By John Manners-Bell
October 22nd 2019
The rapid growth in the volume of online sales has forced a rethink of the B2C last mile delivery model. Ti’s CEO John Manners-Bell explains why, and identifies popular alternative delivery options that are being used.
A podcast by Ti’s CEO, John Manners Bell.
The rapid growth in the volume of online sales has forced a rethink of the B2C last mile delivery model. Home delivery is expensive for retailers and parcels companies sometimes inconvenient for shoppers, as well as being a headache for administrators and regulators concerned about levels of traffic and pollution caused by the soaring number of delivery vans.
The combination of these factors has prompted many companies involved in the e-retailer sector to look for alternative delivery solutions. Many of these solutions involve alternative delivery addresses or locations such as, for example, collection points, lockers, parcel shops or even in car or in-house delivery.
According to a survey run by UPS, 41% of customers have had their orders delivered to an alternative delivery location. And amongst those who had returned an online purchase, 28% had taken their returns to carrier authorised retail stores. A quarter of customers has used a ship to store option, that is click and collect. The survey also found that 63% of customers in Europe, 52% in USA and 71% in Asia were interested in shipping to an alternative delivery location with extended hours for a reduced fee.
The range of delivery options is also critical in consumer choice and has been recognised that delivery location options are important in terms of preventing lost sales, as well as speed and cost. The development of alternative delivery solutions has strategic implications in the trade-off between inventory management and product availability. Many retailers are converging their online and offline, it combines the benefits of open all hour retails with physical bricks and mortar presence, close and convenient to the consumer.
There are many parts to this strategy, including using stores as crowd sourcing locations. However, in terms of alternative delivery solutions, stores can be used as locations for firstly, click and collect for products through a store-based picking strategy, and secondly, click and collect for products delivered from a remote distribution centre. The second option can involve either the collection of goods from a staffed counter or from an automated locker. In some parts of the world, this is described as Click and Collect, and others Buy Online Pick Up in store.
In addition to leveraging stores as delivery locations, e-retailers, express parcels companies and specialist technology companies have established locker networks. These can be located at stores of course but are just as likely to be located at other public spaces such as train stations, filling stations and car parks. There are also based in parcel shops and collection delivery points (CDP’s) and are often an extension to this parallel strategy of developing, receiving and dispatching infrastructure at locations of most convenience to consumers.
The last alternative delivery method of note is in car delivery. Technologies have been developed by car manufacturers that allow a boot or trunk to be opened on a one-time basis by a courier and a parcel dropped off. Similar technology is being used to allow couriers access to a garage or even direct to the home.
In conclusion, customers are increasingly keen to have the option to collecting parcels securely at a time and place which is convenient for them, rather than convenient for the parcels company or e-retailers. This has led to the number and type of alternative delivery location for online shoppers growing, a combination of cost, convenience, trust and increasing consumer awareness about the environmental impact of delivery choices has brought about this change.
The size of the investment opportunity is huge. According to the State Post Bureau of China, the total number of lockers could increase in China alone to 350,000 by 2020, accounting for the delivery of 40% of packages. However, in terms of market development, it is still to be seen whether one single model wins out, closed or open networks of lockers, parcel shops, or in house or in car deliveries, or whether it is economically feasible for all these options and others to co-exist. Whichever model is adopted, there is no doubt that in terms of reducing cost, alternative delivery locations will be a critical part of the last mile delivery strategies of express parcel companies and e-retailers for many years to come.
Our full briefing on alternative delivery solutions is available to subscribe on Ti’s Global Supply Chain Intelligence portal. Contact Michael Clover at [email protected] for more information and a free demo.