Retailers driven to offer faster deliveries
Written by Peter Walker
The proportion of retailers offering same-day delivery is expected to increase from 19 to 29 per cent over the next five years, while those offering next day delivery or faster will face increased competition, with the proportion expected to jump from 62 to 83 per cent.
This is according to interviews with senior business decision-makers at 100 leading UK retailers conducted by GlobalData on behalf of law firm TLT.
With the continued growth of online sales, just under half (46 per cent) of UK retailers said the future of their business now depends on improving fulfilment and logistics.
The average level of investment in fulfilment and logistics is expected to rise from nine per cent of annual revenue to 12 per cent over the next five years, compounded by the fact that three quarters (73 per cent) of retailers said more will have to offer free delivery in order to compete.
Returns are adding to the pressure on costs, with retailers reporting an average 28 per cent rate of returns on all goods sold, climbing to as high as 58 per cent for some. A further 56 per cent responded that effective management of returns is key to the profitability of online sales.
The number of retailers investing in warehouse management systems or robotics is expected to increase from 22 to 44 per cent – both the highest increase and biggest planned area of IT spend.
The biggest barriers to technology adoption include economic uncertainty (66 per cent), legacy issues (58 per cent), not knowing where to invest (53 per cent) and difficulty finding the right partners (32 per cent).
Most retailers are planning on proprietary investment in technology (57 per cent), while just under a third (30 per cent) plan to partner with technology companies and a fifth plan to buy off the shelf. Only 11 per cent plan to acquire or invest in a technology business and eight per cent plan to partner with other retailers.
Perran Jervis, head of retail and consumer goods at TLT, said that while adapting to an increase in online sales is not new, this year's data suggests that retailers have reached a tipping point and business models need to change to become more agile.
"Consumers increasingly want fast, free and flexible delivery – that's going to require fundamental changes to warehouse locations and technology, product visibility and commercial offerings, including offering customers a more personalised service.
"The scale of change needed and pressure on costs means that retailers cannot afford to do this alone,” he continued, adding: “Retailers are now embracing partnerships to deliver the infrastructure required to get products into consumers' hands and this trend will have to continue.”
Separately, research commissioned by Click and Collect provider Doddle revealed that 43 per cent of Brits are now more likely to shop with a rival retailer if they offer a greater range of sustainable delivery options.
Two fifths did not think retailers currently do a good enough job of offering sustainable options, and a quarter were annoyed that home delivery is often positioned as the default option, generating unnecessary emissions.
Younger consumers (18-24 year-olds) are adopting more environmentally friendly habits, with over half of them (53 per cent) planning to use direct home delivery less in future – nearly double the number of 45 year-olds (29 per cent).
Doddle suggested that these changing attitudes could impact retailers’ bottom lines if they don’t give their customers green choices. Half only want to support retailers with a wide range of sustainable options in future, and for younger shoppers, 56 per cent would shop with a competitor which offered more sustainable options.
Tim Robinson, chief executive of Doddle, commented that as shoppers become more environmentally conscious, retailers need to mirror this in their offer. “While convenience remains important for customers, it’s not enough for sustainable delivery to be an add-on or after-thought anymore – in an already tough environment, it will set brands apart in their battle for customer loyalty.”