Logistics firms set to invest in last mile technology as absent consumers pose the biggest problem
The growth in ecommerce has brought big business to the logistics industry and will continue to do so between now and 2018, with 92% of logistics companies seeing it as their biggest area for growth over the next four years, according to new independent research commissioned by Barclays’ transport and logistics and retail banking sector teams.
However, delivering items to consumers can also pose a significant challenge. Consumers not being at home to receive their delivery is the number one issue for logistics companies, listed by 63% of firms as a cause for concern. The issue of absent consumers even tops that of managing costs (57%) and managing peak times (55%). In the same survey, one in five (20%) of consumers questioned stated that they needed to re-arrange delivery of a parcel in the past year.
To address these challenges, logistics companies are looking ahead to where they can improve and innovate to drive future growth. With 45% of consumers stating they would order more products online if delivery services were improved, the opportunity for growth is clear. According to the report, 61% of logistics firms say that improved tracking (61%) along with improved notification alerts (44%) will be their top areas for future development. For over a third (36%) adding the option for Sunday delivery is of interest for future service improvement, a move which will be surely welcomed by consumers as just under 70% of them canvassed in the same survey, wanted deliveries on a Sunday. Interestingly, however, less than 12% of logistics companies feel that this service will specifically drive the growth of their business in terms of sales or profits.
With the number of deliveries set to increase by 40% to 1.35 billion by 2018, logistics companies are looking to capitalise on the opportunities this presents. One area that both logistics firms and retailers are working on, according to Barclays’ report, is the size of packaging for deliveries. With letterbox sized packages set to see the largest increase of deliveries by 2018, increasing by 45%, being able to fulfill delivery in the first attempt will lead to a reduction in costs associated with repeat delivery services and so has obvious benefits for the both the retailer and the consumer.
While the growth of online shopping will boost logistics companies’ business, half (52%) say that having to cope with this increased capacity could also pose a challenge. An increasingly demanding consumer (35%) and surge in the use of free delivery by retailers (32%) along with the rise of click and collect schemes (31%) are also deemed to be potential threats for logistics companies. However, it’s interesting to note that while click and collect offerings appear to be popular, consumers believe it’s an imperfect solution, with 23% of those surveyed deeming it “inconvenient” and 78% would prefer goods to be delivered direct to their homes instead.
Mike Rigby, head of manufacturing, transport and logistics at Barclays, commented: “A competitive and growing delivery market is an exciting place to be at present. Where there is growth, there is opportunity and the real winners will be those who invest in technology and innovation.
“The evolving dynamic between retailers offering a range of delivery options and consumers demanding more flexible delivery methods is an interesting one. However, the predicted growth over the next few years clearly highlights that the opportunities are there for those operators who carefully reassess their delivery strategy and continue to innovate and invest in fulfilling the all-important last mile.
The Barclays Last Mile survey was undertaken in August 2014 by Conlumino. Conlumino spoke to a representative sample of over 2,000 UK consumers to understand usage, preferences and likes and dislikes of delivery after having ordered online.
Informal interviews were also conducted with around 50 retailers and logistics firms to understand their key issues, challenges and opportunities within the fulfilment space.
Modelling was used to generate the forecasts; this was based on Conlumino’s own model of retail sales and online spending.
