E-commerce might be the growth area for retail, but for traditional retailers in particular it is far from painless.
If your logistics system is geared to delivering products in bulk to stores, a home delivery sale will generally have additional costs, reducing profitability.
For example, research by Kurt Salmon (now part of Accenture) a couple of years ago suggested that the big supermarkets were losing between £5 and £7 on every order, and it estimated that this amounted to a £500m cost for the industry.
Of course, e-commerce is not going to go away. According to IMRG, online retail sales in the year to March were up ten per cent on the year before.
So the challenge for retailers is to improve the efficiency of their e-commerce logistics systems. So perhaps it is not surprising that a survey of retailers by law firm TLT had found that spending on logistics will increase from nine per cent of turnover to 12 per cent over the next five years.
One of the factors driving this investment is the increase in returns. The TLT study found that he average proportion of returns is now 27 per cent. However, in some sectors returns can be 58 per cent. For others, the proportion can be as low a two per cent.
The TLT study also predicted that free delivery will increase as retailers compete for online sales.
However, another piece of research, this time the IMRG Consumer Delivery Review 2018, found that satisfaction with online delivery fell from 85 per cent in 2017 to 78 per cent in 2018. Shoppers highlighted a number of concerns, notably: risk of failed delivery, additional cost of home delivery, and delivery too slow.
This focus on logistics has to be good news for the profession. But logistics and supply chain professionals are going to have to deliver, and that will be a major challenge.
