Retailers are losing £1.6bn through delivery failure

This article is brought to you by Retail Technology Review: Retailers are losing £1.6bn through delivery failure.

IMRG’s Valuing Home Delivery Review 2018 revealed at eCommerce Expo and Technology for Marketing, now co-located with ad:tech London, shows that UK retailers, delivery partners and customers are losing £1.6bn by getting delivery wrong.

Through looking at retail data provided to IMRG from over 200 retailers, totalling 120 million orders and deliveries per annum which amounts to £7bn of annual spend, alongside a survey of 2200 consumers IMRG were able to look at the cost to all parties from four types of delivery failures.

These are; when the delivery failed first time and the customer had to collect the delivery, when the delivery failed and the carrier had to redeliver, when the order was late and missed its delivery window and the rare occasions when the order was lost.

The study examined the cost to the retailer, carrier and consumer by looking at; overall UK delivery volumes and the percentage of these that fail, the cost of customer service resource required due to calls, emails and messages about missing parcels, the cost of consumer time in calls and travel, the average retailer fulfilment and delivery costs, average order and customer values and average carrier costs.

The data reveals:

• An annual cost to consumers for failed delivery of £374,822,257
• An annual cost to retailers of £1,170,439,531
• An annual cost to carriers of £122,599,669
• A lost order has the highest cost, with an average of £147.14 per delivery, the vast majority of which is borne by the retailer.

The cost to the shopper

With consumers turning to online shopping to increase convenience and cut costs, the price borne by the customer for failed delivery should ring alarm bells for retailers.

It cost the consumer on average £2.90 for re-delivery, £7.41 to collect a parcel from a depot, £2.53 for late delivery and £5.26 for a lost delivery, with the costs coming largely from money spent on calls and travel to depots, not to speak of the time, effort and frustration involved in what was meant to be a seamless process.

The cost to the retailer

For cash strapped retailers looking to compete with Amazon and grow in straitened economic times, the cost are far higher.

It costs a retailer £4.90 for a failed first delivery that has to be re-delivered, whilst a pick up from the depot incurs no cost, a late delivery costs the retailer £21.64, whilst a lost delivery costs a whopping £123.61.

The cost to the carrier

For carriers the cost of a re-delivery comes to £2.01, with collection slightly more expensive at £2.74, but far less than the £7.41 stomached by the consumer and failed delivery costing £18.27. Significantly IMRG’s research suggests that no cost is borne by the carrier for a late delivery.

Speaking about the research Andrew Starkey head of e-logistics at IMRG said, “Failed first delivery is too dependent on the knowledge of the delivery person and the local knowledge of the postie doesn’t exist in the gig economy. It’s comes down to trial and error and with that you get a lot of complaints.”

He goes on to advise carriers to invest in interactive technology that allows them to not only warn a customer of when a delivery is due, but allows the customer to reschedule or suggest a safe place, he suggests that with DPD already using such technology, consumer expectations are now that all delivery partners should work to the same standards.

Meanwhile he warns retailers that their effort to ape Amazon Prime for delivery speed could actually be an Achilles heel, pointing to the fact that more and more retailers are offering next day delivery as a default, with economy (two to three-day delivery) down 5% since 2016 and next day up 5%. This change is mirrored by an increase in failure on deliveries from 94% in 2016 to a low of 88% in May 2018, suggesting that there simply isn’t enough capacity in the system to deliver such a high proportion of next day deliveries. He says, “Amazon will do what Amazon does, doesn’t mean you have to do the same, there are other ways”.