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Delivery as a service

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John Lewis has prioritised making it easy for customers to collect their online orders
John Lewis has prioritised making it easy for customers to collect their online orders

In 2020, logistics is firmly centre stage in the customer journey and experience, enough to be flagged up by retailers in their advertising and social media posts. It’s a far remove from when fulfilment was a strictly back-end concern. Today super-convenient delivery, collections and returns promises are powered by strong order and warehouse management and enterprise resource planning systems. The perception is that customers often buy from a given retailer based primarily on the delivery, collections and returns experience.
But while leading retailers, including those in the Elite and Leading groups of RXUK Top500 retailers, have developed such services, there’s evidence from this year’s RetailX research that others are choosing to drop the services that may make less economic sense for them. Instead of offering nominated day and time deliveries, many are choosing to offer a standard next-day delivery service, or a choice of next-day collections. Same-day delivery and collections are very much the preserve of a few leading supermarkets and retailers. The others are concentrating on making sure that their delivery promise is both robust and profitable.


Leading the way on delivery

Many of the thousands of products that Argos sells are available elsewhere. That’s why the retailer, ranked Elite in Top500 research, has focused on competing on convenient delivery times. Its hub-and-spoke logistics model enables it to get products to shoppers as quickly as possible. Shoppers can order online from anywhere – whether that’s using their smartphone or in a digital format store – for delivery as quickly as same-day for orders placed by 6pm. Shoppers appear very willing to pay for such convenience. In its 2018/19 full-year results, parent company Sainsbury’s reported that use of Argos’ £3.95 same-day delivery service had grown by 13% over the year, while the service could deliver to 90% of UK postcodes within four hours.
Amazon has also focused on delivery as it has moved from cutting prices and offering free delivery to a strategy of convenient delivery. The retailer, like Argos, uses local hubs to ensure that stock is so close to customers that it can be delivered to Prime members in as quickly as an hour. Non-members can choose to pay for a range of eight delivery services, or to pick up from a collection point. There’s also free delivery for those spending a minimum amount who are willing to wait for their parcel. Both, however, are in a small minority. In 2020, 5% of Top500 retailers offer same-day delivery, although 61% offer next-day delivery, up from 58% a year earlier.

Convenient collections

John Lewis was an early leader in offering convenient collections when it took the step of offering collections not only from its own stores but also from those of its sister business Waitrose. It also offers collections through the CollectPlus network.
Argos’ fast collection service is also proving effective. Shoppers can – and do – pick up their orders within minutes of ordering. Same-day collections rose by 10% in its last financial year. In the Dulwich branch of Argos in Sainsbury’s, shoppers can even browse and pay on self-service tablets and collect orders from dedicated pods.
Amazon may not have a UK-wide network of stores but it offers customers a wide variety of collection options, from local collection in third-party stores to thousands of lockers around the UK, in locations from airports to underground stations and other retailers’ stores. Yet Top500 research shows the proportion of retailers offering click and collect has fallen to 54% from 56% in 2019, while only 19% offer next-day collection – down from 26% in 2019.

Delivering the luxury touch

When shoppers are paying more for their goods, they also expect more from delivery. Shoppers in areas including central London can opt for same-day delivery from Net-A-Porter, when ordering by 10am – or same evening delivery, when ordering by 2pm. They can also select their own nominated day for delivery up to seven days. Same-day premier services come with a £12 fee, although shipping is free, at the time of writing, on orders over £200. Other delivery options include next business day, while £5 standard deliveries are delivered within three days. More flexibility is offered through DHL’s on demand delivery service, where shoppers can schedule their deliveries, leave it with a neighbour, or collect from a DHL service point or parcel locker. Customers then have 28 days to return their order; free collection can be booked online. However, the retailer notes that high levels of returns could result in an account being closed.
Upmarket supermarket Waitrose – whose Portishead branch used to deliver ‘to your yacht’ – has more recently piloted in-fridge deliveries, through its While You’re Away delivery scheme. Drivers use smart locks and one-time codes to access customers’ homes where, equipped with shoe covers and body cameras, they deliver to the kitchen, even putting chilled items away in the fridge.

Returns that work

Shoppers at more than 100 retailers can return – and/or collect – their online orders via supermarket Asda and its Asda toyou service. First introduced in 2015, it can now be managed from a phone or from in-store screens, where returns labels can be printed out in store. More third-party collection points have sprung up in recent years, and RetailX research suggests that in 2020, retailers are less likely to accept returns in their own stores; availability has fallen by five percentage points to 43%. At the same time, they are more likely to enable their customers to return an item via a third-party location (+5pp to 25%). Perhaps any retailers that made the switch found it more cost-effective to do so.

Members-only

Many retailers are now reserving the best service for subscribers. Pureplays such as Amazon and grocers Ocado and Tesco have led the way in this. Members of Amazon’s Prime membership scheme can get deliveries in as little as one hour, while shoppers at the supermarkets sign up to delivery pass schemes that enable them to pay once for free deliveries during peak or off-peak times. H&M’s loyalty club members are encouraged to download its app and get free collection plus free delivery on orders worth £20 or more.
It’s an approach that has certainly worked well for Amazon. In its 2019 full-year figures, it said that its £79 a year Prime scheme – which comes with a range of benefits – had more than 150m members around the world.

Sustainability matters

Many Top500 online and multichannel retailers are now urgently rethinking the way that they send goods out – from the packaging they use to their transport fleet. Plastic bags are fast being replaced with printed paper bags and compostable wrappers. Amazon has even experimented with doing away with packaging altogether and sticking address labels to product boxes.
Meanwhile, couriers are introducing electric vehicles into their delivery fleets. DPD, for example, has recently taken delivery of what it believes is the largest single UK commercial electric vehicle order to date – 300 electric Nissan vans. That takes its total electric fleet to 450 and it aims to reach 500 by the end of the year. DPD chief executive Dwain McDonald said, “These vehicles are changing the way we work. It isn’t just a case of plugging them in and saying, ‘Job done’. We are rethinking and re-engineering how we deliver parcels now and in the future, with different route networks and new types of depots. It is an all-encompassing revolution for our industry and electric, emission-free vehicles are at the heart of that vision. This enables us to say to more and more customers, ‘We’re delivering your parcels emission-free’, which is a key selling point when we are talking to retailers.”

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