Going the distance – how is crowdsourced home delivery affecting UK logistics?

Overall retail growth is low currently at just 1-1.5%, however e-commerce is expanding at around 15% per annum in the B2C (business to consumer) sector, while B2B e-commerce had a sales turnover of around 96.5 billion in 2015, which has accelerated in 2016/17…

Last mile delivery – the logistics of customer satisfaction

While most companies place massive importance on the beginning of the process, chasing click-throughs and trying to minimise abandoned shopping carts, a quieter revolution is taking place in last mile delivery – the vital process of getting the goods into the hands of the consumer.  How does it compare to traditional purchasing? In 2016, retailers spent around £70 billion in picking, packing and last mile delivery, to receive around £380 billion in online sales. This is a massive supply chain cost, compared to retail shops – order fulfilment online costs between 15-18% while bricks and mortar retailing costs for the same processes are just 4-9% of sales.

UK logistics – a world leader or a technology lagger?

The UK had the third biggest e-commerce market globally, in 2015 – a 19% share of total business turnover. An astonishing 80% of UK internet users shop online – this is the highest rate in Europe.

However…delivery technology is slower to keep up. Many more disruptors are being tested in the USA than the UK, with systems such as Deliv and UberRush being reasonably well established in America, but not even trialled here.

The shift in shopping affects supply chain logistics

E-commerce has profoundly changed how people shop. Instead of companies sending goods to physical stores, they are being forced to consider ‘desired location’ when their customers shop. Desired location may be home, a nearby shop or another convenient location such as a locker. Location of assets and delivery models have to keep pace with this much more fragmented market.

Bringing choice closer to desire

Offering a larger assortment of goods and reducing delivery time are the two key areas for e-commerce dominance. This means that both retailers and brands are pushing forward a wider mix of SKUs (stock keeping units) to a much greater range of fulfilment centres. Amazon, for example, has 50 picking warehouses across the US, giving it the ability to offer next day delivery on almost all SKUs.

More space, smaller volumes, quicker turnaround for UK logistics

When considering warehousing, third party logistics (3PL) may be the only way to go for UK retailers. Without the ‘vast open spaces’ that permit Amazon to build enormous warehouses close to urban centres, it’s vital to be adjustable in using warehouse space close to ‘desired location’, which is usually a highly congested city. As a result, bringing inventory closer to demand generally means using shared facilities managed by 3PL professionals who can be effective in space use and picking time in a way that in-house services rarely can.

Last mile delivery – the sticking point for the UK

In the USA, UPS says that over 50% of domestic parcel deliveries are last mile routes for e-commerce. In other words, e-commerce creates more business than all other forms of shopping combined. This growing need for last mile is in part related to the reduction in delivery times (8 days in 2013 to 5 days today, on average). In the UK, the Royal Mail says;

Last mile reverse logistics

One of the major and unrecognised aspects of last mile delivery is the ‘free returns’ phenomenon. Asos trumpet their free returns while Zalando give their customers 100 days to decide if something is for them or not, with the return being – of course – free.

But while the sales aspect of e-commerce is reasonably streamlined with four pairs of hands touching an item from order to home delivery, ‘free returns’ are handler intensive. It’s estimated that each returned fashion item passes through seven pairs of hands, doubling the cost of e-commerce in a single offer. Warehouse space for returns is likely to become a key measure of retail success with customer satisfaction in return processes declining from 62% to 55% in the past five years.

The future of last mile deliveries

In 2015, Whistl failed to challenge Royal Mail and built up losses of over £10 million, despite avoiding the costly rural routes by only putting staff in densely populated cities. As a result, Royal Mail still fulfils more than half the last mile deliveries in the UK. The situation is similar in the USA where the big three national carriers also convey 85% of last mile delivery orders. Disruptive technologies appear to be making small inroads into these huge delivery chains, although they are clearly having better success with the returns process, where Royal Mail is unable to offer an out of hours service that competes with FedEx, UPS etc.

Same day delivery volumes could rise to £3 billion by 2018, offering plenty of scope for those with flexible warehousing options to benefit from customer demand for quicker deliveries and quicker return options.

Who wants what delivered when?

CapGemini believes 90% of last mile deliveries will be social media, crowd-sourced activities by 2018. This is made up in large part by urban millennial expectation; people who have the assumption that certain goods such as food, consumables and luxury clothing will be delivered ‘same day’. They are also willing to pay more for same day convenience – unlike older buyers who seek same day delivery but usually refuse to pay a premium for it.

New services such as Nimber (your parcel delivered by a stranger who’s travelling your way) and PiggyBaggy (crowd-sourcing ride shares for goods by destination rather than retailer) are likely to have a big impact and create even greater demand for flexible warehousing closer to population centres.

We provide warehouse space across the UK with professional warehouse fulfilment services too. Services available include pick and pack, pallet storage, temperature controlled warehousing, 3PL and much more,  to ensure businesses are efficient in space use and time management, fulfilling all requirements.


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