Comment: Surging demand for parcel deliveries creates need for change

The UK is starting to wake up to realise it must follow the US in as much as every company that wants to be customer-centric must have their own logistics and delivery network. Mike Elton, service delivery director of UK & Europe at FarEye, reports.

Growth surge

Parcel volumes in the UK reached 4.1 billion parcels shipped in 2021, due largely to surging e-commerce sales that increased 73% in 2021 vs 2019. Although retailers and carriers in the UK welcome this growth, it is putting tremendous pressure on supply chains and final-mile delivery networks, causing headaches for logistics managers. Amid the challenges faced by retailers caused by swelling parcel volumes are increasing consumer demands for better, faster deliveries.

Optimising delivery orchestration to efficiently handle the growth in e-commerce in the UK and create superior consumer delivery experiences is paramount for retailers. Doing so may require them to reassess their current delivery strategies.

Delivery challenges in the United Kingdom

Logistics is complex across the supply chain, but the most complex and costliest leg of the supply chain can be found in the final mile where deliveries are made. There are four key delivery challenges unique to the UK that retailers in the country must look to overcome to gain competitive advantages in the form of enhanced delivery experiences for their consumers.

Increased traffic congestion

A recent report from Accenture estimates that the streets of London will experience 1.5x more delivery vehicles by 2026 than there are today if the current door-to-door e-commerce delivery model continues. Retailers must look to alternative delivery models that can reduce traffic congestion and miles driven, which include deliveries made to parcel lockers, pick-up points and even neighbours’ homes.

Carrier integrations

All but the largest retailers rely on outsourced carriers to complete final-mile deliveries. And although many retailers have aspirations of owning their own fleet and enjoying the in-house control of the entire delivery process, the reality is that this model is capital-intensive and financially not worth its cost. Thus, they are left with outside carriers such as Royal Mail, DPD and DHL to reach their consumers. The challenge here is the lack of visibility, control and flexibility that these carriers provide to retailers, leaving ample room for improvement in the relationship between the two parties.

Rural / urban divide

According to the World Bank, nearly 85% of the population in the UK lives in urban areas, and much of the improvements made in final-mile delivery have centred around urban logistics. Localised fulfilment centres, hyperlocal delivery and the increased use of gig fleets are largely urban solutions. Retailers must not neglect rural areas, however. Identifying the best solution or set of solutions for rural final-mile deliveries is a major challenge for retailers, where billions are spent on retail e-commerce annually.

Increasing consumer demands

Although a challenge experienced among retailers worldwide, meeting and exceeding consumer delivery demands is a proven strategy for driving repeat business and enhancing consumer loyalty. Retailers today can actually compete purely on delivery terms. Fast delivery, low/no shipping costs and delivery transparency are key demands among UK shoppers, and are important factors they evaluate when deciding where to purchase from.

The shared network – taking a page out the US playbook

Retailers in the UK realise the opportunity for new delivery models that can overcome these challenges and provide superior delivery experiences to their consumers. Looking to the US, a growing trend of retailers implementing shared delivery networks is uncovering a new model that can overcome key delivery challenges.

Retailers in the US such as Gap and American Eagle Outfitters (AEO) have launched their own final-mile delivery arms and now offer their final-mile delivery services to other retailers. AEO created a subsidiary named Quiet Platforms after it acquired Quiet Logistics and AirTerra last year to create its own delivery network. Gap launched GPS Platform Services, a logistics and fulfilment network that is also open to other brands.

Walmart entered the market in 2021 with GoLocal that offers same day delivery to other businesses. By offering their delivery services to other retailers, Walmart, Gap and AEO have created additional revenue streams by using their own investment in fast delivery. Retailers without their own dedicated delivery networks can join Walmart, Gap and AEO to create their own branded final-mile deliveries. Both Gap and AEO say their supply chain operations provide full visibility to both retailers and their customers.

Competitor delivery networks are relatively new in the US. It remains to be seen if UK retailers will move into creating and sharing delivery networks with other retailers in the near future. But the added capacity, flexibility, speed and cost effectiveness that they provide create an opportunity they may not want to miss.