The booming world of online shopping is the tiger of the retail market. But, can the delivery market keep up with consumers who demand instant gratification? Malory Davies asks the questions.
The growth in online retail has been driving dramatic change right across the retail market and there is no sign of it slowing down. In the past year the value of online sales rose ten per cent, according to figures from IMRG and Capgemini. And there is no sign of the market running out of steam. Neil Ashworth, chief commercial officer of Yodel and chief executive of CollectPlus, says: “Online shopping has transformed the UK retail sector. Despite its rapid growth showing some signs of slowing the UK consumer continues to embrace the convenience that it offers. Data from the Office for National Statistics recently showed that online sales rose by 15.3 per cent over the past year and now make up a record high of 18.2 per cent of total retail sales. When compared to 2013 when only one pound in every ten was spent online, the growth is markedly clear. “Despite this continued progress, the grocery industry bucks the trend. Online food sales remain stubbornly below ten per cent, as customers continue to seek the satisfaction of choosing their own produce from physical stores. With non-food purchases on the other hand, there is often a greater desire to compare prices, and service options – driving a greater amount of business online “The growth in online retail sales via mobile is especially impressive, as consumers increasingly shop on the move during their morning commute, or in the evening, on the sofa in front of their TV,” says Ashworth. “Therefore, we can expect the demand for online shopping deliveries to align and increase over time., and GlobalData predicts that online retail sales will grow by 34 per cent over the next five years. “While the popularity of key shopping dates like Black Friday and Cyber Monday are well established, Singles Day – a Chinese import to the UK retail calendar – is likely to become the next online shopping phenomenon, and at Yodel and CollectPlus, we’re working with our retail clients to factor this into our preparations this Peak,” says Ashworth. Richard Blown, head of innovation at Hermes, argues that consumer expectation has never been higher when it comes to flexibility and convenient delivery options that place them in control. “But this requires personalisation and a greater understanding of the customer. For us, this also extends to customer returns, as well as receiving parcels, so we’re working on improving our returns process to make it even easier with trackable, instant refunds. We’re also seeing growth of our international footprint and buying and selling from the US and China in particular, so the ability to deliver across these geographies and integrate into a UK carrier network is becoming increasingly important.” Two-person delivery is also growing rapidly. “There are opportunities everywhere and in every market sector. New e-commerce retailers are being created daily and existing retailers are getting smarter,” says Charlie Shiels, chief executive at ArrowXL. And Brian McCarthy, chief operating officer at Panther, says: “Consumers are now much more comfortable in buying heavy and large items online indicative of which is the introduction of Amazon’s Heavy and Large programme of which we are a part. Further the fact that home shopping within the larger sector of the market is now able to provide an immediate solution in terms of next day or nominated day delivery to suit the customer’s requirements – something which often high street retailers are unable to do – is appealing and in turn provides greater flexibility and ease of use making the shopping experience much easier,” says McCarthy. International growth is another area of development. Dave Gladen, group marketing manager at Xpediator points out that traditionally consumers did face barriers to access foreign e-tailers, “but today they can take advantage of online opportunities taking them from domestic to international markets. Xpediator introduced EshopWedrop to meet the under-serviced Eastern European demand for access to UK and Western European markets with affordable delivery costs. “Through overlaying EshopWedrop service on top of the regular groupage services for Xpediator’s freight forwarding division Delamode’s across its international freight network, consumers across Europe can now access a much wider range of goods at greatly reduced delivery rates. For example, a laptop bought from an online UK retailer to Vilnius (Lithuania) through EshopWedrop would only cost a customer €6.99 to be delivered. With significant cross-border online shopping in Western and Northern Europe too, Xpediator is expanding their offering within these markets. “By using our international B2B freight network already in place, our customers across Europe can now afford to buy the products they want at any time. So, customers in Lithuania can buy the car parts they are looking for from Poland and customers in Romania can buy the baby clothes they want from the UK, and now they can do this far more quickly and cheaply than before,” says Gladen. Instant gratification is an important factor in retail and not surprisingly retailers are always looking to offer later cut-offs and faster delivery. “Customers expect speed and convenience when they shop online, especially in the fast fashion sector, and are likely to form a negative opinion of a retailer if they are let down by their delivery experience,” says Ashworth. “Therefore, retailers must be wary of over-promising and under-delivering to preserve customer loyalty. Putting the customer first and prioritising a reliable and convenient service will always win over a ‘speed at any cost’ approach. “As an industry, there is also a need to educate the consumer that there is a cost to delivery. The continual downward pressure on delivery charges is unsustainable when providing a suite of services that balance cost with factors such as environmental impact, efficient operations and fair payment,” says Ashworth. Hermes’ Richard Blown says there’s definitely still an appetite for later cut-off times and faster delivery, thanks to the Amazon effect setting expectations for next and same day. “However, we see that customers would still take the certainty of delivery – ie a convenient time slot – over speed, if this was a cheaper option. We’re always looking to deliver premium services like this that don’t have to cost the earth, as not all customers are prepared to pay a premium for instant delivery, unless the circumstances were very specific – like a crucial emergency order or a very last minute gift.” Andrew Tavener, head of marketing at Descartes Systems, says: “Retailers and transport operators alike are now faced with an intense pressure to satisfy customer expectations of faster, more convenient and ever-more personalised delivery options. For retailers who are struggling to keep up with the demand there is a hefty price to pay, with PCA Predict research revealing that UK small to medium e-commerce retailers are losing a whopping £183,000 a year in costs relating to failed or lost deliveries. “The challenges posed to retailers to fulfil faster, more flexible delivery options at no extra cost are well known within the industry, and organisations of all sizes are under increasing pressure to find greater efficiencies within their supply chain to compete. With a dedicated e-commerce WMS, more organisations can become operationally ready to better fulfil orders, reduce error rates, reduce costs, increase sales and most important meet and exceed customer expectations. “It could be argued that the Amazon effect is truly in action and will continue to gain momentum. Simply stated, the Amazon effect is the on-going evolution and disruption of logistics, supply chains, retail, consumer behaviour, markets, and more since Amazon’s debut in 1994. Take consumer behaviour for example, Amazon habituates consumers to expect a near frictionless shopping process. The e-commerce giant has helped to solidify the expectation for fast delivery, visibility, communication, and straight-forward returns,” says Tavener. The demand for later cut-offs and faster delivery is also a factor in the two-person market. Panther’s Brian McCarthy says: “This will continue as consumer demands drive the market, however as in the case of any premium service it carries a cost which, certainly in the smaller sector of the market, brings up the age old adage of who is going to pick up the tab. This however doesn’t apply within the two-person market. It is a different dynamic and if the consumer has a choice of delivery options they will choose that which best suits their requirement and if that happens to be a premium service then they are prepared to pay for it,” says McCarthy. And ArrowXL’s Charlie Shiels says: “In our two-person delivery space it is normally all about convenience and often speed as a broken washing machine or fridge is all about getting a quick replacement. For Arrow XL, it’s not the final mile but the final five metres that is the key as we deliver to the room of choice, unpacked and/or assembled/installed.” Technology has always played a critical role in parcel delivery – today the idea of keeping track of hundreds of thousands of parcels a day using a pencil and paper seems ludicrous. And as the demands on the network increase, technology is increasingly helping to take the strain. “We’re seeing a lot of augmented reality options when it comes to fashion retail in particular, but also homewares and furniture,” says Richard Blown of Hermes. “IKEA for example uses this to visualise products in the home before purchase. We hosted a Hackathon earlier this year with students from Leeds Beckett University and it was interesting to see how many of their concepts also included virtual assistants and augmented reality, which this demographic is increasingly starting to expect. Smart locks for delivery to safe places both outside and inside the home are also a talking point, but a slightly more comfortable fit would seem to be the use of connected vehicles allowing car boot delivery and in-car commerce. “The use of Google Assistants and Alexa to learn and make personalised shopping recommendations is also something we’re looking at in the Hermes Innovation Lab, building on our existing use of Alexa integration for parcel tracking,” says Blown. Yodel’s Neil Ashworth believes innovation will likely centre around the refinement of existing processes. “Improvements in self-service options, automated collection, and auto-recognition would be among the most recent. “For example, CollectPlus has recently integrated its Print in Store Returns service with Amazon’s Echo devices, meaning customers can make the most of the Alexa voice-activation technology to simplify the returns process. Combined with the growth of AI technologies, similar developments which centre around improving the customer experience are likely to point towards the future of home shopping,” says Ashworth. James Robbins, chief information officer at ArrowXL, highlights augmented reality and improved near field communication, saying they “will both play a vital role in delivering slicker in-store processes in the near future. I enjoy seeing organisations harnessing smart technology to enhance the consumer experience and I am a huge fan of Wagamamago – the restaurant’s ‘walk out and pay’ app. “I was recently discussing how consumer behaviour differed from in-store to online. When shopping in-store, behaviour is largely driven by location whereas this is not a factor online. I think AR could be used to improve the in-store buying process and bring location choices to the online shopping experience. Of course, AI and Robotics are obvious choices, but I like the quirkiness of this technology and its potential impact,” says Robbins. Charlie Shiels, of ArrowXL, adds: “Developments in final mile alternatives to post codes such as Post Tag, W3W are really interesting as they take a driver right to the front door.” The efficiency of delivery operations can be improved with routing software as well a telematics, says Descartes’ Andrew Tavener. He argues that collaborative technology is key to driving developments in home shopping in the future. “Poor delivery can immediately put a consumer off shopping with a particular retailer again, meaning it is crucial for deliveries to be optimised. With real time feedback from telematics systems transport operators can ensure they have real time visibility over their fleet, allowing managers to not only see where a vehicle is, but also to compare this to where it should be.” Panther’s Brian McCarthy says: “Rather than technologies driving developments in home shopping, I see that it will be the introduction of new developments, such as consolidation, ever increasing later cut off times and a greater focus on ensuring the delivery experience.”
This feature first appeared in the October issue of Logistics Manager.
