As it’s transformation slows, could B&M make digital pay?

B&M's latest trading update raises one of the most interesting questions in retail transformation.

The business is making progress. CEO Tjeerd Jegen's "Back to B&M Basics" strategy is beginning to show through. Ranges are being simplified, discontinued stock is being cleared, pricing has been sharpened and general merchandise margins are improving.

Yet despite all of that, UK like-for-like sales still fell by 2.3 per cent in the first quarter.

If you're sitting in the B&M boardroom, the obvious question almost asks itself.

Shouldn't we finally start selling online?

It's an understandable conclusion. Almost every retailer has embraced ecommerce in one form or another, and consumers increasingly expect to buy almost everything from their phone. Against that backdrop, B&M can look like an outlier.

The trouble is that retail economics rarely reward obvious answers.

B&M's average basket is built around products that are cheap to buy, cheap to transport in bulk and cheap to sell from a store. A packet of biscuits, a storage box and a bottle of washing-up liquid work perfectly when customers walk the aisles and take them to the till themselves. They become a very different proposition once every order needs picking, packing, shipping and, occasionally, returning.

This is the classic cost-to-serve problem. The economics of the channel have to work for the basket it's carrying, not simply for the products being sold. For a retailer built on value, adding another layer of cost can quickly destroy the very margin that makes the business successful.

B&M has already reached that conclusion once before. It experimented with online sales for larger products before quietly withdrawing the service. That wasn't a rejection of digital. It was an acceptance that, at least in its traditional form, ecommerce didn't stack up commercially.

There is another reason executives are unlikely to rush towards a full online offer.

B&M doesn't simply sell products. It sells discovery.

Most customers don't visit with a carefully planned shopping list. They come in for kitchen roll and leave with a basket containing snacks, cushions, dog treats, garden lights and something seasonal that wasn't even on the radar when they parked the car. Retailers call it the treasure hunt. Behavioural economists would probably describe it as context-driven purchasing. Whatever label you give it, it quietly drives basket value and profitability.

Online shopping encourages almost the opposite behaviour. Customers search, compare, buy and leave. Good ecommerce removes friction because that's exactly what customers expect. The challenge for B&M is that some of the friction inside a physical store is commercially valuable. Browsing isn't a weakness of the model. It's one of its strengths.

That changes the question completely.

Instead of asking whether B&M should "go online", the better question is which digital capabilities strengthen the existing business rather than compete with it.

Click and collect feels like the obvious starting point because it solves the biggest economic problem without introducing a new one. Customers complete the expensive final mile themselves while B&M benefits from another visit into the store. Every collection creates another opportunity for the treasure hunt to do its work.

Reserve and collect could be equally powerful. One of the frustrations of shopping at B&M is uncertainty. Popular products appear on social media and disappear from shelves almost overnight. Giving customers confidence that an item is waiting for them removes friction without introducing delivery costs. Technically, this is far more an inventory visibility problem than an ecommerce problem.

Selective online sales also become much easier to justify when the economics improve. Garden furniture, mattresses, electricals and bulky homeware carry healthier margins and are categories where customers already expect to pay for delivery. Those economics look very different from shipping a £2 bottle of bleach across the country.

There are more ambitious possibilities too. A supplier marketplace would allow manufacturers to fulfil selected products directly while B&M earns commission without taking on additional inventory risk. AI could improve demand forecasting, store allocation and ranging long before customers ever reach an online checkout. Better inventory accuracy would support almost every digital capability the business might choose to introduce in future.

Interestingly, some of the strongest examples already exist in the United States. Target has invested heavily in click and collect and fulfilment from stores rather than relying entirely on central warehouses. Walmart has turned thousands of stores into local fulfilment hubs, using digital to make physical retail stronger rather than less relevant. B&M shouldn't copy either business because its economics are fundamentally different. It should, however, borrow the principle that technology works best when it amplifies an existing competitive advantage instead of replacing it.

That is why I think the next phase of B&M's transformation probably isn't about ecommerce at all.

It's about deciding where digital creates value and where it simply creates cost.

Too many transformation programmes begin by asking which technology they should implement. The better ones begin by asking which commercial problem they are trying to solve. Online checkout may eventually become part of B&M's future, but it is very unlikely to be the first answer.

The retailers that outperform over the next decade won't necessarily have the biggest ecommerce operations. They'll be the ones that understand, with brutal honesty, exactly where digital strengthens their business model and exactly where it weakens it.