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Online retailers to hit delivery ceiling

12 December 2012

SSI Schaefer has warned that online retailers may soon hit a ceiling in terms of what automation technology can do to allow them to make increasingly competitive deliveries.

SSI Schaefer has warned that online retailers may soon hit a ceiling in terms of what automation technology can do to allow them to make increasingly competitive deliveries.

Speaking at SSI Schaefer's Automation of eLogistics conference in Leicester last week, director Jaap Vos said: “Retailers are driving the online market by looking for competitive advantage. Fast deliveries and extra features are key to this.

“But this will eventually stop as retailers will hit a ceiling in terms of what can done by automation. For example, if a retailer wants to gift wrap or iron shirts before despatch - you just can't automate that.”

Vos added that retailers would then have to look at other factors such as reliability to differentiate their service.

In his presentation, SSI Schaefer business development manager David Hibbert said eCommerce was continuing to grow quickly, although he cautioned that predictions, such as 40% growth by 2017, were over-ambitious.

“Devices like the iPad are aimed at older users and will make online retail easier for users and a better experience,” he said.

Hibbert added that eCommerce was creating logistical challenges, with faster deliveries increasing the importance of redundancy of systems. Indeed some operators were choosing to separate eCommerce logistics from the regular supply chain.

Cancelled orders were also an issue, with speed of delivery so key to some retailers they were not holding orders in a buffer to protect against swift cancellation.

Home delivery failure costs soar to £1 billion

In other news, home delivery failures are costing around £1 billion a year according to the Interactive Media in Retail Group (IMRG) report Valuing Home Delivery.

The report says the cost of delivery failure is almost a three-way split among carriers/logistics providers, consumers and retailers. The inefficiencies add £1.45 in total costs for each transaction.

The compounded cost to the retailer is much higher - as much as £9.54 for each failed delivery. Lost business, however, is a staggering £77.82. Carriers lose over £6 for each undeliverable consignment. Consumers are paying the lions' share of the total bill of £22.68. These costs are even higher for failed deliveries of larger, bulkier items requiring specialist delivery such as furniture and electrical goods.

Other interesting findings from the IMRG report highlight the importance of delivery success to the consumer. Forty-three per cent say that delivery experience influences their choice of retailer. Also, poor delivery performance has resulted in nearly 40 per cent of consumers from using a certain retailer.

“These statistics should signal a call to action for retailers, carriers and logistics providers. Efficient and effective home deliveries make customers happy and help build brand loyalty,” says Wayne Holgate, director, Axida.

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