Making cents of online delivery

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Despite the huge rise in popularity of online shopping, the logistics sector has struggled to turn increased deliveries into a profit. A new survey sheds some light on how the industry can cut costs and keep customers happy.

The Hermes’ 2012 Parcel Deliveries Usage and Attitude Survey has revealed that four in 10 consumers are more likely to purchase a product if offered a selection of delivery options. Interestingly, only 13 per cent of respondents felt guaranteed next day delivery was important. Just under half said specified day options were key to their decision making process. The survey also found that 57 per cent of consumers felt deliveries for items priced between £10 and £30 should be free.

Discussing the findings, Carole Woodhead, Chief Executive of Hermes, said; “The consumer is shopping online because of the convenience and savings that can be made, so the delivery needs to reflect these motives.”

Convenience Trumps Speed

It is no secret that the logistics sector has yet to find a sustainable solution for the online delivery process. At a recent 4C Associates roundtable, a number of senior supply chain and logistics professionals voiced their concerns over the current state of online retail. Although there was no consensus as to what the single best solution is, it was agreed that the current delivery strategy is untenable.

Faced with rising demand, parcel operators are increasing their delivery capacity, which may in turn drive up distribution costs. With the majority of customers unwilling to shoulder added costs, the industry has been forced to explore alternative models. Tesco is actively promoting it’s their click and collect model, a strategy which allows the retailer to compete with Amazon’s network of collection lockers. This promising approach enables retailers to leverage their real estate as collection points and drive in-store footfall.

New Models Emerging

The current state of affairs is not viable and logistics operators have begun experimenting with a range of different delivery options. Current models include in-store pickup, ParcelShops and innovative decentralised stock management systems. Allowing customers to select from a variety of delivery options, which compromise speed but not the convenience of the process, may well be the solution for retailers looking to compete with pure play online.

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