Analysis

Opinion: Four key trends that will influence click and collect this year

The UK click and collect market is changing fast. Earlier this month Tesco extended its same day click and collect grocery service so what else can we expect? Tim Robinson, CEO of Doddle, reveals four key trends he believes we will see in 2017.

1) Collection of parcels at third party locations will grow from 18m to 40m+ in 2017

We’ve seen click and collect via third party click and collect locations grow three-fold in volume for the last two consecutive years. We expect that growth rate to slow slightly in 2017, with the market growing at 130% year on year. This increase exceeds recent predictions by the IMRG/MetaPack Delivery Index.

Our basis for this is the increasing number of third-party click and collect providers and locations, combined with increasing adoption of third-party click and collect at online checkouts of retailers and consumer demand as a result of fewer people being “home” during the day.

Workplace and city policies such as those put forward by the London Assembly to ban personal deliveries to workplaces to reduce congestion will also drive greater volume to third-party click and collect points. We believe the impact of this has not been fully considered in previous predictions, however a mandated behaviour change of this nature could be a significant tipping point for third-party click and collect volume in 2017.

2) Retailers will start to price click and collect at third party locations more cheaply than home delivery

Historically, retailers have priced collection at a third party click and collect location to consumers more expensively than home delivery. This is because carriers have had to factor in a carriage fee and a commission fee payable to the concession host, but carriers haven’t typically passed on the benefits of consolidation to retailers.

Recently, retailers like Next, Shoeaholics and La Redoute have taken a market-changing approach and priced third party click and collect at a cheaper rate than home delivery. In Next’s case, we believe this is one of the first signs of a major UK retailer passing on the significant consolidation benefits of third party click and collect straight onto the consumer.

With retailers coming under greater margin pressure, there are few areas with as much margin gaining potential as offered by consolidating deliveries to third party click and collect locations. The significant efficiencies offered to retailers and carriers by consolidation, will compel more retailers to take this approach, driving a marked shift in volume away from home delivery in 2017.

3) In-store collect will require investment or face slowing growth rates

In-store click and collect has been extraordinarily successful, with many multi-channel retailers reporting upwards of 30% of all online orders being collected in-store. This nearly doubles amongst market leaders like John Lewis and M&S which have reported upwards of 50%. However, retailers will struggle to see the same level of growth in 2017 if they don’t invest in the channel.

The reason for this is that consumers are becoming more discerning in the experience they expect from click and collect. Research from JDA has found that 73% of shoppers would switch retailers if they had a poor experience with an online click and collect order.

Putting click and collect in a remote corner of the store and having to wait while store teams rifle through poorly formatted and organised storage rooms to find parcels, just doesn’t wash with today’s attuned click and collect shopper. This requires investment in the technology and customer experience to make sure retailers don’t lose out to other retailers offering a slicker in-store experience, or third party networks offering a more convenient experience.

Additionally, more and more retailers are having to reflect the cost of in-store click and collect in their pricing to customers as the benefit of footfall does not always outweigh the fulfilment cost for in-store click and collect. Tesco, John Lewis and New Look have all taken steps in this regard.

This increased cost to the consumer, be it by ascribing a minimum basket value to free in-store click and collect or adding on a shipping cost to the service, will soften the pace of consumer adoption of in-store click and collect, an impact that will be exacerbated where the experience isn’t up to scratch.

4) Number of third party click and collect points will continue to grow at an alarmingly fast rate – but collaboration will be slow

We calculate there are currently 35,000 third party click and collect points in the UK, up from a base of c.7,000 in 2013. This has resulted in a significant over-supply of pick up points, driven by the proliferation of competing carrier-owned pick up point networks, each of which are signalling further expansion in 2017.

There has been a lot of talk about greater collaboration within the industry and some have hinted at the need for consolidation of third party collection points. However history tells us that leopards don’t change their spots and we are some time off from seeing collaboration between competing carrier networks.

While carrier owned-networks drive consolidation benefits in the short term, being tied to one carrier makes life more difficult for consumers. Forcing shoppers to visit multiple locations to collect parcels delivered by different carriers is not a consumer-friendly experience. An oversupply of these points also reduces the consolidation benefits offered by click and collect in the first place.

So that’s our click and collect crystal ball predictions for this year. What we think these trends show is that choice comes at a cost, but it’s a small price to pay to keep customers on your side, lest you face the cost of losing them.

Tim Robinson is CEO of Doddle. 

Image credit: Doddle