“Most Brits Now EXPECT Same Day Deliveries,” says ParcelHero
New research from the home delivery experts, ParcelHero, shows a “dramatic” change in online attitudes and expectations. The question is: can retailers deliver?
The pandemic FORCED many people to shop online for the first time. In February 2020, online sales accounted for just 19% of the overall retail market. Today, they account for 30% of ALL sales. As a result, “online shoppers have dramatically changed their expectations,” explained ParcelHero’s Head of Consumer Research, David Jinks M.I.L.T.
56% of online shoppers believe that same-day delivery options are important. In 2020, this number sat at just 33%, whereas 62% of British consumers now EXPECT next-day delivery options. And last but not least, 55% now demand 2-hour time slots (up from 44% in 2020).
“The results of our latest consumer survey shows that customers increasingly want to see all of their favourite stores providing the same delivery options as Amazon Prime,” David highlighted.
Prior to the pandemic, most online purchases were for non-essential items only (such as entertainment products and electronics, for instance). However, over the last two years, online buyers have become increasingly more wary of the high street, and of out-of-town shopping malls. Many have switched to ordering household essentials online, instead, with same-day delivery options becoming more popular.
“We’re now starting to see the full impact of Covid-19 on our shopping habits. Increasing knowledge of delivery options transformed consumers’ expectations of what services their favourite brands should be offering,” said David.
But can retailers afford to deliver on these ever-rising consumer expectations?
“The problem for most retailers, is that same-day deliveries are vastly more expensive to fulfil, than next-day services. Although 64% of shoppers said that they are willing to pay more for same-day deliveries, it’s unlikely that this would ever cover the upfront cost of the huge changes in supply chains and distribution centres needed,” added David.
In 2020, 74% of us said that we’d be happy to wait longer for purchases, if it meant that the delivery method was more sustainable. However, in this latest survey, that number dropped down to 61%, which is concerning for both the environment, AND for retailers.
“Understandably, home shoppers now expect faster services with increased options, as they spend more time on e-commerce specialist sites, such as Amazon. And who can blame them? However the transformation in same-day delivery expectations could be bad news for smaller store chains who don’t have distribution centres spread across the country,” said David.
Whilst the UK was a pioneer in next-day deliveries (most orders throughout our relatively small country can be fulfilled within 1 working day), there is a vast difference in the infrastructure needed for same-day deliveries.
To elaborate, the Warehouse Management Systems (WMS) retailers typically use are ideal for deliveries ranging from next-day, to 2 weeks. WMS systems can group orders and deal with them in batches, which is ideal for processing orders overnight. In contrast, same-day orders have a 1 or a 2-hour window, and delivery batch sizes have to be reduced, with smaller order pools.
Naturally, orders can’t be grouped and optimised in the same way that they can for next-day deliveries, which means… a higher-cost-per-unit.
As it stands, “to make same-day delivery economically viable, firms need high and consistent volumes of daily orders within a reasonable radius of their distribution hub. Having vans travel miles to deliver just one or two items to a particular area isn’t viable. For many retailers, that means that fulfilling their orders is impossible,” said David.
Amazon, on the one hand, met this challenge by building their own delivery network, Amazon Logistics. But constructing distribution centres across the country is something that most retailers can’t easily do.
However on the other hand, retailers such as Sainsbury’s and Tesco and are now able to provide same-day deliveries within certain urban areas, where their infrastructure already includes distribution centres, superstores with armies of in-store pickers, or newly implemented “dark stores” (servicing online orders, only).
Smaller supermarkets have options too though, such as piggybacking onto the networks of Ocado, or onto the food delivery specialist, Deliveroo. And for remaining retailers, their best option is to partner up with courier and haulage firms, which can provide same-day delivery via vans and motorbikes.
This study also shows why many UK and international couriers are now investing in infrastructures to develop their same-day options. “It’s an expensive thing to do,” said David.
“International delivery companies already find it less cost-effective delivering to private addresses rather than businesses, because there are fewer parcels going to one address, and a far greater chance of a failed delivery, because no one is at home. It’s one of the many reasons why the delivery giant DPD recently finalised the takeover of the courier network CitySprint, which specialises in same-day services,” said David.
In fact, DPD claims that same-day delivery is one of the fastest-growing segments of the logistics market, and the deal enables it to provide a range of new delivery options.
‘Today is the day of same-day deliveries. The question is though, is whether shoppers are willing to pay for them. Amazon was able to build up its same-day capacity through its Prime membership programme. That’s OK if you are Amazon, but a small store chain might have trouble convincing people to splash out £79 on a membership scheme in order to fund their infrastructure growth. That’s a loyalty scheme that really tests loyalties,” added David.
So what’s in store for stores?
Well, ParcelHero’s study indicates that we will see more dark stores, robot pickers and stock-less stores (three radically different solutions) in the evolution of e-commerce.
More information on how retailers can adapt their existing infrastructure to meet the changing customer expectations can be found here.