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Delivering convenience at a price

With forecasters predicting that global online sales will account for 15% of all retail trade within two years, managing cost-effective delivery options will become essential, says Penelope Ody.

When it comes to receiving their online shopping orders, consumers now always expect speed and convenience. Leading retailers in this Dimension have responded by upping their game, with a steady growth in next-day and nominated-day options, as well as same-day click and collect.

While this trend suggests a bonanza for logistics providers, the reality of providing such services may prove rather more challenging. Alongside this demand for speed and convenience, consumers also expect minimal delivery costs, while a shortage of drivers across Europe could very quickly limit carrier capacity.

Retailers have used free delivery for online orders as a promotional tactic since the dawn of ebusiness, yet it remains one which consumers regularly exploit by ordering goods up to the free delivery threshold and then using the free returns option to send back some of them.

Sustaining the reduced margin on online sales that results from this tactic wasn’t too much of an issue when online formed only a small proportion of turnover, but it is now very different for some major players, where online business can account for 30% or more of turnover and where all those hidden delivery costs seriously erode company profits.

Retailers have tried to counter the trend by upping the free delivery or free click-and-collect threshold – typically £20/€20 or more – but in the longer term, more sophisticated data analytics may needed in order to identify those customers who persistently over-order and return goods, then personalise their delivery charges accordingly.

Perhaps more significant is that looming driver shortage. In the UK, the obvious concern is that many Eastern European van drivers will head for home after Brexit, although this is an issue that affects the rest of the continent as well. In France, logistics company STEF struggles to fill the 500 driver vacancies it has each year, with the company quoted as saying that France needs 20,000 more drivers.

In Germany, trade associations put the shortfall at 45,000, with one union suggesting that up to 20% of German trucks are off the road because of the driver shortage. The main concern is in the heavy goods sector, where antisocial hours and low pay contribute to the problem.

The average age of truck drivers is also a problem – one German source suggests that in the next 15 years, two-thirds of the country’s truck drivers will retire. Last year, UK grocery etailer, Ocado, even went so far as to blame the driver shortage for restricting its growth plans.

As retail demand starts to outstrip carrier capacity, sites will need to adjust their options accordingly: by raising the prices for premium services, for example, or extending the lead time for ‘standard’ delivery. Managing customer expectation will be essential in order to minimise complaints, combat loss of goodwill and limit those, “Where is my order?” calls.

Among leading retailers, Zara manages those expectations quite clearly. Home delivery takes up to five days and is free for orders of more than £50/€50. Same-day and nominated-day delivery are available only in limited geographic areas, and are priced at a realistic £9.95/€9.95.

Zara also quite clearly states, “When processing your purchase we will show you the shipping methods available for this order and we will indicate the shipping costs”. For Screwfix’s trade customers, speed can be essential and so ‘standard delivery’ is actually next-day, click and collect is available within minutes and, if the component is needed before 10am the next day, then it’s £10-£15 depending on the order value.

Shoppers may still be wooed by free delivery but if it is convenience they’re after, then the leading retailers are already demonstrating that their customers are more than willing to pay for it.

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