Three quarters would spend more for fast delivery
Written by Hannah McGrath
Nearly three quarters (74 per cent) of shoppers would be prepared to spend more in exchange for shorter delivery times, according to a new study that highlights the value of the ‘last mile economy’ in opening up new revenue streams for retailers.
A global survey of more than 2,870 consumers and 500 supply chain executives, retail entrepreneurs and industry leaders by the Capgemini Research Institute found that despite growing appetite for innovate delivery options, just one per cent of retailers would be willing to cover the full cost of delivery.
As delivery services such as Amazon Prime and Deliveroo become more mainstream, consumer expectations have adapted. The research revealed that fast and effective deliveries could increase consumer spend with retailers by as much as 12 per cent and improve their loyalty over time.
Despite the fact that 55 per cent of shoppers said two hour delivery times would increase their loyalty to a retailer, just 19 per cent of businesses currently provide this option, the report found.
Just over half of shoppers (53 per cent) said they would be willing to purchase a paid membership in exchange for a good delivery service.
Furthermore, the report’s study of retail executives found that automation could be key to making last-mile delivery a profitable area for investment. Automation of back-room functions could automatically increase profit margins by as much as 14 per cent, the study found, by reducing the cost of Click and Collect order and deliveries to stores.
In the same vein, half of consumers expressed a willingness to use new technology such as smart locks, to enable delivery when they are not at home.
In the groceries industry, the survey found that the volume of online orders is set to surge from the current 43 per cent to 56 per cent by 2021, suggesting that retailers offering smooth and efficient delivery could profit from increased uptake in the coming years.
Meanwhile, tech-forward grocery delivery companies are already tapping into the 65 per cent of customers who have opted for innovative last-mile delivery options such as Google Express, Instacart or Ocado. Delivery services for food and grocery products are considered a “must have” by shoppers, with one in five prepared to switch retailers if this is not provided.
The report found that the majority (59 per cent) of customers are not satisfied with the high prices attached to last mile delivery services, while 47 per cent said a lack of same-day delivery is their major frustration, followed by late deliveries on 45 per cent.
Nearly half (48 per cent) of customers who had an unsatisfactory experience with delivery would stop purchasing from a retailer as a result, while those who remained loyal would still reduce their spend by 45 per cent.
The study found that last-mile delivery accounts for 41 per cent of overall supply chain cost, which can take a huge chunk out of profits, as organisations only pass 80 per cent of the cost of delivery on to the consumer.
As a result, 97 per cent of retailers said that current last-mile delivery models are not sustainable in all locations, suggesting they would do well to find a balance between customer expectations of delivery and the company’s profitability.
Ruud Limmen, vice president for value chain development at Dutch food retailer Ahold Delhaize said: “We view the last mile delivery as a fundamental part of our service to the customer as it greatly contributes to the overall purchase.
“With changing customer demands, and increasing online purchases of food and grocery items, we are experimenting with new services to be able to continue providing a better customer experience.”