Online delivery, click and collect to double in UK

By

Cajsa Lykke Carlson

Published
Mar 15, 2016

OC&C Strategy Consultants' latest report, "Reinventing the Last Mile" found that 40% of non-food sales in Britain will be made online by 2025.

But this development is set to cause problems for retailers, as increasing costs related to home delivery and click-and-collect are expected to decrease retailers' margins by 1.5%. Multichannel retailers will be hit the hardest.

The last decade has seen online purchases excluding food fulfilled through delivery and click-and-collect doubling in value, and over the next ten years they're predicted to double again. As the retail market itself is only predicted to increase by a modest 2.2%, from £189bn in 2015 to £230bn in 2025, the rise in delivery and click-and-collect will come at the expense of in-store sales.

In 2005 only 9% of retail sales (£15bn) were fulfilled through home delivery and less than 1% by click-and-collect. In contrast, by 2025, home delivery is expected to be responsible for 30% (£69bn) of sales and click-and-collect for 10% (£23bn).

The proportion of shoppers who opted for next-day delivery grew by 50% between 2013 and 2015, and the proportion of those willing to wait 3-5 days for their parcel to arrive dropped by 10%, showing that customers are now increasingly wanting their deliveries to come faster. More than half, 60% of baskets abandoned online are due to delivery issues.

The research also revealed that click-and-collect costs retailers four times more than in-store purchases, and that average operating profit margins for the UK’s top-10 multichannel retailers have more than halved since 2011, from 6% in 2011 to 2.5% in 2015.

Anita Balchandani, Partner and Head of Retail at OC&C Strategy Consultants, said: “When six in ten shoppers abandoning baskets online are doing so because of issues relating to the last mile, it’s clear that investing only in the front end of e-commerce is no longer sufficient. The last mile is fast becoming the ultimate battleground for retailers as shoppers demand more convenience. Being able to offer predictable delivery slots, free next-day delivery and an accessibly priced same-day service is becoming the norm. The challenge retailers face is how to meet these changing expectations while making the economics work for their business.”