceland supply chain director who was promoted by the charismatic Walker last year to become director of delivered sales, will be overseeing the new operation. He has also been the man responsible for getting Iceland back into eCommerce in 2013 after an eight-year hiatus.

“Last year, we decided we wanted to resurrect online,” he explained to Essential Retail.

“Having rolled out online retail in 1999, we were probably ahead of the game and ended up doing a lot of transactions on the telephone. Our customers didn’t typically have PCs, so we were crucifying our in-store operation taking calls throughout the day and then not having enough resource to pick the goods – so we canned it in 2005.”

But by May this year, thanks to an investment of just over £1 million, the company had an eCommerce operation linked to 25 of its 800+ store estate. Orders placed via the internet are fulfilled by the shopper’s local store, and this system is now live in 280 stores in the south of England.

Built by London-based eCommerce solutions provider Portaltech, which includes Office, LK Bennett and Long Tall Sally among its retail clients, the site is producing sales levels that Mackie says are “significantly better than original expectations”.

The site was tested on Bonus Card customers, but the message began to spread on social media and through word of mouth, and it has given Mackie the confidence to continue the wider roll-out of eCommerce into its northern territories. Ultimately, the retailer will have between 550 and 600 stores linked to online, and this would give the company around 82-85% coverage of the UK.

“We’re going out to 300 stores in the north in the early part of 2014 – that’s our store estate rolled out, but then we’ll move on very quickly.

“In-store we provide customers with Bonus Cards, where savings can be redeemed, and we need to offer this online. This will happen early next year, and then we’ll allow shoppers to be able to redeem coupons online soon after.”

There is a team of around 15-20 people working on Iceland’s online operations, with nine people sitting on an online desk, where phone calls are received. There is a project manager and three people looking after the site content, as well as technical support.

The speed at which Iceland has been able to plan, develop and launch a transactional website does beg the question why it has taken other grocery retailers, in particular Morrisons, so long to commit to eCommerce.

The UK’s fourth largest grocer wrote off an almost £30 million investment in online retail development last year, and has instead committed to a multimillion pound partnership with e-tail-only supermarket Ocado that will start in January 2014. Iceland and Morrisons differ hugely in size and they operate very different supply chains, and Mackie says that his company has been able to build its online retail site quickly due to its well-established home delivery platform, which has 180,000 transactions each week.

“Morrisons had to go from a standing start, but we had an operation that has offered home delivery since 1996, so we already had the vans, drivers and storage – we just needed a website,” he explained.

“We wanted to keep things as simple as possible.”

The latest Kantar Worldpanel data indicates that Iceland holds a 2% share of the UK grocery market, but this is expected to grow around Christmas as shoppers take advantage of the company’s frozen food party offering. When looking at its closest rivals in terms of market share, Iceland’s new website could certainly be viewed as a tool to distinguish it from the likes of German discounters Aldi and Lidl, and value frozen food retailer Farm Foods.

Mackie said: “If we didn’t offer online, would this business still be here? Yes, I think it would, but the big boxes are offering it so we should absolutely be there and it will probably differentiate us from some of our closer rivals.

“Morrisons has put its recent lack of growth down to not having online shopping, so it’s clear we have to be playing in that field now.”

Once loyalty features have been added to Iceland’s online site, further technological development is expected to follow.

Iceland already runs a mobile-optimised website, but Mackie is planning to launch a mobile app by the middle of 2014 and then more advanced fulfilment options.

Highlighting the adaptability today’s retailers must show on a near-weekly basis, Mackie added: “I’ve always said we wouldn’t have to offer click & collect, but retail has moved on very quickly and we’ll look at that by the middle of next year. There are no definite plans for it but it’s something we’re considering at the moment.”

The online operation is solely for the UK, but Iceland is currently growing internationally and Mackie is confident that the limited investment it has taken to set up on home soil proves that the model could be transported abroad, although there are no concrete plans yet.

At present, Iceland’s global reach stretches to standalone stores in the Czech Republic, franchise operations in other parts of Europe and partnerships as far afield as Libya. Thanks to Mackie’s work over the last 12 months, Iceland can once again include the world wide web in this burgeoning retailing portfolio.

Says Mackie: “Wherever Malcolm Walker can sell Iceland products we will not be held back.”