Retailers need to disrupt last-mile delivery if they want to succeed in online grocery market
Greater investment in ‘last mile’ delivery – the final leg of the online purchase journey before a product lands in the customer’s hands – is needed if retailers want to uncover new revenue streams, according to a recent report by Capgemini.
In a study entitled 'The Last-Mile Delivery Challenge: Giving retail and consumer product customers a superior delivery experience without hurting profitability', Capgemini surveyed over 2,870 consumers as well as 500 supply chain executives, and entrepreneurs and industry leaders,
The study found that 97% of organisations believe that current last-mile delivery models are unsustainable for full-scale implementation across all locations.
It also reported that three in four customers would increase spend and shopping frequency in return for timely online grocery deliveries.
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To tackle the challenge of last-mile delivery, respondents highlighted how back-room automation could potentially increase profit margins by 14% by reducing the cost of click-and-collect orders and deliveries from the store.
On top of this, half of customers said they are willing to use innovative services like smartlocks where deliveries can be made when no one is at home.
Interestingly, Capgemini also pointed out how 65% of customers use alternative grocery delivery services – such as Google Express, Instacart or Ocado – for better services than from traditional retailers.
The volume of online grocery orders is set to increase rapidly in the coming years, according to the report. Today 40% of customers already order groceries online from retailers (at least once a week or multiple times) and this is expected to grow to 55% by 2021.
Additionally, 40% of customers say that delivery services as a “must have” when purchasing food and grocery products, with 1 in 5 (20%) prepared to switch retailers if this is not provided.
Therefore, technology and automation services could play a pivotal role in last-mile delivery success.
“Today customers are neither satisfied with the quality of delivery services nor willing to bear the total cost of last-mile delivery,” said Tim Bridges, Global Sector Lead, Consumer Products and Retail Distribution, Capgemini.
“Therefore, the dilemma facing retailers is to provide last-mile delivery services that customers value, without damaging their own profitability.
“If done right, and their last-mile experience can win over customer satisfaction, retailers stand to gain loyalty, increased purchase value and frequency, while mitigating profitability risk through automation and optimization of fulfilment locations.”
